Can a Michigan lawyer join a for-profit lawyer referral service that charges per-referral fees and advertises its lawyers as screened and associated?

Plain-English summary

A lawyer referral service registered with the State Bar solicited member lawyers who signed a contract and paid one-time and monthly fees. The LRS sold a limited number of geographic "positions" (a lawyer could buy all positions in a market to receive all of its referrals), set "minimum standards" including handling a number of personal injury cases and maintaining a good disciplinary record, and reserved the right to suspend a lawyer the LRS general counsel judged to represent clients unsatisfactorily. The LRS ran television and national advertising proclaiming "[LRS] lawyers really know their stuff" and "OFFICES EVERYWHERE," with no mechanism for member lawyers to control the ad content; operators screened calls and relayed "bona fide referrals" to members on rotation.

The Committee concluded participation was unethical on several independent grounds. Applying R-6 and MRPC 7.2(c), it found the LRS was a classic for-profit referral service (nothing said it was not-for-profit), so it fell within neither exception in MRPC 7.2(c), and a Michigan lawyer paying for its referrals would contravene the rule. Under MRPC 7.1, the advertising was materially misleading or likely to create unjustified expectations: the name implied an "association" of "trial lawyers" when members were not required to be trial lawyers and had no association with each other, and claims of experienced, competent lawyers were unverifiable because the LRS had no mechanism to confirm qualifications (citing RI-31). The Committee also found the scheme gave participating lawyers no opportunity to review or control the advertising, violating their duty under MRPC 7.1 and 7.2.

Finally, the Committee identified two further problems. The LRS general counsel's review of whether representation was "satisfactory" could expose client confidences and secrets if it involved inspecting client files (MRPC 1.6), and having a non-supervising general counsel judge the adequacy of representation improperly interfered with the lawyer's independent professional judgment (MRPC 5.4). Allowing a general counsel not licensed in Michigan to review the representation of a Michigan client in a Michigan case would assist the unauthorized practice of law (MRPC 5.5). The Committee concluded a lawyer may not ethically participate in such a service.

Currency note

This opinion was issued in 1990 and interprets the Michigan Rules of Professional Conduct as they then stood. The MRPC have since been amended, and later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer pay a for-profit referral service a fee for each referral?

A: Per the opinion, no. The Committee concluded that participating in a for-profit referral service to which the lawyer pays a referral fee violates MRPC 7.2(c), because such a service fits neither the advertising-cost nor the not-for-profit exception.

Q: What made the referral service's advertising misleading under MRPC 7.1?

A: The opinion concluded the ads implied an "association" of "trial lawyers" when members were neither required to be trial lawyers nor associated with each other, and claimed the lawyers were experienced and competent without any mechanism to verify those qualifications.

Q: Can a referral service's general counsel review a participating lawyer's work?

A: The opinion concluded that review which inspects client files risks exposing confidences in violation of MRPC 1.6, that a non-supervising general counsel judging the adequacy of representation interferes with independent professional judgment under MRPC 5.4, and that review by a general counsel not licensed in Michigan would assist the unauthorized practice of law under MRPC 5.5.

Background and rules framework

The opinion interprets MRPC 7.2(c) (paying for recommendations; the for-profit referral-service bar; Model Rule 7.2), MRPC 7.1 (false or misleading communications; Model Rule 7.1), MRPC 5.4 (independent professional judgment; Model Rule 5.4), MRPC 1.6 (confidentiality; Model Rule 1.6), and MRPC 5.5 (unauthorized practice; Model Rule 5.5), building on the general referral-service framework of R-6.

Citations and references

Rules of Professional Conduct:

• MR 7.2 / MRPC 7.2(c) (paying for recommendations; for-profit referral services)
• MR 7.1 / MRPC 7.1 (communications concerning a lawyer's services)
• MR 5.4 / MRPC 5.4 (independent professional judgment)
• MR 1.6 / MRPC 1.6 (confidentiality of information)
• MR 5.5 / MRPC 5.5 (unauthorized practice of law)

Other opinions cited:

• Michigan R-6: general guidelines on participating in a lawyer referral service
• Michigan RI-7, RI-9, RI-17, RI-24, RI-31

See also

• Mich Ethics Op. R-6: Lawyer Referral Service Rules
• Mich Ethics Op. R-18: Group TV Advertising Schemes
• Mich Ethics Op. RI-99: Seminar Booth Marketing

Source

• Landing page: https://www.michbar.org/opinions/ethics/numbered_opinions?OpinionID=857&Type=6

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

R-8

October 26, 1990

SYLLABUS

A lawyer may not ethically participate in a for-profit lawyer referral service to which the lawyer pays a fee for the referral.

