Ethics Opinions

Opinion No. 97-2

Summary:A lawyer's proposal to offer legal services at reduced fees to employees of local businesses and to involve those businesses in soliciting their employees violates DR 2-103 (E)'s prohibition against a lawyer's paying someone to solicit professional employment.

A participating lawyer's payment of a modest administrative fee to an insurance company which maintains a panel of participating lawyers to serve its insureds under a prepaid legal services plan does not violate DR 2-103 (E) when the insurance company meets the requirements of a "qualified legal assistance organization" under that Rule.

Facts:Our advice has been asked with respect to two different situations which, because they involve the same disciplinary rule, we will discuss in a single opinion.

Situation 1: A lawyer in private practice proposes contacting businesses in her area with offers to provide legal services to their employees at less than her usual rates. The businesses would notify their employees of the availability of the reduced rate services, make the lawyer's literature available to their employees, and provide to the lawyer verification of the employment status of prospective clients. The lawyer asks whether DR 2-103 (E) would be violated by the proposal.

Situation 2: A for-profit insurance company writes policies to cover the needs of its insured for legal services. It does not receive profits from rendering legal services, and it was not designed to provide financial benefits or legal work for lawyers. It maintains a panel of participating lawyers to whom it charges a modest annual administrative fee of less than $100. When one of its insureds has need for legal services that are covered by a company policy, the insured has the option of contacting one of the company's participating lawyers for paid-in-full services or employing a non-participating lawyer and submitting a claim for reimbursement. The insurer justifies the administrative fee as reflecting the value of services that it renders to the lawyers: expedited claim processing, client satisfaction survey data, a newsletter, and instant client eligibility information from a 24-hour voice response unit over a dedicated 800 line. The company has stated that it is necessary to impose the charge in order to provide this level of service, meet expense ratios set under insurance regulations, and still provide a cost-effective package to its insureds. One of the participating lawyers asks whether payment of the fee is a violation of DR-103 (E).

DR 2-103 provides:
(E) A lawyer shall not pay any person or organization to solicit professional employment for the lawyer from a prospective client. However, this disciplinary rule does not prohibit a lawyer or a partner or associate or any other lawyer affiliated with the lawyer or the lawyer's firm from requesting referrals from a lawyer referral service operated, sponsored, or approved by a bar association or from cooperating with any other qualified legal assistance organization.

Discussion Situation 1:
The lawyer wishes to use the prospect of reduced fees for the employees of various businesses to induce those employers to notify their employees of the lawyer's proposal, to distribute the lawyer's literature to those employees, and to verify their employment status to the lawyer. There seems little question that the lawyer is using those businesses to solicit professional employment. The Supreme Judicial Court's Committee on Lawyer Solicitation, which recommended DR 2-103 (E) to the Court, wrote a Comment to the Rule that distinguished "solicitation," covered by this Disciplinary Rule, from "advertising," covered by DR 2-101; "This rule [DR 2-103] applies to solicitation, the obtaining of business through letter, telephone, in-person or other communications directed to particular prospective clients. It does not apply to advertising, the obtaining of business through communications circulated more generally and more indirectly than that, such as through newspapers or placards in mass transit vehicles." The lawyer is certainly seeking to obtain business by having employers communicate with "particular, prospective clients," namely, their employees.

There is a question, however, whether the lawyer is "paying" the businesses to solicit employment for her. The Comment of the Committee on Lawyer Solicitation indicates the breadth of the Rule:

Paragraph (E) prohibits paying a person or organization to solicit in behalf of the lawyer. Since the rule [DR 2-103] permits a substantial amount of solicitation for the first time, it was thought advisable to prohibit employment of paid solicitors. For example, a law firm could not employ professional salespersons to solicit businesses in person or by use of telephone banks. Therefore, the practical effect of the limitation will be to limit most solicitation to that performed by the lawyer or law firm itself. This prohibition, like the other prohibitions of DR 2-103, does not apply to the use of television, radio or other mass media directed to the public generally.

