Proceed with Caution: Lawyer Referral Services

With the Covid-19 pandemic impacting in-person networking and marketing opportunities, and remote work a new reality for many of us, smart and ethical legal marketing is an ever more critical component of legal practice.  Legal marketing encompasses a wide variety of methods and media, including print and broadcast advertisements, social media, websites, webcasts, and seminars, among others.

Internet marketing is ubiquitous, and for many attorneys it is an important component of their business development efforts.  Given the wide range of options, a growing number of attorneys rely on third-party internet marketing companies.  These companies offer increasingly creative methods to increase exposure and generate leads, ranging from basic services to drive traffic to law firm websites (e.g., search engine optimization and “pay-per-click” advertising) to more active measures, including so called “lawyer referral services”—companies that attract prospective clients and direct them to participating attorneys.

This article focuses on the interplay between lawyer referral services and the Georgia Rules of Professional Conduct (“Georgia Rules”) most directly applicable to such services.[1]  Before signing on with a lawyer referral service, it is vitally important that you perform due diligence and verify that the company’s practices are consistent with the Georgia Rules.  Relying on the fact that a company has been in business for several years or claims to comply with “all applicable state bar rules” is fraught with risk:  you, not the referral service, are subject to disciplinary proceedings (and perhaps even malpractice and fiduciary liability).

Lawyer referral services are addressed by Georgia Rule 7.3(c), which provides in relevant part that:

[a] lawyer shall not compensate or give anything of value to a person or organization to recommend or secure the lawyer’s employment by a client, or as a reward for having made a recommendation resulting in the lawyer’s employment by a client.

Georgia Rule 7.3(c).

This general prohibition is well known to most lawyers.  Lawyers have long been prohibited from paying “runners” or entering into exclusive referral agreements with other lawyers and professionals.[2]

Does this mean, however, that lawyers are prohibited from paying third-party referral services?  No.  However, any such arrangement must comply with Rule 7.3(c)(1), which carves out an exception to Rule 7.3(c) for certain for-profit lawyer referral services:

(1)   A lawyer may pay the usual and reasonable fees or dues charged by a lawyer referral service, if the service:

(i)    does not engage in conduct that would violate the Rules if engaged in by a lawyer;

(ii)   provides an explanation to the prospective client regarding how the lawyers are selected by the service to participate in the service; and

(iii) discloses to the prospective client how many lawyers are participating in the service and that those lawyers have paid the service a fee to participate in the service.”

Georgia Rule 7.3(c)(1)(i)-(iii).

Rule 7.3(c)(1) does not define “lawyer referral service,” but comment 7 (“Paying Others to Recommend a Lawyer”) provides guidance:

A lawyer is allowed to pay for communications permitted by these Rules, but otherwise is not permitted to pay another person for channeling professional work.  This restriction does not prevent an organization or person other than the lawyer from advertising or recommending the lawyer’s services.  Thus, a legal aid agency, a prepaid legal services plan or prepaid legal insurance organization may pay to advertise legal services provided under its auspices.[3]

Georgia Rule 7.3, comment 7 (emphases added).

Channeling refers to the practice of steering prospective clients to an attorney in return for a fee.  One example is the use of “runners.”  In a typical setting, runners target victims at accident scenes and hospitals, recommending attorneys in return for a fee from the attorney.  Runners also may rely on contacts at hospitals, law enforcement agencies, and medical providers to provide them with victim contact information for the same purpose.  Georgia’s anti-running statute, O.C.G.A. § 33-24-53, prohibits this practice with respect to motor vehicle accidents, subjecting to criminal liability runners and those who rely on or support them.  Notably, the anti-running rule excludes from its purview fees paid to third-parties for “public media” communications intended to procure clients.  O.C.G.A. § 33-24-53(b).

So where is the line drawn between permissible communications about an attorney’s services, on the one hand, and channeling, on the other hand?  Unfortunately, the Georgia Rules are less than clear.  However, the ABA Model Rules of Professional Conduct (“ABA Model Rules”) provide insight by distinguishing between whether the lawyer’s services are being endorsed and recommended, as opposed to simply being conveyed to the public (albeit in a manner designed to increase exposure and attract clients).  ABA Model Rule 7.2 (Communications Concerning a Lawyer’s Services: Specific Rules), comment 2 (captioned “Paying Others to Recommend a Lawyer”) provides that:

[a] communication contains a recommendation if it endorses or vouches for a lawyer’s credentials, abilities, competence, character, or other professional qualities.  Directory listings and group advertisements that list lawyers by practice area, without more, do not constitute impermissible “recommendations.”

