Third-Party Payments for Legal Services

By: Arend J. Abel, Attorney

Occasionally, a lawyer will run into a situation where someone other than the client agrees to pay the lawyer for the representation.  This situation arises most frequently with insurance, but also can occur when a company pays for an employee’s defense or a relative pays for the representation of an individual.  Third-party payment creates ethical issues for the lawyer, and is specifically governed by the Indiana Rules of Professional Conduct.  Rule 1.8(f) provides:

A lawyer shall not accept compensation for representing a client from one other than the client unless:

(1)    the client gives informed consent;

(2)    there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and

(3)    information relating to representation of a client is protected as required by Rule 1.6.

Legal Zoom and Avvo – Attorneys Beware

By: Arend J. Abel, Attorney

In April, the Indiana Supreme Court Disciplinary Commission issued its first ever advisory opinion, and it was a doozy.  It’s fair to say that the opinion puts the kibosh on the current business “lawyer consultation” models for online giants Legal Zoom and Avvo for a whole host of reasons.

Background

Not content to remain in the realm of automated preparation of legal documents, online companies such as Legal Zoom and Avvo have begun offering consultation with actual lawyers.  The lawyers are not, however, employees of the online entities, but “independent” lawyers.  The company establishes the fee for the service, which is typically a flat fee charged to the consumer.  Say $500 for estate planning advice and preparation of a simple will.  The client selects a lawyer from the company’s online database, sets up an appointment and receives the service.  In addition, the lawyer pays a “marketing fee” to the company for each matter the lawyer receives.

The Commission’s Opinion

According to the Commission, such an arrangement raises a host of issues under the Indiana Rules of Professional Conduct.  First, the Commission concludes, the marketing fee can be viewed as violating the rule that a lawyer may not split legal fees with a non-lawyer, a practice prohibited by Indiana Rule of Professional Conduct 5.4(a).  While the Commission’s reasoning is less than clear, it appears that the fact the marketing fee is not payable unless the lawyer earns a fee is the key to seeing the fee as simply part of the overall fee that the consumer pays.

The Commission’s reasoning for its conclusion that the arrangement risks an abdication of the lawyer’s professional independence is more extensive, but less convincing.  According to the Commission the abdication occurs because the client’s legal needs are “locked in” without prior consultation, and the lawyer must have a prior consultation with the client to determine the client’s needs.  However, nothing in the arrangement appears to prevent a lawyer from consulting with the client (indeed consultations are part of the model) and advising the client whether the services the client selected are sufficient to the client’s needs.  The Commission also concludes that the fact the online company sets the fee based on the time the company assumes the service will take to perform amounts to “direct[ing] the length of time lawyer should spend on the representation” such that the attorney may agree to provide legal services that cannot realistically be performed within the allotted time.  Again, though, nothing in the arrangement prevents the lawyer from spending the amount of time the lawyer independently deems adequate to get the job done right.  Finally, the Commission suggests that a “money back customer satisfaction” guarantee somehow abdicates the lawyer’s independence.  The reasoning behind this concern is particularly unclear.  Does it mean that individual lawyers can’t offer a money-back guarantees?  If it doesn’t, what’s the functional difference, if the “satisfaction” decision is truly in the hands of the consumer?  Or is the problem that the company, rather than the lawyer, will decide whether to refund the fee?

The commission also suggests that the arrangement could violate Ind. R. Prof. Cond. 1.2(c), which governs limited scope representations.  The rule requires both that the limitations be reasonable, and that the client consent.  While the Commission concludes that the “ ‘referral’ business model raises concerns about meeting this obligation,” the opinion does not explain why.

Unlike other passages of the opinion, that portion of the opinion stating that the marketing fee does not qualify as an advertising cost is not couched in conditional language saying the arrangement creates a risk of violation.  Rather, the opinion flatly states that the marketing fee “is not reasonable cost of advertising.”  That conclusion, if correct, would mean that participation likely violates Rule 7.2(b), which provides that a lawyer “shall not give anything of value to a person for recommending or advertising the lawyer’s services.”  Reasonable costs of advertising are an exception from this general prohibition, as are “the usual charges of a legal service plan or a not-for-profit or qualified lawyer referral service described in Rule 7.3(d)”  Rule 7.3(d) limits qualified referral services to those run by not-for-profit and government entities and bar associations, so for-profit online referral services wouldn’t qualify.

