New Jersey Says No To Avvo Fee-Splitting Scheme

Remember that tech train lawyers were told they had to hop on or it would pass them by? Well, it doesn’t stop in New Jersey anymore.

On June 21, 2017, the Advisory Committee on Professional Ethics, Committee on Attorney Advertising, and Committee on the Unauthorized Practice of Law issued a Joint Opinion (ACPE Opinion 732, CAA Opinion 44, UPL Opinion 54) stating that the legal service program operated by Avvo through its website is an impermissible lawyer referral service, in violation of Rules of Professional Conduct 7.2(c) and 7.3(d), and comprises improper fee sharing with a nonlawyer in violation of Rule of Professional Conduct 5.4(a). New Jersey lawyers may not participate in the Avvo legal service program.

The program specifically referred to is Avvo Advisor, its 15 minute consultations for $39.95, of which Avvo takes $10 as its advertising fee. New Jersey calls bullshit.

The first question asks whether lawyers who participate in these programs are engaged in impermissible fee sharing in violation of Rule of Professional Conduct 5.4(a) (“[a] lawyer shall not share legal fees with a nonlawyer”). The Committees find that the Avvo business model violates Rule of Professional Conduct 5.4(a). The participating lawyer receives the set price for the legal service provided, then pays a portion of that amount to Avvo. The label Avvo assigns to this payment (“marketing fee”) does not determine the purpose of the fee.

An ongoing dispute has been whether fee splitting isn’t fee splitting if you call it by another name. Bad as lawyer advertising may be, it’s permitted. But if it’s advertising, then you pay for the advertising without regard to whether you get any business or fee out of it. Here, you pay a “marketing” fee in exchange for getting that 15-minute consultation.

The concept was dubious, in that lawyers are selling an essentially worthless service (15 minutes of a lawyer’s time isn’t enough to provide any useful advice). The fee per referral was obviously fee splitting, no matter what Avvo calls it, and then there was the scamminess of the concept, where Avvo would promote the notion that people were being referred to “great lawyers,” “experienced lawyers with an average of 4.5/5 star reviews,” all designed to vaguely suggest that the client wasn’t getting the most pathetic schmuck around.

Lawyers may “advertise” by placing an ad on the Avvo website or participating in other parts of the website without paying this “marketing fee.” Lawyers may pay a set, flat amount for potential client inquiries or “leads” that may or may not result in retention of a client for a specific matter, but they may not pay a fee in exchange for referral or retention of a client for a specific case. CAA Opinion 43 (June 2011). This service offered by Avvo is a lawyer referral program that does not conform to the requirements of Rule of Professional Conduct 7.2(c) and Rule of Professional Conduct 7.3(d). Accordingly, New Jersey lawyers may not participate in the program.

It’s just the usual pay-to-play scheme. The referrals are to lawyers, admitted to practice law, so by that metric, they’re “great.” Beyond that, they’re lawyers willing to split fees with Avvo at $29.95 for 15-minutes because they have time to fill. It doesn’t make them bad lawyers, but it doesn’t make them great lawyers either.

The opinion also concludes that LegalZoom and Rocket Lawyer are running unregistered legal referral services, though for other reasons as their business models don’t include fee splitting. They can remedy their faults by registering. Avvo’s scheme, on the other hand, isn’t going to fly.

AVVO asserted that its marketing scheme is commercial speech that must be tested against the intermediate scrutiny standard applied to First Amendment commercial speech. The Committees are not restricting Avvo’s marketing; the focus of this Joint Opinion is on the for-profit lawyer referral program and sharing of a legal fee with a nonlawyer. The First Amendment does not protect lawyers who seek to participate in prohibited attorney referral programs or engage in impermissible fee sharing.

This has been an argument that I’ve had with Avvo’s General Counsel and Chief Marketeer, Josh King, for years, that his “interpretation” of commercial speech enables Avvo to circumvent legal ethics so it can take a slice out of legal fees. Josh has long held a curious view of the First Amendment that finds no support in law, which is why he teaches it at CLEs in the expectation that if you keep repeating nonsense, lawyers will start to believe it.

Fee splits are not inherently unethical. They only become a problem if the split creates a situation that may compromise a lawyer’s professional independence of judgment. We believe that Avvo Legal Services fees, like credit card fees, would involve the sort of technical fee split that would not create such a potential for compromise. Nonetheless, we have tried to keep things simple and clear by making the per-service marketing fee a separate charge.

Actually, fee splits are inherently unethical, both for the rationale behind the rule and because there is a rule that says exactly that. Josh’s argument is that if they keep their nose out of the lawyer’s business, then no client can be harmed. And isn’t it really all about client harm?

Bottom line: we built Avvo Legal Services at every turn to delight consumers. We’re happy to entertain any feedback from Bars if they think we are doing something that is hurting consumers. But we’re not going to hobble the product just to comply with misguided regulatory interpretations.

So kind of Avvo to entertain “feedback from the Bars,” like South Carolina, which has similarly rejected the scheme. And that’s the problem, that Avvo is a company selling laundry detergent, so it doesn’t give a damn what the bar has to say. They can’t be disbarred. But you can. And if you’re desperate and clueless enough to ignore the ethical prohibition on fee-splitting, then you’re exactly the “great” lawyer Avvo’s pawning off on clueless clients who think 15 minutes is going to solve their legal woes.

But is Josh right? Are the rules archaic and formulistic, and Avvo’s fee-splitting scheme harms no one? Well, there’s another side to this unseemly mess, where Avvo is telling clients that the lawyers it’s selling will make their whites whiter and their colors brighter, when the only two things Avvo knows about the lawyers is that they’re admitted to practice and willing to split fees. Will anyone be harmed by a non-lawyer’s hype? If they are, would they even know? And if they don’t know, does it matter? Does Avvo care either way, as long as they get their cut?

5 comments on “New Jersey Says No To Avvo Fee-Splitting Scheme

  1. B. McLeod

    If aliens came down and burned AVVO off the planet, many more lawyers would cheer than shed a tear.

    1. SHG Post author

      You’re the first (and maybe only) one to notice. I feel so unappreciated.

      (So now that somebody notice, I can fix it.)

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