Ethics Advisory Opinion 15-05

Utah State Bar

Ethics Advisory Opinion Committee
Opinion Number 15-05
Issued September 30, 2015

ISSUE

  1. May an attorney pay an internet service company a nominal fee to bid on potential legal work? May an attorney seek clients through an internet business that provides the attorney with limited client information in order to permit the attorney to bid to provide the needed legal services?

OPINION

  1. Payment of a nominal fee to the internet forum service provider described herein, thereby enabling the attorney to offer a bid  for legal services to a potential client, does not violate: (a) Rule 7.1, Communications concerning a Lawyer’s Services; (b) Rule 7.2, Advertising, or (c) Rule 7.3, Direct Contact with Prospective Clients.  Using such an internet business to seek new clients does not violate Rule 1.18 or other rules of professional conduct provided the attorney does not undertake representation for which he has a conflict of interest and the attorney protects the confidentiality of the information received from the prospective client.

BACKGROUND

  1. A new internet service provider website has emerged for Utah business market consumers, including potential clients who need and/or seek legal services.  The website is an internet forum designed to help all consumers, obtain bids or quotes on various professional services, including legal services, in the geographic area where the potential consumer or client lives or where the potential services are needed.  Professionals, including attorneys, may create a profile on the service website (free of charge both to the consumer and to the professional). These professionals may respond in writing to consumer requests for bids or quotes on proposed services.  Consumers, including potential legal clients, are allowed to review the professionals/potential attorneys’ submissions, such as attorney biographies, other client analysis of such attorney services, and attorney case summaries.  The consumer/potential client may then leave comments or recommendations on the website for separate consumer access.
  2. This internet forum service is akin to the popular Angie’s List website, www.angieslist.com, which also allows consumers to find professional services the consumer either wants or requires in an identified geographic area.  Yet a critical difference between Angie’s List and the internet forum service provider described in this Opinion is that the Angie’s List service charges consumers to become Angie’s List “members” in order to take advantage of Angie’s List services.   In contrast, the internet service described in this Opinion is available cost-free to consumers.  Instead, the internet service charges the professionals, including attorneys, for this internet service when the professionals submit bids to the consumer with respect to the consumer’s requested service.  In order for an attorney to submit a bid to the potential client for requested legal services, the attorney must pay a nominal fee of approximately $3.00 – $5.00 per bid to the internet service provider.  The attorney must pay this fee for each bid, regardless of whether the bid actually results in any work for the consumer/client.
  3. Any Utah lawyer can register on the internet forum service provider described herein and submit a resume and/or listing of attorney qualifications for designated legal services. The internet service confirms that the Utah State Bar has in fact licensed the bidding attorney.  The attorney, who has registered with the internet service, selects a category of requests he/she would like to receive, such as tax litigation, contract law, criminal law, etc.  The attorney also sets a travel geographic area to specify the maximum distance the professional would limit his/her services.
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Ethics Advisory Opinion No. 07-01

Issued March 9, 2007
1. Issue:
May a lawyer purchase the exclusive right to referrals generated from the membership base of an organization whose members from time to time may have need of the legal services offered by that lawyer?