The opinion gives two reasons for its conclusion that the marketing fee is not the reasonable cost of advertising.  The fees are typically “tied to the cost of the legal services” rather than the actual cost of advertising the individual lawyer’s services.  In addition, because the fee is only paid after the lawyer renders the service, the opinion reasons it is more akin to fee splitting.

Finally, the opinion suggests that advertising by the online companies may falsely inflate the abilities of the lawyers to whom they make referrals, describing lawyers as highly qualified, knowledgeable, or even specialized, but allowing lawyers to take cases without prior experience.

Conclusion

In spite of the fact that much of the opinion is cast in conditional language, saying particular aspects of the arrangement “may risk” violating Indiana’s Rules of Professional Conduct, and the fact that the opinion is “non-binding,” an lawyer would have to be more than reckless to participate in the arrangements described above.  It remains to be seen how the online services react, but my prediction is there will be litigation against bar authorities over these issues.

Judicial Qualifications Commission Gives Green Light to Tweeting at Trial

By: Arend J. Abel, Attorney

You may remember just over a year ago when a partner in Barnes & Thornburg’s Chicago office was sanctioned for live-tweeting a trial.  That event makes all the more surprising an Ethics Opinion that the Indiana Commission on Judicial Qualifications issued last month.  According to the Commission, live-tweeting a trial does not amount to “Broadcasting,” which is barred by Rule 2.17 of the Code of Judicial Conduct, except in very narrow circumstances or with prior permission of the Supreme Court.

The Indiana Appellate Rules Do Not Allow Exhibits in the Appendix or Citations in Footnotes

By: Arend J. Abel, Attorney

[November 17, 2016]– The Indiana Court of Appeals issued an opinion today in which it said Exhibits should not be put in the Appendix.  Sperro, LLC v. Ford Motor Credit Company, LLC.  In footnote 4 of the opinion, the Court said:

“Appellants’ and FMCC’s appendices do not comply with the Indiana Rules of Appellate Procedure because they contain exhibits, which are considered part of the transcript and therefore are not to be reproduced in an appendix pursuant to Appellant Rules 29 and 50(F).”

Tea Leaves About Testimonials

By: Arend J. Abel, Attorney

Despite what many Indiana lawyers believe, client testimonials are no longer absolutely barred by the Indiana Rules of Professional Conduct.  They used to be, until January of 2011, when a set of amendments to the rules took effect.  Until that time, former Rule 7.2(d)(3) expressly prohibited “use of any form of public communication which . . . contains a testimonial about or endorsement of a lawyer.”  Testimonials aren’t even mentioned in the text of the current rules. 

When incivility crosses the line into a disciplinary violation

By: Arend J. Abel, Attorney

The Supreme Court entered an order last week that should cause every attorney to pause before hitting “Send” on that nasty email targeted at opposing counsel, and before filing a motion that vents frustration at a trial court’s ruling.  They could get you suspended.

Last week, an attorney in northern Indiana was suspended for, among other things, sending an email to opposing counsel saying the opposing parties were “possibly homophobic, racist, [and] sexist” and accusing the judge in a parenting time dispute of displaying a “stubbornly injudicious attitude” and  “taking off on detours and frolics that ignore the fact that there are laws in Indiana that the court is supposed to follow and uphold.”

To Report or Not to Report: That is the Question (Part I)

By: Arend J. Abel, Attorney

I help cover the Indiana State Bar Association’s Ethics Hotline, and one of the questions I get most often is a question like this:

“My opposing counsel did X. Do I have a duty to report to the Disciplinary Commission?”

Sometime the “X” isn’t an ethics violation at all, which makes the answer to the question easy. More often, though there is some sort of violation, so the issue of duty to report arises.

The duty to report other attorneys’ ethics violations appears in Ind. R. Prof. Cond. 8.3, which says:

(a)   A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.

Indiana Ethics Rule Could Hit You Where You Live – Literally

by: Arend J. Abel, Attorney

Any lawyer who pays attention to legal ethics issues in Indiana by now has heard of In re Anonymous. 6 N.E.3d 903 (2014).  The most widely talked about aspect of the case was the fact that the disciplined lawyer was somehow caught off-guard because he sought out legal advice and other opinions and believed he was in compliance with the rules.  There was a hue and cry that enforcement against the lawyer was unfair or even a violation of due process, either because the client testimonials that the Court held violated the rules were on a website the lawyer couldn’t control, or because the rules were unclear on what amounts to a violation.