New Jersey Prohibits Lawyers from Using Avvo Legal Services

Prohibited

Avvo says that it charges a “marketing fee” to the lawyers it connects with potential clients through its Legal Services program. However, three New Jersey Supreme Court committees defined it differently in a recently issued joint ethics opinion.

Avvo’s “marketing fee” actually amounts to a referral fee and a form of fee sharing, which violates New Jersey’s Rules of Professional Conduct, according to the June 21, 2017, ethics opinion. As a result, lawyers in New Jersey cannot participate in the program, the opinion states.

“And it’s not just New Jersey that thinks this way,” writes attorney Shannon Achimalbe at AbovetheLaw.com in an article about the opinion, noting that New Jersey joins Ohio, Pennsylvania and South Carolina in prohibiting lawyers from participating in the program. “I am very confident that other states will rule the same way.”

The committees found that slightly similar programs that LegalZoom and Rocket Lawyer offer to lawyers do not appear to involve unethical fee-sharing schemes, New Jersey Law Journal reports. However, because those companies have failed to register their legal services programs with the state’s Administrative Office of the Courts (AOC), lawyers cannot participate in them, either, according to the ethics opinion.

If your law firm uses Avvo, LegalZoom, Rocket Lawyer or similar legal services programs, or if you are considering use of one or more of those programs, you should pay close attention to this ethics opinion and examine how your state treats them.

What Legal Services Programs Are Under Scrutiny?

The Avvo Legal Services program at issue in the New Jersey ethics opinion is different from its other advertising services, which we previously discussed in this blog in May 2016 and September 2016. While those advertising programs involve “sponsored listings” in the Avvo legal directory, the Legal Services program tries to directly connect lawyers with potential clients.

As ABA Journal describes, the program offers two products:

  • Avvo Advisor – In this program, people pay fixed fees of $39 or $69 to have a 15-minute or 30-minute “advice session” with a lawyer who participates in the program. The New Jersey Law Journal reports that Avvo keeps a portion of this money as its “marketing fee.”
  • Avvo Legal Services – This program allows people to buy specific legal services from a participating lawyer such as creation of a living trust for $895. ABA Journal reports that Avvo deposits the fee into a lawyer’s bank account and then later withdraws a “marketing fee.”

The other programs that the ethics opinion examined were:

  • LegalZoom – In this program’s Business Advantage Pro and Legal Advantage Plus services, people pay a subscription fee and receive phone consultations with lawyers, the New Jersey Law Journal reports. Lawyers do not pay to participate in this program. LegalZoom keeps the subscription fees.
  • Rocket Lawyer – In this program, people can consult with participating lawyers by phone and receive limited legal review of documents. Rocket Lawyer does not charge lawyers to participate or share its membership fees with them. Lawyers who participate agree to offer discounted fees for additional services they provide, the New Jersey Law Journal states.

According to a press release, the New Jersey State Bar Association (NJSBA) sought an opinion from the New Jersey Supreme Court about these programs. The NJSBA expressed concern about “the growing number of organizations that have sought to open the door to fee sharing, which could interfere with the lawyer’s independent professional judgment.” The NJSBA noted that several lawyers could be using these programs “without a thorough vetting of how they comport with ethics rules.”

Marketing Fee or Fee Splitting?

The New Jersey Supreme Court’s Advisory Committee on Professional Ethics, Committee on Attorney Advertising and Committee on the Unauthorized Practice of Law responded to the NJSBA’s inquiry with the joint ethics opinion. In the opinion, the committees found:

  • Avvo’s Legal Services program amounted to “an impermissible lawyer referral service” in violation of Rules 7.2(c) and 7.3(d) of the state’s Rules of Professional Conduct (RPC);
  • Avvo’s “marketing fee” amounted to “improper fee sharing” in violation of RPC 5.4(a); and
  • The LegalZoom and Rocket Lawyer legal service plans had not been registered with the state’s AOC in violation of RPC 7.3(e)(4)(vii).

However, interestingly, the opinion made no finding that Avvo’s Legal Services program in any way interferes with a lawyer’s independent professional judgment – a key concern of the NJSBA and the primary purpose of rules that prohibit fee sharing between lawyers and non-lawyers.

Avvo Calls Ethics Opinion a “Mechanistic Application of the Rules”

In the NJSBA press release, the organization’s president, Robert B. Hille, said that the joint ethics opinion provided “clarity and practical guidance for New Jersey attorneys about whether and to what extent they can participate in such programs.” Presumably, any New Jersey lawyer who continues to participate in the program could face disciplinary action.

However, based on comments reported by ABA Journal, Avvo’s chief legal officer, Josh King, indicated that the company was far from happy about the ethics opinion and would continue to press forward with its business model.

King told ABA Journal that the company was glad that the committees made no finding in the ethics opinion that Avvo interfered with the professional judgment of lawyers. However, by finding that Avvo’s Legal Services program involved unethical fee sharing, King said that the committees “focused solely on mechanistic application of the rules rather than what the law requires: consumer protection and respect for the First Amendment.”

Achimalbe of AbovetheLaw.com points out that Avvo (or lawyers participating in the program) could challenge similar ethics rulings in the future by not only asserting First Amendment rights but antitrust violations as well.

So, what do you think? Do legal services programs such as those offered by Avvo, LegalZoom and Rocket Lawyer amount to unethical fee sharing between lawyers and non-lawyers? Do the companies that offer those programs interfere with lawyer’s independent professional judgment? In the end, do these programs actually help or harm people in need of legal services?

Please feel free to share your comments below.