A lawyer may not ethically participate in a lawyer referral service which falsely implies that participating lawyers are qualified or are associated with each other in the practice of law.

A lawyer may not ethically participate in the use of any form of public communication that is false, fraudulent, misleading or deceptive. A communication shall not:

(a) contain a material misrepresentation of fact or law, or omit a fact necessary to make the statement considered as a whole not materially misleading;

(b) be likely to create an unjustified expectation about results the lawyer can achieve, or state or imply that the lawyer can achieve results by means that violate the Rules of Professional Conduct or other law; or

(c) compare the lawyer's services with other lawyers' services, unless the comparison can be factually substantiated.

A lawyer may not ethically participate in a lawyer referral service in which a lawyer employee of the referral service interferes with the independent professional judgment of the participating lawyer, or in which a lawyer not licensed in Michigan is given access to confidences of a client of a participating lawyer.

References: MRPC 1.6, 5.4, 5.5, 7.1, 7.2(c); R-6; RI-7, RI-9, RI-17, RI-24, RI-31.

TEXT

A Lawyer Referral Service ["LRS"] registered with the State Bar of Michigan pursuant to MRPC 6.3, solicits member lawyers who sign a contract and pay a variety of one-time and monthly fees.

LRS creates a limited number of market "positions" available to a geographical area, e.g., 15 positions in the Grand Rapids market and 10 in the Kalamazoo market. A member lawyer could purchase all LRS positions within a given market so that all calls to LRS from that market's potential clients would be referred to that single lawyer. The LRS marketing materials state:

"Referrals are handled on a strict rotation basis, and members may acquire as many positions as they desire. Of course, the more rotation slots per attorney will enhance the total percentage of the number of referrals for that member. Markets are determined by population and area boundaries and are subject to change. Participation is limited by market size. [LRS] members are kept strictly confidential."

To be eligible to participate in the LRS, members agree to abide by LRS "minimum standards," including (1) remaining a member in good standing in a state bar; (2) maintaining malpractice insurance; (3) participating in a certain number of personal injury cases; (4) possessing a good disciplinary record; and (5) having no ownership interest in the LRS. In addition, the minimum standards require:

"Each participating lawyer must satisfactorily represent the client referred to him; in the event that a participating lawyer does not, in the judgment of the [LRS] general counsel, satisfactorily represent a client, [LRS] shall suspend the lawyer from [LRS] participation."

LRS prepares and airs television commercials in Michigan and across the nation. One LRS ad depicts an injured person discussing the injury and the results the person achieved by calling the LRS toll-free number. "[LRS] lawyers really know their stuff" proclaims the TV announcer. The TV screen message reads "OFFICES EVERYWHERE - CALL 1-800-XXX-XXXX 24 Hrs." There is no mechanism for member lawyers to control the content of LRS advertisements.

LRS operators are available on a 24-hour, 7-day a week basis to screen telephone calls from potential clients, and then relay them to "referral assistants" who in turn refer "bona fide referrals" to member lawyers on a rotation basis. LRS describes a bona fide referral as one in which there has been "injury due to negligence"; there is "insurance coverage"; and there is "no attorney involvement." Member lawyers are under no obligation to accept any referral.

In addition to personal injury referrals, member lawyers are invited by LRS to designate other fields of practice (i.e., bankruptcy, real estate, immigration, etc.) in which they are interested in receiving LRS referrals.

MRPC 7.2(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 communication permitted by this rule and may participate in, and pay the usual charges of, a not-for-profit lawyer referral service or other legal services organization that satisfies the requirements of rule 6.3(b)."