2. Opinion: The proposed arrangement, which contemplates the exclusive funneling of referrals to one lawyer or firm, is not permitted, as it violates Rule 7.2(b), which prohibits a lawyer from giving anything of value to a person for recommending the lawyer’s services. The fact that the recommendation is made by an organization does not change the outcome here.
3. Facts: A Utah for-profit organization provides an array of services to its members, including assistance in finding legal representation for its members for various circumstances, including immigration, criminal defense and personal injury following an automobile accident. This organization has solicited a Utah law firm to purchase the exclusive right to receive referrals generated by its membership base, for members who need legal consultation following an automobile accident.
4. Analysis: Rule 7.2(b) of the Utah Rules of Professional Conduct sets out the basic rule that applies to the issue presented:
(b) A lawyer shall not give anything of value to a person for recommending the lawyer’s services; except that a lawyer may:
(1) pay the reasonable costs of advertisements or communications permitted by this Rule;
(2) pay the usual charges of a legal service plan or a lawyer referral service;
(3) pay for a law practice in accordance with Rule 1.17; or
(4) divide a fee with another lawyer as permitted by Rule 1.5(e).1
This fundamental rule is elaborated upon by Comment [5] to the Rule, which further states: “Lawyers are not permitted to pay others for channeling professional work.”2 Under the plain language of this Rule and the explanatory comment, a lawyer would be prohibited from purchasing exclusive referral rights from the organization, because that would constitute paying another person for recommending the lawyer’s services.3
5. Rule 7.2(b) contains several exceptions to this blanket prohibition. Subsection 7.2(b)(2) permits a lawyer to “pay the usual charges of a legal service plan or lawyer referral service.” This provision of the Utah Rules of Professional Conduct differs from the American Bar Association Model Rule, which permits a lawyer to pay the usual charges of a legal service plan or a “not-for-profit or qualified” lawyer referral service.4 It would be inappropriate to conclude, however, that the difference between the Utah Rule and the ABA Model Rule was intended to permit a lawyer to avoid the prohibition of Rule 7.2(b) through the use of an organization that is not, in fact, a “lawyer referral service” in even the most colloquial sense of the term.
6. Comment [6] to Rule 7.2 defines a lawyer referral service as “an organization that holds itself out to the public to provide referrals to lawyers with appropriate experience in the subject matter of the representation.” At a minimum, Rule 7.2(b)(2) requires that the lawyer referral service be available to the public and that it provide referrals to multiple lawyers and law firms, not to a single lawyer or a single law firm.
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ETHICS ADVISORY OPINION No. 03-03

Issued June 23, 2003
1 Issue
: Is it ethical for a lawyer to advertise to provide legal services in Social Security Administration hearings to claimants who have been denied benefits, where nonlawyers are used by the lawyer in providing these services?

2 Opinion: With due consideration for the rules governing advertising and supervi­sion of nonlawyers assistants, it is not unethical for a lawyer to use nonlawyer para­professionals to provide representation of clients in hearings before a government agency that authorizes nonlawyer representation. In particular, the lawyer does not assist the nonlawyer paraprofessional in the unauthorized practice of law under these circum­stances.1
3 Background: The United States Social Security Administration permits nonlawyers to appear at hearings as representatives of claimants challenging the denial of Social Security benefits. The hearings are evidentiary and require representatives of claimants to offer direct testimony and to cross-examine adverse witnesses. Lawyers who represent claimants for Social Security Administration benefits often use nonlawyer parapro­fessionals to represent the clients in the agency hearings. These lawyers advertise their services in Social Security Administration matters, but commonly do not disclose in the advertisements that the client’s representative at the hearing is normally a nonlawyer paraprofessional.
4 Analysis: We have been asked whether an advertisement placed by a lawyer to provide legal services in Social Security Administration hearings to claimants who have been denied Social Security benefits must disclose that the lawyer normally uses nonlawyer para­professionals in making appearances for claimants in such hearings.
5 Advertising Rules. The first step in the analysis is to review the rules governing advertising. First, “[s]ubject to the requirements of Rules 7.1 and 7.3, a lawyer may advertise services through public media, such as a telephone directory, legal directory, newspaper or other periodical, outdoor advertising, radio or television, or through written or recorded communication.”2 But, any advertisement for the lawyer’s legal services must comport with Rule 7.1(a):
A lawyer shall not make a false or misleading communication about the law­yer or the lawyer’s services. A communication is false or misleading if it: (a) Contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.3
As the comment to the Rule emphasizes, “This Rule applies to all communications concerning the lawyer’s services, including advertising materials.”4
6 Thus, a disclosure concerning the use of paraprofessionals would only be required if it were necessary to make the advertisement “considered as a whole, not materially misleading.” But, lawyers routinely provide legal services through the use of nonlawyer paraprofessionals and, indeed, are encouraged to do so to make legal services affordable to the broadest spectrum of the population. Thus, we conclude that the advertisement in question is not materially misleading if it does not disclose that the services are often provided through nonlawyer paraprofessionals.
7 Delegation to Nonlawyers. Social Security Administration rules and regulations permit the appearance of nonlawyer representatives for claimants in Social Security Administration hearings challenging the denial of benefits.5 Without such authority, paraprofessionals would ordinarily not be allowed to provide unassisted representation of a client in an evidentiary hearing. Given the Social Security Administration’s authoriza­tion of nonlawyer professionals to appear as representatives of claimants at its hearings, a lawyer does not act unethically in delegating to paralegals the representation of clients at these hearings. However, the lawyer must comply with his supervisory responsibilities under Rule 5.3,6 which permits nonlawyer paraprofessionals to “act for the lawyer in rendition of the lawyer’s professional services.”7 Rule 5.3 requires, however, that the lawyer provide nonlawyer paraprofessionals appropriate supervision and retain responsi­bility for their work.8
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Ethics Advisory Opinion No. 97-03

(Approved April 25, 1997)
Issue:
May an attorney engage in a direct solicitation, by mail and for pecuniary gain, that advertises mediation and arbitration services?
Opinion: A solicitation that is limited to alternative dispute resolution services is not prohibited, provided that the solicitation makes it clear to all parties that the alternative dispute resolution services are not legal services and that no attorney-client relationship will be established.