The Committee on Professional Ethics has heretofore interpreted DR 2-103 (E) as encompassing subtle forms of "payment" as well as the obvious payment by transfer of cash. In our Opinion 87-3 we advised that a law firm's offer of estate planning services at reduced fees to clients of a financial services agency would violate DR 2-103 (E). The "payment" consisted of the agreement of the law firm to reduce its fees for the agency's clients. The only significant factual difference between that situation and the present inquiry is that in Opinion 87-3 the agency, rather than the law firm, initiated the reduced fee proposal, and the reverse is true in the present inquiry. But the "payment" is the same. The informal agreement is that the law firm will reduce its fees to the businesses' employees and they in return will announce the proposal to their employees, distribute the lawyer's literature to them, and cooperate in verifying their employment status. The businesses are not simply recommending the lawyer's employment on their own. They are doing so as the result of an arrangement that they must consider beneficial to themselves. (We disagree with Opinion 96-09 of the Arizona State Committee on Rules of Professional Conduct which concludes, in discussing a similar situation, that the discounted services constitute a "soft benefit" of "intangibles" and is therefore not a "thing of value" that has been "given" by the lawyer.)

Our interpretation of the first sentence of DR 2-103 (E) is confirmed by the breadth of the exception contained in the second sentence with respect to seeking referrals from certain lawyer referral services and to cooperating with qualified legal assistance organizations. If "payment" meant only the transfer of cash or other tangible forms of consideration, there would be no need to use the comprehensive word "cooperating" in the exception. We believe, therefore, that the Supreme Judicial Court would most likely consider the lawyer's proposal to run afoul of the first sentence of DR 2-103 (E). The ethical problem does not arise from the proposed offer of reduced fees to employees of certain businesses. Rather, it arises from the lawyer's involving the businesses in the solicitation of their employees. (The text of DR 2-103 (E), with a minor stylistic change, is repeated in the proposed Massachusetts Rules of Professional Conduct S7.3 (e).)

A second question arises out of the exceptions contained in the second sentence of DR 2-103 (E). In our Opinion 88-3, we advised that a law firm pursuant to an agreement with a union could offer services at reduced rates to union members. There we explicitly relied on the exception contained in DR 2-103 (E) for cooperation with a "qualified legal assistance organization." Such an organization is defined in the disciplinary rules as follows:

(8) "Qualified legal assistance organization" means a legal aid, public defender, or military assistance office; a lawyer referral service operated, sponsored, or approved by a bar association; or a bona fide organization that recommends, furnishes or pays for legal services to its members or beneficiaries, provided the office, service, or organization receives no profit from the rendition of legal services, is not designated [sic, designed?] to procure financial benefit or legal work for a lawyer as a private practitioner, does not infringe the individual member's freedom as a client to challenge the approved counsel or to select outside counsel at the client's expense, and is not in violation of any applicable law.

While a union fits within this definition, we believe that in the circumstances of this case the businesses that the inquiring lawyer proposes to contact do not. This is not a situation where a business has decided to provide a benefit for its employees and operates an open or closed panel legal services plan for them. This arrangement was designed to procure legal work for the lawyer, and the businesses would only be serving as a conduit for a lawyer to solicit their employees.

Situation 2:
This inquiry presents a situation of an organization that fits within the definition of a "qualified legal assistance organization," and hence the payment is not prohibited. The insurance company is a bona fide organization that pays for legal services performed for its members, and one of the main purposes of the exception in DR 2-103 (E) was to protect prepaid legal services plans from the prohibition in DR 2-103 (E). The company has complied with all the conditions of the exemption. It receives no profit from the rendition of legal services, was not designed to procure legal work for private practitioners, and does not infringe on the freedom of its members to select their own counsel.

The only remaining issue is whether the payment of the administrative charge is a permissible form of cooperation, an issue that we left open in our Opinion 88-3. In that inquiry, as indicated above, a law firm negotiated with a union to provide legal services to the union's members at reduced fees. Believing that the union was a "qualified legal assistance organization," we expressed our belief that the "payment" that the union received in the form of reduced fees for its members was permissible cooperation but advised that the payment of cash by the law firm to the union itself would present a different case. Without disavowing our concern that some payments in some contexts might exceed permissible cooperation, we believe that in the current context the payment of a modest administrative charge has been justified so as to constitute permitted cooperation.

Permission to publish granted by the Board of Delegates on February 6, 1997. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official government status.

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