ABA Model Rule 7.2, comment 2.

This reasoning has been adopted in many states.  See, e.g., Tennessee Rules of Professional Conduct, Rule 7.2, comment 7 (“a lawyer may pay others for generating client leads, such as Internet-based client leads, as long as the lead generator does not recommend the lawyer . . . [and] the lead generator’s communications [do not create] a reasonable impression that it is recommending the lawyer, is making the referral without payment from the lawyer, or has analyzed a person’s legal problems when determining which lawyer should receive the referral.”); Colorado Rules of Professional Conduct, Rule 7.2, comment 5 (same); Texas Legal Ethics Opinion 573 (July 2006) (a permissible lawyer referral service “must not state that it is making referrals of lawyers or describe itself in such a way that would cause a reasonable potential client to believe the Service is selecting, referring and recommending the participating lawyers”).

Of course, other state bar rules are not controlling as to the Georgia Rules, but they may present persuasive authority in interpreting Georgia Rule 7.3(c)(1).

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So how do you determine whether a lawyer referral service complies with Rule 7.3(c)(1)?  The short answer is that you have to understand clearly what services are being proposed and how the referral service intends to fulfill them.  Reading the fine print and looking at the company’s on-line presence (including all links and uploaded files) is critical.  Obtaining and interviewing several company references could also give you peace of mind that you are making a good selection. Again, it is you, the attorney, who will answer to Bar Counsel if the Rules are violated, not the referral service.[4]

Below are descriptions of some types of popular lawyer referral services.  These are for illustration only, and the actual structure may vary significantly from company to company.

Legal directories

Legal directories are a common marketing tool. Some of the more well-known sites include FindLaw (https://www.findlaw.com/), Avvo (https://www.avvo.com/), and Martindale https://www.martindale.com/).  These sites offer the ability to search for attorneys by name, practice, location, and other criteria.  Search results present detailed biographical, contact, and related information in a uniform, and ostensibly objective format.  Attorneys can increase their visibility on these sites with paid subscriptions that place their information more prominently and at the top of the search result page.

Legal directories are relatively straightforward, and this marketing model has been accepted by many state bars.  The Georgia Bar has not issued any specific advisory opinion on this subject, but legal directories appear to be permissible communications as contemplated by Rule 7.3(c)(1), assuming the substantive requirements of the Rule are met (i.e., the company explains how lawyers are selected, how many lawyers are participating, and that the lawyers have paid to be listed).[5]

Lead-generating services

Lead generating services match prospective clients with subscribing attorneys through the use of proprietary, interactive features on the company’s website.  Matching services purport to prescreen attorneys based on practice area, experience, disciplinary records, and professional references.  Prospective clients complete intake forms on the service’s website, which are then forwarded to subscribing attorneys whom the service has identified as a match, based on the attorney’s practice area, location, and other factors.[6]  If the attorney elects to “accept” the referral, she contacts the prospective client directly and discusses the terms of representation. Examples of such services include LegalMatch (https://www.legalmatch.com/), Martindale “Pay per Lead” (https://www.martindale.com/marketyourfirm/legal-leads/how-to-get-legal-leads/), and JurisLead (https://www.jurislead.com/lead-generation-for-attorneys/).

Lead generating services that operate within the confines described above, including by communicating objective information, not endorsing particular attorneys, and complying with the substantive requirements of Rules 7.1 and 7.2, appear to be permissible lawyer referral services.

Outsourced client intake/retention

In what appears to be a new trend, companies are offering to sell “ready to litigate” cases.  Here, the marketing company acquires and screens prospective clients purportedly based on criteria provided by the attorney.  Prospective clients meeting the specified criteria sign the attorney’s retention agreement, a copy of which has been provided in advance to the company. The signed retention agreement is then forwarded to the attorney for countersignature.  Signed retention agreements not meeting the attorney’s specified criteria can be returned to the company, provided notice is given within a specified deadline.

The “ready to litigate” model raises a number of issues and may be outside the boundaries of Georgia Rule 7.3(c)(1).  Among other things, there is no transparency into client acquisition and intake methods, which prevents evaluating compliance with Rules 7.1 (communication about a lawyer’s services), 7.2 (advertising), and 7.3(a), (b), and (d) (limits on direct written, in-person, and telephone contact).

Moreover, even if acquisition and intake practices are compliant, evaluating prospective clients’ claims and then having them sign the attorney’s retention agreement appears to be an impermissible recommendation and could also be construed as channeling.  Rather than simply providing information about the attorney’s services from which the prospective client can make an informed decision, the company appears to be evaluating the case and then “closing the deal” by getting the retention agreement signed.