Analysis: An attorney proposes to engage in providing mediation and arbitration services and advertises those services by mail. The first sentence of the attorney’s letter to a prospective client would read: “Recently, you entered into legal proceedings with another party in connection with a dispute which you have.” The solicitation recites a number of disadvantages to litigation and compares them with the advantages of alternative dispute resolution (ADR). The solicitation also identifies the attorney as a “licensed Attorney with 14 years of experience in business, employment and contracting law as well as litigation experience,” and it explains the ADR services that are available through the attorney’s business.
Under some circumstances, the Utah Rules of Professional Conduct prohibit attorneys from making a direct, in-person solicitation of clients if done to “solicit professional employment.”1The mailing in question is a written communication by an attorney, directed to specific individuals who are parties in pending litigation. However, our inquiry into whether such a letter is governed by Rule 7.3 turns on whether the “professional employment” the attorney seeks includes the type of service this rule intended to regulate. Because we conclude it is not, we need not reach the question of whether the letter would otherwise violate Rule 7.3.
Under Utah statute, neither formal legal education nor membership in the Utah State Bar is required to provide mediation, arbitration or similar services.2It follows that ADR services are not considered by the Utah Legislature to be legal services or the practice of law.
The drafters of Rule 7.3 apparently intended that the direct solicitation described in the rule be prohibited only when legal services are solicited. In this regard, the language of Rule 7.3 might seem ambiguous, as it prohibits an attorney from soliciting “professional employment from a prospective client” without including such phrases as “practice of law” or “legal services.” However, the comments to Rule 7.3 and the context of the rule indicate an intent that the prohibition be limited to the solicitation of legal services in a direct relationship where the attorney, as advocate, represents the client, and that the rule’s reference to “professional employment” would not be construed to include non-legal services such as arbitration and mediation.
We must, however, make two cautionary comments. First, because the solicitation at issue here was conducted by an attorney, we call attention to Utah Ethics Advisory Opinion No. 151.3That opinion reviewed the conduct of a lawyer who had been appointed by an insurance company as an independent appraiser of the property of an insured of the company. The lawyer also provided legal services for the insurance company on unrelated matters. In holding that the lawyer’s conduct as an appraiser did not constitute legal services subject to the Rules of Professional Conduct, the opinion stated that:
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Ethics Advisory Opinion No. 97-05

(Approved April 25, 1997)
Issue No. 1: Is it ethical for an attorney to receive payment for legal services other than in money?
Opinion: The Utah Rules of Professional Conduct permit an attorney to accept payment for legal services in a form other than money. All arrangements for payment of an attorney’s fees, however, must comply with the applicable provisions of the Utah Rules of Professional Conduct concerning fees and the attorney-client relationship.
Issue No. 2: Is it ethical for an attorney to barter legal services through a barter exchange?

