Legal Ethics

Avvo 'marketing fee' pays for an endorsement and violates New York lawyer ethics rules, opinion says

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The New York State Bar Association has joined the list of jurisdictions saying Avvo’s “marketing fee” taken from fees paid to lawyers using its client-linking services violate ethics rules against impermissible referral fees.

Because Avvo Legal Services provides ratings of lawyers using the service based on various qualifiers such as years in practice, information provided by the lawyers, volunteer bar work and other publicly available information, and offers to find a client “the right” lawyer with a money-back guarantee, there is an implied recommendation as to the lawyer’s “credentials, abilities, competence, character, or other professional qualities,” according to the ethics opinion issued Tuesday. Thus, the lawyer, by paying a marketing fee, is “making an improper payment for a recommendation in violation of Rule 7.2(a)” of the New York Rules of Professional Conduct, according to the opinion.

Because Avvo lawyers are assigned a rating on a scale of 1 to 10, and “the Avvo website also extols the benefits of being able to work with highly rated lawyers,” Avvo creates a reasonable impression that it is recommending its top-rated lawyers, the opinion states. And Comment 1 of Rule 7.2 “prohibits a lead generator not only from stating that it is recommending a lawyer, but also from implying or creating a reasonable impression that it is making such a recommendation,” the opinion said.

“Avvo is giving potential clients the impression that a lawyer with a rating of ‘10’ is ‘superb,’ and is thus a better lawyer for the client’s matter than a lawyer with a lower rating. Avvo is also giving potential clients the impression that Avvo’s eligibility requirements for lawyers who participate in Avvo Legal Services assure that participating lawyers are ‘highly qualified.’” The opinion sates that Avvo Legal Services’ “satisfaction guarantee” also contributes to the impression that Avvo is recommending its lawyers’ services “because it stands behind them to the extent of refunding payment if the client is not satisfied.”

While this opinion doesn’t forbid lawyers from using ratings generated by third parties in its advertising, “Avvo Legal Services is different. It is not a third party, but rather the very party that will benefit financially if potential clients hire the lawyers rated by Avvo.”

Consumers who use Avvo Legal Services purchase specific services, such as an uncontested divorce, for a flat fee. So when a client receives services from a lawyer through Avvo that cost $149, the New York opinion gave as an example, the company pays that amount to the lawyer but then takes back a $40 marketing fee.

Avvo’s chief legal officer, Josh King, told the ABA Journal that New York’s voluntary state bar, the opinion of which is advisory and not binding, has focused, as have some other state bars both mandatory and voluntary, “on the marketing fee and whether it’s fee-splitting—we believe not.”

King points to an ethics opinion (PDF) pending in North Carolina, which is more favorable to the Avvo business model as far as the propriety of paying for recommendations is concerned. Too many other ethics opinions fail to deal with First Amendment protections for lawyers and the public by narrowly applying the standards, King says.

In June, three committees of the New Jersey Supreme Court issued a joint ethics opinion saying that “marketing fee” was an impermissible referral fee, rather than a fee for the cost of advertising, as well as an impermissible shared fee.The New Jersey opinion noted similar decisions concerning Avvo in Ohio, South Carolina and Pennsylvania.

The New York State Bar Association issued a companion ethics opinion that details variation in structures of various web-based services and, though not addressing every factual possibility, explains how such services can operate within the Rules of Professional Conduct.

Updated at 2:13 p.m. to include link to pending ethics opinion.

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