MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 2016-14

You have asked for an opinion as to whethera lawyer’s participation in an online fixedfee legal services program would constitute fee-sharing with a non-attorney.

You have asked for an opinion as to whether a lawyer’s participation in an online fixed-fee
legal services program would constitute fee-sharing with a non-attorney.1

Summary Conclusion

The Committee concludes that a fee paid to participate in an online fixed-fee legal services program constitutes fee-sharing if the fee is contingent upon a client retaining a lawyer for a service and the amount of the fee differs depending upon the services provided by the lawyer for the client.

Opinion

Your inquiry focuses on online fixed-fee legal services companies that allow lawyers to advertise on their websites to provide fixed-fee, limited-scope legal services at prices set by the company. A client would use a company’s website to purchase legal services, choose the lawyer the client wished to hire, and pay the company a fixed-fee in advance for those legal services. Once the lawyer completed the legal service for the client, the company would pay the lawyer the full fixed-fee paid by the client. In a separate transaction, the lawyer would pay the company a per-service “marketing” fee, which is set by the company and differs in amount depending upon the fixed-fee paid by the client.

A lawyer cannot share legal fees with a non-lawyer, except in certain limited situations that would not apply to a lawyer’s participation in an online fixed-fee legal services program. See Md. R. Prof Conduct 5.a(a). Additionally, a lawyer cannot pay a referral fee. See Md. R. Prof Conduct 7.2(c). A lawyer can however, pay a reasonable fee for advertising. See Md. R. Prof I Conduct 7 .2(c)(l).2 Thus, the key question is whether a per-service “marketing” fee in connection with an online legal services provider is a fee that is being shared with a non-lawyer, a referral fee, or a reasonable fee for advertising. The first two would be impermissible under the Rules, the last would be permissible.

Here, the proposed arrangement you have asked about does not appear to be a referral service because the company would not recommend or refer a client to a particular lawyer, but rather the client would choose the lawyer from the company’s online directory of lawyers in a particular geographic area.

The Committee’s prior opinions regarding online advertising are instructive in determining whether the fee paid would constitute impermissible fee-sharing or a permissible advertising fee. In Docket 2012-07, the Committee concluded that the fee paid to a daily deal website was an advertising cost, even though the website collected fees from the client in advance and the fee paid by the lawyer to the website was based on a percentage of the fee paid by the client. In doing so, the Committee determined that a daily deal website was merely a form of advertising and the fee paid by the lawyer was the cost of advertising.

In Docket 2007-01, the Committee considered whether a lawyer could pay a fee to appear in an online directory. Because the fee paid by the lawyer was not tied to any payment by a client, the Committee determined that the fee paid by the lawyer was an advertising fee and, therefore, did not violate Rule 5.4(a).3

In Ethics Docket 2004-21, the Committee considered whether a lawyer could pay a fee to be listed in an online legal directory when the fee was paid only when the lawyer was retained by a client who learned of the lawyer through the directory. The company providing the online directory required lawyers to pay the fee to the company from the lawyer’s operating or business account and to agree not to charge the fee to the client. The Committee determined that because the fee was contingent upon the client retaining the lawyer, the fee came from the client, even though the fee was paid from the lawyer’s operating or business account. In doing so, the Committee noted that “[t]he 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 [the] company is directly tied to the fee to be earned from the client.” Accordingly, the Committee concluded that such an arrangement would be an impermissible fee-sharing arrangement.

The Committee concludes that the fee charged for participation in an online fixed-fee legal program is most analogous to the fee charged to participate in the online legal directory discussed in Ethics Docket 2004-21. The lawyer would pay the fee only if the lawyer is retained by the client. Regardless of the fact that the fee arrangement would be structured as two separate transactions, the fee would effectively be paid by the client because the fee paid to the company is tied directly to the fee earned by the lawyer. Other facts that suggest that this would be a fee-sharing arrangement are that the company providing the online fixed-fee legal program would specify the types of legal services that may be provided, set the fees for each legal service, and change the fee due from the lawyer depending upon the amount of the fee charged to the client.

This situation differs from the daily deal website that the Committee recently considered because with a daily deal website, the lawyer determines what service to offer and sets the fee to be paid by the client for the service. The daily deal website was merely being used to advertise the lawyer’s service and was charging an advertising fee of a set percentage for doing so.

Although your inquiry was addressed solely to the issue of fee-sharing, the Committee notes that a lawyer’s relationship with an online fixed-fee legal services program presents other potential ethical issues under the Maryland Rules of Professional Conduct. The Committee discussed a number of the potential issues in Ethics Docket 2012-07, and any lawyer should review these and any other potential ethical issues before entering into a specific arrangement with any online fixed-fee legal services company.

The Committee’s opinions are available online at www.msba.org.

Authorities
Md. Rule of Prof Conduct 5.4 (Professional Independence of a Lawyer)
Md. Rule of Prol Conduct 7.2 (Advertising)
MSBA Ethics Docket 2012-07
MSBA Ethics Docket 2007-01
MSBA Ethics Docket 2004-21

1. Although your inquiry was focused on a specific company’s legal services program, the Committee will not provide an advisory opinion on a specific company or legal services program. Rather, the opinion will be based on how such a program may work.

2. A lawyer may also “pay the usual charges of a legal services plan or a not-for-profit lawyer referral service” (see Md. R. Prof Conduct 7.2(c)(2)); however, your inquiry does not indicate that the type of fixed-fee program about which you have inquired is either a legal services plan or a not-for-profit lawyer referral service. A “legal services plan” is generally an arrangement “in the nature of an insurance scheme whereby a subscriber in return for a set fee can partake of a broad range of legal services.” Prepaid legal service plans,93 A.L.R.3d 199 (1e7e).

3. Nonetheless, the Committee determined that the agreement between the lawyer and the directory violated Rule 7.1’s prohibition against misleading advertisements.