Opinion: Although an attorney’s bartering of legal services through a barter exchange is not prohibited per se by the Utah Rules of Professional Conduct, such bartering is unethical if the attorney’s conduct or the structure, terms, or conditions of the attorney’s arrangements with the barter exchange violate any of the Utah Rules of Professional Conduct.
Analysis: The request for this opinion asks generally, without presenting specific facts and circumstances, whether attorneys ethically may receive payment for legal services other than in money, such as through barter exchanges. The request also asks whether Utah Ethics Advisory Opinion No. 50, issued August 25, 1978, is still valid, noting that questions concerning an attorney’s participation in barter exchanges are of continuing interest in Utah.
Payment of Attorneys’ Fees Other Than in Money. Nothing in the Utah Rules of Professional Conduct requires that an attorney’s fees be paid in money. The fundamental requirement of the Utah Rules of Professional Conduct is that an attorney’s fees must be reasonable.1
Rule 1.5(b) requires a written communication concerning the basis or rate of an attorney’s fee when the lawyer has not regularly represented the client and it is reasonably foreseeable that total attorneys’ fees to the client will exceed $750.00. A determination of whether the $750.00 threshold will be met in a particular case requires that attorneys’ fees be evaluated in terms of their dollar amount.
However, Rule 1.5 does not require that payment for legal services be made in money. The following official comment to Rule 1.5 states that an attorney may accept property in payment for fees:
A lawyer may accept property in payment for services, such as an ownership interest in an enterprise, providing this does not involve acquisition of a proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 1.8(j). However, a fee paid in property instead of money may be subject to special scrutiny because it involves questions concerning both the value of the services and the lawyer’s special knowledge of the value of the property.
As this comment illustrates, no arrangement for payment of an attorney’s fees, whether in money, property or services, should violate any of the prohibited transaction rules of Rule 1.8. For example, an arrangement for payment of attorneys’ fees that involves the acquisition of a pecuniary interest adverse to a client in violation of Rule 1.8(a) is prohibited. Any arrangement for payment of attorneys’ fees that involves giving the lawyer literary or media rights in violation of Rule 1.8(d) is prohibited. Accepting reimbursement of costs other than in money in a way that provides for an improper advance of costs or expenses could also violate the financial assistance restrictions of Rule 1.8(e).
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Ethics Advisory Opinion No. 97-07

(Approved May 30, 1997)
Issue
: Is a lawyer, acting as a trustee under the United States Bankruptcy Code, required to maintain bankruptcy estate trust funds in a financial institution that complies with check-overdraft reporting requirements described in Rule 1.15?

Opinion: No. A lawyer, acting as a trustee under the United States Bankruptcy Code, is not required to maintain funds in a financial institution that complies with the check-overdraft reporting requirements of Rule 1.15, because the administration of such bankruptcy funds is not the practice of law.
Facts: Pursuant to 11 U.S.C. § 1302, the United States Trustee appointed a lawyer as a Chapter 13 trustee for the District of Utah.1As a Chapter 13 trustee, the lawyer is a fiduciary for Chapter 13 estates created upon filing a petition for relief under Chapter 13 of the Bankruptcy Code. On behalf of the Chapter 13 estate, the trustee receives money from Chapter 13 debtors. The trustee is bonded, submits regular reports and is audited on a regular basis by the United States Trustee.
Analysis: Utah Rule of Professional Conduct 1.15 now requires a lawyer to enter an agreement with any financial institution where that lawyer has client or third-party trust funds. Under the agreement, the financial institution will report any non-sufficient checks or check overdrafts to the Office of Attorney Discipline.2
However, most of the Rules of Professional Conduct govern a lawyer’s actions only in the providing of legal services or in the practice of law. For example, an attorney’s direct-mail advertising of mediation and arbitration services is not prohibited under Rule 7.3 since mediation and arbitration services are not the practice of law.3This is true of Rule 1.15. Rule 1.15 states that the rule applies only to property “in connection with a representation.” The Comment to Rule 1.15 also suggests that Rule 1.15 only applies in the practice of law.4
The administration of a Chapter 13 trust is not the practice of law. The Bankruptcy Code does not require that a bankruptcy trustee be a lawyer.5The bankruptcy trustee has no attorney-client relationship with either the debtor or with any of the creditors. The bankruptcy trustee does not act as an advocate for or represent any of the parties. Therefore, a lawyer practicing as a Chapter 13 trustee is not required to conform with the requirements of Rule 1.15 in maintaining Chapter 13 funds.
Provisions other than Rule 1.15 exist to protect Chapter 13 funds. As a bankruptcy trustee, the lawyer must be bonded.6The United States Trustee regularly audits the lawyer, and the lawyer submits periodic reports to the United States Trustee. Finally, a lawyer acting as a trustee, even a Chapter 13 trustee, is still subject to Rule 8.4 for any misconduct in the handling of trust funds.7
This opinion that Rule 1.15 does not govern the Chapter 13 trustee’s actions applies only to the supervision of bankruptcy trust funds. If the lawyer, acting as a bankruptcy trustee, also maintains a non-bankruptcy estate trust fund for a client or a third party, that fund may be subject to Rule 1.15.
Footnotes
1.Although this opinion involves a Chapter 13 trustee, the analysis and result would be the same for other bankruptcy trustees.
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