Can a lawyer join a for-profit networking and referral organization that encourages members to trade business referrals?

Plain-English summary

A lawyer wanted to join a for-profit networking organization in which one professional per field per chapter meets weekly, gives a 60-second "commercial" advertising his services, and is encouraged (but not paid or penalized) to trade business referrals tracked with "tickets." The organization's website pitched membership as having sales people who carry your business cards and recommend you. The question is whether the lawyer may participate.

The opinion concludes yes, provided participation does not require the lawyer to violate the Rules. When advising a client to use a third party, a lawyer must exercise independent professional judgment and give competent advice (Rules 1.7 and 1.1). A lawyer also may not give anything of value to a person for recommending the lawyer's services (with limited exceptions) and may not solicit prospective clients in person, directly or through an agent (Rules 7.2(b) and 7.3(a)). So a lawyer may participate only if making referrals to other members is not a condition of membership and the lawyer is not required to fill out referral tickets. If the lawyer refers a client to another member, he may do so only with the client's informed consent and after determining that the client would benefit, the member's credentials are legitimate, and the member is qualified.

The opinion adds that the lawyer may not make referrals on a quid pro quo basis and must emphasize to other members that any referral to him should rest on their independent analysis of his qualifications. A participating lawyer must act in good faith; if reciprocal referrals are an explicit or implicit condition of membership, the lawyer may not participate. On the specific activities: the lawyer may make presentations about his services to members and guests at the weekly meetings; he may not provide business cards to other members for distribution to third parties, because of the risk of in-person solicitation on his behalf; and he may not ask other members to refer business to him, though he may give them information about his qualifications.

In practice

Under the North Carolina rules as they stood at the time of the opinion, the analysis turns on whether membership forces reciprocal referrals or in-person solicitation by others. The opinion holds that a lawyer may participate only where referrals are voluntary, not ticket-tracked, and not quid pro quo, and where the lawyer keeps independent judgment about any referral he makes and obtains the client's informed consent.

Per the opinion, the lawyer may present information about his own services but may not have members distribute his cards or solicit referrals on his behalf, because that risks the in-person solicitation Rule 7.3(a) prohibits.

Common questions

Q: Can a lawyer join a referral-networking group like a for-profit business network?

A: Yes, with conditions. The opinion concludes a lawyer may join only if making referrals is not a condition of membership and the lawyer is not required to fill out referral tickets.

Q: Can the lawyer refer a client to another member of the group?

A: Only with informed consent and after a qualifications check. The opinion concludes the lawyer may refer a client to a member only with the client's informed consent and after determining the client would benefit and the member's credentials and qualifications are legitimate, never on a quid pro quo basis.

Q: Can the lawyer leave business cards for members to give to potential clients?

A: No. The opinion concludes the lawyer may not provide business cards for members to distribute to third parties, because of the risk of in-person solicitation by the other members on the lawyer's behalf.

Q: Can the lawyer ask other members to send him business?

A: No. The opinion concludes the lawyer may not ask other members to refer business to him, though he may provide them with information about his qualifications.

Background and rules framework

The opinion applies North Carolina Rule 1.1 (competence) and Rule 1.7 (independent professional judgment when advising a client to use a third party), Rule 7.2(b) (a lawyer may not give anything of value for a recommendation, with limited exceptions), and Rule 7.3(a) (no in-person solicitation of prospective clients, directly or through an agent). These track Model Rules 1.1, 1.7, 7.2, and 7.3. The opinion treats members distributing the lawyer's cards as creating the risk of agent solicitation the rules forbid.

Citations and references

Rules of Professional Conduct:

• MR 1.1 / NC Rule 1.1 (competence)
• MR 1.7 / NC Rule 1.7 (independent professional judgment)
• MR 7.2 / NC Rule 7.2(b) (no giving anything of value for a recommendation, with limited exceptions)
• MR 7.3 / NC Rule 7.3(a) (no in-person solicitation, directly or through an agent)

See also

• NC 2007 FEO 4: Solicitation, Gifts, and Business Cards
• ABA Formal Op. 501: Solicitation

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2006-formal-ethics-opinion-7/

Original opinion text

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

Inquiry #1:

Attorney wants to become a member of a for-profit referral and networking organization that has numerous chapters around the world. Each chapter consists of various professionals and business people who seek business referrals through networking with others. Only one person from any given profession or line of business can become a member in any particular chapter. The annual fee for a membership is approximately $295.00.

Each chapter holds weekly meetings. Members are required to attend these meetings (exceeding a maximum number of absences results in termination of membership), and they may bring guests. Among the activities at each meeting, each member gives a short presentation (which may be described as a 60-second "commercial") advertising his/her services to those present.

Members are encouraged to provide each other with business referrals, although no tangible compensation is provided for such referrals and there is no penalty for not providing referrals to other members. To keep track of referrals, a member is expected to fill out a "ticket" for each referral he/she provides to another member. The ticket is given to the member receiving the referral, and the referring member retains a copy.

The organization's website states in part:

Belonging to [this organization] is like having dozens of sales people working for you...because all of them carry several copies of your business card around with them. When they meet someone who could use your products or services, they hand out your card and recommend you.* It's as simple as that! It's simple because it's based on a proven concept by [the organization's] founder. If I give you business you'll give me business and we'll both benefit as a result.

(*) Note, some professions, specifically attorneys and certain health care professionals, may not be permitted to seek direct referrals through in-person solicitation through the use of business cards pursuant to their ethical code. Members of [the organization] that belong to these professions are directed to follow their profession's own ethical guidelines.

May Attorney become a participating member of this organization?

Opinion #1:

Yes, provided participation does not require Attorney to violate the Rules of Professional Conduct.

When advising a client to use the services of a third party, a lawyer must exercise independent professional judgment and give competent advice. Rule 1.7 and Rule 1.1. In addition, the lawyer may not give anything of value to a person for recommending the lawyer's services (with certain limited exceptions not relevant here), and may not engage in in-person solicitation of prospective clients either directly or by use of an agent. Rule 7.2(b) and Rule 7.3(a).

Therefore, a lawyer may participate in a networking organization, such as the one described in this inquiry, only if making referrals to other members of the organization is not a condition of membership and the lawyer is not required to fill out referral "tickets." If the lawyer refers a client to another member of the organization, he may only do so upon receiving the informed consent of the client, and after determining that the client would benefit from the referral, the other member's credentials are legitimate, and the other member is qualified to provide services to the client.

The lawyer is prohibited from making a referral to another member of the organization on a quid pro quo basis. The lawyer must emphasize to the other members of the organization that any referral to him should be based upon the member's independent analysis of his qualifications.

Any lawyer who participates in an organization of this nature is expected to act in good faith. If, in fact, reciprocal referrals are an explicit or implicit condition of membership in the organization, the lawyer may not participate.

Inquiry #2:

If Attorney may participate in the organization, may Attorney make presentations regarding his/her services to members and their guests at weekly meetings?

Opinion #2:

Yes.

Inquiry #3:

May Attorney provide his/her business cards to other members for distribution to third parties?

Opinion #3:

No, because of the risk of in-person solicitation by the other members on the lawyer's behalf.

Inquiry #4:

May Attorney ask other members to refer business to Attorney?

Opinion #4:

No. However, Attorney may provide the other members with information about his qualifications.