MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2004-21
Legal Directory; Fee-Sharing
You have requested an opinion of the Maryland State Bar Association Committee on Ethics regarding your proposal to set up a legal directory in the State of Maryland in which participating lawyers would only pay a fee for their listing when they are retained by a client who learned of the lawyer through the directory. You ask for an opinion of the Committee regarding the impact of Rule 7.2 of the Rules of Professional Conduct on your proposed directory.
In your inquiry, you state that your company, which is owned and operated by Maryland attorneys, is starting a legal directory in Maryland. The directory will be available free online to the public. Persons looking for a lawyer may use your directory to choose a lawyer based upon the lawyer's location and "area of law."
Your directory will list only those lawyers who wish to be listed. Those choosing to be listed will not pay a listing fee but will be charged a "case acceptance fee" of $250.00. The fee is only due when the lawyer and the client, who chose the lawyer from your directory, enter into a retainer agreement. Lawyers who participate in your directory must sign a contract with your company promising he or she will "not engage in the splitting of client fees" with "(your) company, but instead will pay the fee from their operating or business account and will not charge the fee to the client. (In a subsequent telephone call one of the inquirers stated that the fee should actually come from the lawyer's "personal" account.)
You outline the reasons you believe the arrangement you proposed is permissible under the Rules of Professional Responsibility. You believe the fee charged would not be considered as an impermissible fee-sharing arrangement.
We disagree. Because the "case acceptance" fee is contingent upon the client, retaining the lawyer, the fee clearly comes from the client through the lawyer to your company. The fact that the fee will be paid from the lawyer's operating or business (or "personal") account does not change the fact that the fee is only due when the lawyer reasonably expects to be paid a fee by the client. Thus, the fee paid to your company is directly tied to the fee to be earned from the client.
You state that your proposal is simply a way for listing lawyers to have a risk free means of publicizing their practice. They would only pay for their listing when they were retained by a client. Otherwise, your company will bear the cost of the listing. Lawyer advertising is permitted by Rule 7.2 and the rule presumes that lawyers will pay for such advertising as they do for other overhead expenses. If a lawyer chooses to advertise the cost of that advertising is borne by the lawyer's reduced profits, which presumably will be more than offset by increases fees generated by the advertising. In your proposal, the lawyer does not suffer reduced profits because the fee paid to your company is offset by the fee to be generated by the client who found the lawyer through your listing. In other words a portion of the fee that would normally go to the lawyer is "shared" with your company. In concluding as we do we are not suggesting that the lawyer will increase his fee to the client to offset the fee paid to your company. We simply believe that the fee paid is directly attributable to the fee to be paid by a client and, thus, is a sharing of a fee.
Fee-sharing arrangements are permissible under the Rules of Professional Conduct in certain circumstances. Rule 1.5(e) states that a division of fee between lawyers who are not in the same firm may be made only if:
"(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 does not object to the participation of all the
lawyers involved; and
(3) the total fee is reasonable."
Your proposal does not contemplate such joint responsibility for representation so Rule 1.5(e) does not apply.
Getting back to Rule 7.2 subparagraph (c) states:
"A lawyer shall not give anything of value to a person for recommending
the lawyer's services, except that a lawyer may pay the reasonable cost of
advertising or written communication permitted by this Rule, may pay the usual
charges of a not-for-profit lawyer referral service or other legal service
organization…"
In a subsequent communication with the Committee you stated that your proposed listing is not a referral service because it does not recommend a specific lawyer but merely presents a list of lawyers to prospective clients. (In our telephone conversation, one of the inquirers stated that the list would be limited to a finite number of lawyers in a particular area of practice. So the list you proposed would be limited to only those lawyers you allow to take part in your listing.) By adopting Rule 7.2(c), the Court of Appeals has specifically outlined when a lawyer may pay for publicizing their availability to provide legal services. Since your proposal is a for profit plan, it does not fit the exception provided for not for profits. The rule also says that "a lawyer may pay" for advertising. However reasonable your fee may be, the cost borne by specific clients rather than the lawyer. Even though the lawyer in your scenario is not charging the client an additional fee but is simply recovering the fee from the client, we believe it is a fee- sharing arrangement that does not fit within the Rules.