In addition, this practice raises numerous collateral issues because it appears to place control of the client intake/retention/termination process in the hands of a third party who may be unqualified to make decisions about a host of matters requiring an attorney’s professional judgment.  Indeed, we have represented lawyers where this process led to client confusion, implied attorney-client relationships, and the filing of disciplinary grievances with the Bar Counsel.

Accordingly, you should review any marketing opportunity involving “ready to litigate” or similar methods with skepticism and carefully scrutinize the particular techniques and procedures employed in relation to the Georgia Rules.

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Before you engage a lawyer referral service, it is important to fully vet the proposal.  In addition, ongoing monitoring is recommended.  Below are some questions you should consider before engaging a lawyer referral service:

• What are the specific methods of communication the service uses to obtain prospective clients?
• Does the service accept leads from other entities unaffiliated with the company? If so, how does the company verify that the acquisition methods are in compliance with the Georgia Rules?
• How are prospective clients screened?
• What training does the service provide to its employees enabling them to screen prospective clients?
• If the service represents that it complies with applicable state bar rules, how has it made such determination?[7]

In addition to conducting appropriate due diligence, you should carefully evaluate the terms and conditions of the engagement.  Again, read the fine print.  Preferably, the company will be willing to negotiate a service agreement or other form of contract that details the services to be provided and contains other relevant terms desirable in such an agreement.  At a minimum, such an agreement should contain:

• a detailed description of the services, including any specified referral criteria;
• representations and warranties regarding the company’s:
  • marketing and prospective client acquisition practices, and
  • compliance with law (including the applicable Georgia Rules);
• covenants requiring compliance with prospective client disclosures and attorney advertising disclosures required under the Georgia Rules;
• provisions for periodic verification/auditing of the company’s compliance with the Georgia Rules; and
• indemnification provisions appropriately tailored to the scope of work.

Finally, the referral service should have an appropriate privacy policy fully disclosing the ways it gathers, uses, manages, and shares your data.  In representing our lawyer clients, we have seen situations where the referral service, without the knowledge of the lawyer, sold or bargained the lawyer’s information to other referral companies.

The bottom line is that you—not the legal referral service—are responsible for fully complying with the Georgia Rules.  Such services can afford numerous opportunities for practice enhancement, but not at the expense of clouding your good judgment or harming your professional reputation.  Having advised referral companies and lawyers facing claims and disciplinary investigation, we understand these issues.  Our hope is that our involvement and advice will help prevent and avoid claims and grievances. But, if trouble has already arisen, we are always there to help. If you have any questions or require assistance, please feel free to contact us to discuss your particular situation. We can be reached at (404) 593-2670 or on the internet at https://chandler-law.net/.

[1] This article is limited to discussion of for-profit lawyer referral services.  Bar-operated non-profit lawyer referral services are governed by Georgia Rule 7.3(c)(2).

[2] See, e.g., Georgia Rule 1.5(e) (prohibiting fee sharing among attorneys not in the same firm unless “(1) the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation; (2) the client is advised of the share that each lawyer is to receive and does not object to the participation of all the lawyers involved; and (3) the total fee is reasonable”).

[3]Note that comment 7 does permit third party recommendations for a “legal aid agency, a prepaid legal services plan or prepaid legal insurance organization,” which are subject to the less restrictive requirements of Rule 7.3(c)(2)-(3).

[4] Lawyers are responsible for their own communications and those of third parties acting on their behalf.  See Georgia Rule 7.3(e) (“A lawyer shall not accept employment when the lawyer knows or reasonably should know that the person who seeks to employ the lawyer does so as a result of conduct by any person or organization that would violate these Rules if engaged in by a lawyer.”); see also Rule 7.1(c) (“A lawyer retains ultimate responsibility to insure that all communications concerning the lawyer or the lawyer’s services comply with the Georgia Rules of Professional Conduct.”).

[5] In addition to complying with Rule 7.3(c)(1), lawyers must be mindful of the requirements of Rules 7.1 and 7.2 relating to, among other things, advertising content, disclosures, and record keeping.

[6] In order to remain objective and avoid the appearance of recommending lawyers, some services rely on a rotating, “next-in-line” referral model whereby lawyers receive referrals only when they reach the top of the list.

[7] Chandler Law, LLC has represented attorneys in situations involving referral services where the service interviewed our client about the advice we gave and then used our advice to revise its own referral agreements in an effort to comply with the Georgia Rules.  In other words, they used their prospective referral partner to get free legal advice about how their program did or did not comply with the Georgia Rules.