The Ethics of Online Referrals

Online auction websites, matchmaking services, and do-it-yourself tools have revolutionized many industries. In a rapidly evolving society that often rewards risk-takers and mavericks, the time seems ripe to revolutionize the delivery of legal services to those who need them. But Internet-based innovation in this area also raises questions of legal ethics regarding fee splitting with nonlawyers, attorney-client relations, and conflicts of interest.

Take new businesses that are expressly designed to enable attorneys to vie for clients online. LawPivot allows attorneys to answer questions from prospective clients to prove their utility to the client for future paid business. Shpoonkle lets lawyers bid on fees for a particular matter using a reverse-auction system. Legal Playground is a similar site, and others are likely to mushroom. These potentially disruptive legal products are daring and radical, and they highlight the need for ambitious lawyers to know the ethics rules now more than ever.

Fee-Splitting Rules
California's Rule of Professional Conduct 1-320 governs fee splitting, stating that an attorney shall not "directly or indirectly share legal fees with a person who is not a lawyer," with certain exceptions. Rule 1-320(A)(4) provides the applicable exception for website referral services: "A member may pay a prescribed registration, referral, or participation fee to a lawyer referral service established, sponsored, and operated in accordance with the State Bar of California's Minimum Standards for a Lawyer Referral Service in California."

So long as an online referral service charges users no fees, participating attorneys should be clear of fee-splitting trouble. Shpoonkle is currently free to all participants. LawPivot is free for lawyers to join and has offered potential clients a "free trial." However, were either start-up to shift to a "freemium" model - a hybrid of free basic service and paid premium service - use of the site might implicate Rule 1-320(A)(4).

It's Up to the Lawyer
The first thing any lawyer interested in these experimental new services should understand is an age-old maxim of Internet law: Users are bound by the terms of service. This means the onus for knowing and heeding the ethical rules of the lawyer-participant's jurisdiction falls squarely on the attorney.

LawPivot places a number of obligations on potential clients. Its terms and conditions require a user to acknowledge that he or she "understands beforehand and intends that no attorney-client relationship necessarily forms" between the client and participating attorneys. Potential clients also agree that LawPivot is not liable for any errors or omissions by the attorneys, and that they must "independently ensure and verify" that the attorneys they communicate with are licensed "and are in fact qualified to handle [the client's] legal matter."

A prudent attorney should know that these disclaimers are written for the benefit of LawPivot, not the attorney. Section V of LawPivot's terms and conditions requires attorneys to heed the duties applying to confidentiality, competence, conflicts of interest, and solicitation. Section VI places the duty on the attorney to "first determine and represent that no conflicts of interest exist."

Shpoonkle's "Terms for Professionals" cites the attorneys' duty to make sure they are in compliance with: ABA Model Rule 5.5, regarding multijurisdictional practice; Rule 7.1 (false and misleading communications); Rule 7.4 (lawyer promotion of practice area specialization); and Rule 1.18 (duties of confidentiality to prospective clients). These terms even refer to a design flaw of the Shpoonkle platform: At the time of bidding, an attorney does not know enough to determine whether there is an actual or potential conflict in the matter being bid upon.

With its motto "Justice You Can Afford," Shpoonkle is also controversial. A Rohrstaff Law Firm blog muses that this system may place too much emphasis on choosing the attorney that bids the lowest, even if it is not the best fit for the client. Another blogger, Susan Cartier Liebel of Solo Practice University, calls the reverse-auction model "a race to the bottom," while Scott H. Greenfield posts on Simple Justice that any lawyer who signs up "should be immediately disbarred."

Back to the Future
Despite their potential ethical pitfalls, referral websites shed some light on the future of legal innovation. Online practice is inherently multijurisdictional; geographical demarcations seem to matter less and less - for both the client and the attorney.

These creative services have tremendous potential to broaden access to legal services. However, attorneys still have a duty to follow the rules in using any such new services. A critical question is whether the California Rules of Professional Conduct or the ABA Model Rules will adapt quickly enough to specifically address the likely proliferation of such websites. Making rules hastily or one platform at a time may not be the best strategy.

The potential efficiency of these revolutionary websites may tempt attorneys to be less vigilant about ethical issues. In an economy that has left many lawyers searching for work - especially young lawyers new to the profession - such sites seem like a tantalizing way to find clients. But they may inadvertently leave the relationship element of the attorney-client interaction by the wayside. Also, the pro forma contractual service terms of sites like LawPivot and Shpoonkle may leave participating lawyers with more liability than they counted on. So refresh your command of the ethics rules, not just your browser.

Lisa J. Borodkin has a private practice specializing in Internet and entertainment law in Los Angeles. Christina M. Gagnier is the managing partner of Gagnier Margossian's digital strategy consultancy and leads its IP and Technology law practice in San Francisco.

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