A lawyer may not ethically participate in a lawyer referral service in which the lawyer pays for client referrals from a for-profit referral service. R-6. Likewise, it is unethical for a lawyer to participate in a legal service marketing scheme where the member lawyer's participation fee is allocated to an expense other than advertising, RI-9. A for-profit entity which markets legal services to a defined interest group, for a fee to be paid by the participating lawyer, constitutes a legal referral service, participation in which violates MRPC 7.2(c). RI-17, RI-24.

The LRS marketing scheme is more than a mere advertising medium. By any definition, it is a classical lawyer referral service. Nowhere in LRS advertising to the public, LRS solicitations to attorneys, or in LRS marketing brochures is there any statement that LRS is not-for-profit. Therefore, LRS does not fall within either exception recognized in MRPC 7.2(c). A Michigan lawyer who participates in the LRS marketing scheme would be in contravention of MRPC 7.2(c) and consequently subject to discipline.

MRPC 7.1 states:

"A lawyer may, on the lawyer's own behalf, on behalf of a partner or associate, or on behalf of any other lawyer affiliated with the lawyer or the lawyer's law firm, use or participate in the use of any form of public communication that is not false, fraudulent, misleading or deceptive. A communication shall not:

"(a) contain a material misrepresentation of fact or law, or omit a fact necessary to make the statement considered as a whole not materially misleading;

"(b) be likely to create an unjustified expectation about results the lawyer can achieve, or state or imply that the lawyer can achieve results by means that violate the Rules of Professional Conduct or other law; or

"(c) compare the lawyer's services with other lawyers' services, unless the comparison can be factually substantiated."

A lawyer cannot ethically participate in a lawyer referral service which advertises its member lawyers as being screened, qualified and competent, when in fact there is no mechanism by which the lawyer referral service independently verifies the qualifications of a participating lawyer. RI-31.

The above referenced advertising information disseminated by LRS is either materially misleading or likely to create an unjustified expectation about results the lawyer can achieve, in the following respects:

(a) The LRS by its very name, claims to be an "association" of "trial lawyers" thereby implying to the public that callers will be referred by LRS to trial lawyers who are in association with each other. However, LRS is not an "association" of lawyers inasmuch as its participating members are not required, nor are they likely to have any association or contact with each other. In addition, LRS does not require its lawyer members to be trial lawyers and does not have a mechanism to verify that its members are trial lawyers.

(b) The LRS television advertisement claims that "[LRS] lawyers really know their stuff." Its marketing materials recite that LRS is "a cooperative of experienced, competent lawyers" and that LRS is a "premier attorney referral corporation." However, the LRS scheme includes no mechanism to verify that its member lawyers are experienced, competent, or "really know their stuff." As to level of experience, LRS minimum standards state that participating lawyers "must have participated in the resolution of at least 50 personal injury cases." However, LRS has no mechanism to verify that lawyer applicants have met this standard. Even if such standard were met by participating lawyers, it would not establish them as experienced, competent trial lawyers "who really know their stuff."

Given the misleading information disseminated by LRS and its propensity to result in unjustified expectations by the general public, a Michigan lawyer's participation in LRS would violate MRPC 7.1.

Under MRPC 7.1 and 7.2, a lawyer has an inherent duty to assure that all communications about the lawyer's legal services and qualifications are not misleading. RI-7, RI-17, RI-24. The LRS marketing scheme affords no opportunity for its participating lawyers to review or control LRS advertisements about the qualifications and services of participating lawyers. Consequently, Michigan lawyers may not ethically participate in a plan which fails to provide for lawyer review of advertisements.

Finally, the LRS minimum standards suggest that its general counsel would be reviewing and evaluating the work of participating lawyers. If such a review contemplates LRS inspection of client files, confidences and secrets of the client may be improperly exposed. MRPC 1.6. Having LRS general counsel, who does not supervise and is not otherwise associated with the lawyer, determine whether a particular representation is "satisfactory" constitutes improper interference with the lawyer's independent professional judgment. MRPC 5.4. Allowing a general counsel who is not licensed in Michigan to review the representation rendered to a Michigan client in a Michigan case would be assisting in the unauthorized practice of law. MRPC 5.5.

A lawyer may not ethically participate in such a lawyer referral service.