Hello everyone and welcome to this Ethics Alert which will discuss the Florida Bar Board of Governor’s (BOG) unanimous approval of Ethics Advisory Opinion 18-1 addressing fee arrangements between qualifying providers and participating lawyers to comply with amended Florida Bar Rule 4-7.22, which substantially revises the requirements for qualifying providers. Ethics Opinion 18-1 is here: https://www-media.floridabar.org/uploads/2018/10/Proposed-Advisory-Op-18-1-website-10-12-18.pdf
At its December 14, 2018 meeting in Naples, the BOG approved Advisory Ethics Opinion 18-1, “Payments to Qualifying Providers/Lawyer Referral Services.” regarding for-profit qualifying providers, previously known as lawyer referral services, and related payment methods. The BOG approved the Ethics Opinion unanimously without debate.
Under amended Bar Rule 4-7.22, which became effective in April 2018, a qualifying provider is, “any person, group, or persons, associations, organizations, or entities that receive any benefit or consideration, monetary or otherwise, for the direct or indirect referral of respective clients to the lawyers or law firm.”
The Comment to Rule 4-7.22 states:
“A lawyer may not participate with a qualifying provider that receives any legal fee that constitutes a division of legal fees with a non-lawyer unless the qualifying provider is The Florida Bar Lawyer Referral Service or a lawyer referral service approved by The Florida Bar pursuant to Chapter 8 of these rules,” the comment states. “A fee calculated as a percentage of the fee received by a lawyer, or based on the success or perceived value of the case, would be an improper division of legal fees…(a)dditionally, a fee that constitutes an improper division of fees occurs when the qualifying provider directs, regulates, or influences the lawyer’s professional judgement in rendering legal services to the client.”
Ethics Advisory Opinion 18-1 lists the following factors which “mitigate in favor of a conclusion that the charge is permissible”:
- The charge is reasonably based on the qualifying provider’s costs for marketing and administration plus a reasonable profit; and
- the charge is imposed regardless of whether the lawyer is hired by the prospective client.
The opinion lists the following factors which would “mitigate in favor of a conclusion that the charge is impermissible”:
- The charge is based on the perceived value of the individual matter.
- The qualifying provider collects the lawyers’ fees directly from the consumer, takes a portion of the fee as the charge for the referral or match, then remits the remainder to the lawyer.
- The qualifying provider interferes with the lawyer’s independent professional judgment in representing clients or directs the lawyer’s activities in representing clients.
- There is sufficient incentive for the qualifying provider to improperly solicit prospective clients or improperly market the service.
The opinion states that: “the board believes the following would be permissible:”
- A reasonable, pre-arranged fixed charge per time period such as weekly, monthly, or yearly;
- A reasonable, pre-arranged fixed charge for each time a consumer views information about a specific lawyer, commonly referred to as “pay-per-click.”
- A reasonable, pre-arranged fixed charge per matter referred to the lawyer that is not contingent on the outcome of the matter and does not vary based on the amount at issue in the matter.
- A reasonable, pre-arranged fixed charge per matter referred to the lawyer that varies based on the type of matter only if the varying charge is based on demonstrably different marketing and administrative costs rather than the perceived value of the case.
The opinion states that: “the board believes the following would generally be impermissible”:
- A charge calculated as a percentage of the fee received by a lawyer.
- A charge calculated as a percentage of the client’s recovery in the matter.
- A charge based on the perceived value of the case referred to or accepted by a participating lawyer.
- A flat charge that differs based on the perceived value of the case referred to or accepted by a participating lawyer.
- A flat charge per case accepted by a participating lawyer.
- A flat charge per case accepted by a participating lawyer that differs based on the type of matter (e.g., personal injury versus family law).
The opinion states that it is designed solely to address what constitutes impermissible fee splitting, and that lawyers should not “assume that a lawyer may participate with a particular qualifying provider solely because the qualifying provider’s method of charging for its services falls within one of the methods the board concludes generally would be found to be permissible.”
Bottom line: The Ethics Opinion identifies various fee arrangements between lawyers and qualifying providers which may or may not comply with the new rule. Any lawyers who participate in (or are considering participating in) referrals from a private entity should carefully review this ethics opinion and the amended rule, since lawyers can be disciplined if the referral service (qualifying provider) fails to comply with the Florida Bar rules.
Be careful out there.
Disclaimer: this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
29605 U.S. Highway 19, N., Suite 150
Clearwater, Florida 33761
Office (727) 799-1688
Fax (727) 799-1670