Can Virginia lawyers enter reciprocal referral agreements with doctors or other lawyers under a proposed update to the ethics rules?

Plain-English summary

The Virginia State Bar was considering an amendment to Rule 7.2 of the Rules of Professional Conduct that would create an exception to the general ban on lawyers paying for referrals. Under the proposed amendment, a lawyer could refer clients to another lawyer or to a non-lawyer professional under a reciprocal referral agreement, as long as the agreement was not exclusive and the client was told about the arrangement. Bar Executive Director Karen Gould asked the AG whether conduct allowed by the amendment would clash with Virginia's "running and capping" criminal statute.

The AG concluded that it would. The proposed amendment would invite conduct that the statute criminalizes. The Bar can't override a criminal statute by writing an ethics rule.

The reasoning starts with the statute. Section 54.1-3941 makes it "unlawful for any person to act singly or in concert with others as a runner or capper for an attorney." Section 54.1-3939 defines "runner" or "capper" as "any person acting within the Commonwealth as an agent for an attorney in the solicitation of professional employment for the attorney." It defines "agent" as anyone who acts for another with or without compensation. And it defines "solicitation of professional employment" as obtaining or attempting to obtain, for an attorney, the opportunity to represent or render other legal services to another person for which the attorney may receive compensation. Those definitions sweep broadly.

Applied to the proposed amendment: under a reciprocal referral agreement, a non-lawyer professional (say a doctor or financial planner) is sending business to the lawyer in exchange for the lawyer sending business back. That makes the non-lawyer an "agent" for the attorney in the "solicitation of professional employment" — the textbook definition of a runner or capper. The non-lawyer commits the crime by acting as an agent for the attorney. If the agreement is between two lawyers, both can be liable for acting "in concert" to obtain business for the other lawyer.

A previous AG opinion had addressed running and capping in the real estate broker context, where brokers were including a particular lawyer's name on prepared contracts. The AG had concluded the practice was illegal even when the broker acted with the home purchaser's authority to select an attorney without the attorney's knowledge. By analogy, reciprocal agreements expressly designed to obtain clients for lawyers fall squarely within the prohibition.

The AG distinguished the Brotherhood of Railroad Trainmen line of cases, in which the U.S. Supreme Court struck down Virginia's application of the running-and-capping statute to a labor union recommending lawyers to its members. Those cases involved First Amendment-protected expression by a labor union helping members vindicate federal statutory rights. A commercial reciprocal referral agreement does not implicate the same First Amendment concerns. The Supreme Court of Virginia, on remand, made clear that solicitation, joining in, or authorizing of running and capping can still be prohibited where First Amendment concerns are absent.

The proposed amendment's official Comment 8 reinforced the AG's reading. The comment described referring a client to a healthcare professional "with the expectation" that the professional would reciprocate by sending clients to the lawyer. That "expectation" language made the professional an agent of the attorney for obtaining business, the AG concluded.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Rules of Professional Conduct have been amended many times in the years since 2010, and the running-and-capping statute has been examined in additional opinions and court decisions. Anyone evaluating a current referral arrangement should look at the current Virginia rules, the current statutory text, and any newer AG opinions.

Common questions

What is "running and capping"?
Old-fashioned legal terminology for soliciting clients for a lawyer. A "runner" or "capper" is someone who hustles business for an attorney, typically in exchange for a payment, kickback, or quid pro quo. The terms are still used in Virginia's statutes; many other states refer to "solicitation" or "barratry."

Why does Virginia have this statute?
Historically, the concern was hospital orderlies, tow-truck drivers, and other workers funneling accident victims to particular plaintiffs' lawyers in exchange for fees. The statute aims to keep the lawyer-client relationship clean by making it a crime for the lawyer's "agent" to chase clients on the lawyer's behalf.

What's a "reciprocal referral agreement"?
An arrangement where two professionals agree to send business to each other. A lawyer might refer estate planning clients to a CPA who in turn sends tax clients to the lawyer. Many states allow these under their ethics rules with disclosure to the client. Virginia's running-and-capping statute, per this opinion, blocks them.

Can a lawyer accept a one-off referral from a doctor without a formal agreement?
The opinion focuses on agreements that contain the reciprocity expectation. A doctor who happens to recommend a particular lawyer once or twice without any expectation of return business is not acting as an agent for the lawyer. The line is the expectation of reciprocity, formalized or not.

Could the Virginia State Bar adopt the amendment anyway?
The Bar can amend its ethics rules, but those amendments don't repeal criminal statutes. A lawyer who relied on the amendment to enter reciprocal referral agreements could face criminal prosecution under § 54.1-3941, regardless of what Rule 7.2 says.

Why did the Bar consider this amendment if the statute clearly prohibits it?
The Model Rules of Professional Conduct (drafted by the ABA) permit reciprocal referral agreements with disclosure. Many states have adopted the Model Rule. Virginia was considering the same step, but the existence of the criminal running-and-capping statute makes Virginia's path different from those of states without similar statutes.

Background and statutory framework

The criminal prohibition:

• § 54.1-3941. Unlawful for any person to act singly or in concert as a runner or capper for an attorney.
• § 54.1-3939. Definitions:
  • "Agent" means any person who acts for another with or without compensation at the request, or with the knowledge and acquiescence, of the other in dealing with third persons.
  • "Runner" or "capper" means any person acting within the Commonwealth as an agent for an attorney in the solicitation of professional employment for the attorney.
  • "Solicitation of professional employment" means obtaining or attempting to obtain, for an attorney, the opportunity to represent or render other legal services to another person, for which services the attorney will or may receive compensation. Excludes mere statements of opinion respecting the ability of an attorney, conduct pursuant to a uniform legal aid or lawyer referral plan approved by the Virginia State Bar, and conduct pursuant to a qualified legal services plan or legal services insurance contract.

The proposed Rule 7.2(c)(4): would have allowed a lawyer to refer clients to another lawyer or non-lawyer professional pursuant to a non-exclusive reciprocal referral agreement, with client disclosure.

The First Amendment line:

• Brotherhood of Railroad Trainmen v. Virginia (U.S. 1964): Application of Virginia's running-and-capping statute to a labor union's recommendation of lawyers to members for federal statutory claims was unconstitutional under the First Amendment.
• On remand, Virginia courts narrowed the application to honor that First Amendment line but kept the prohibition in place for ordinary commercial arrangements.

The AG's logic: the proposed amendment would authorize ordinary commercial reciprocal arrangements, not First Amendment-protected expression. Those fall within the part of § 54.1-3941 that remains enforceable post-Brotherhood.

The complementary criminal liability of the lawyer: a lawyer would only violate § 54.1-3941 by working to obtain business for another lawyer. A reciprocal agreement between a lawyer and a non-lawyer would only make the non-lawyer a runner and capper. Both forms become liable under the proposed amendment.

Citations

• Va. Code § 2.2-505
• Va. Code Ann. § 54.1-3939
• Va. Code Ann. § 54.1-3941
• Brotherhood of Railroad Trainmen v. Virginia ex rel. Virginia State Bar, 377 U.S. 1 (1964)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2010/10-103-Gould.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

December 7, 2010

Ms. Karen A. Gould
Executive Director
Virginia State Bar
Eighth and Main Building
707 E. Main Street, Suite 1500
Richmond, Virginia 23219

Dear Ms. Gould:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You inquire whether conduct appearing to be permissible under a proposed amendment ("amendment") to Rule 7.2 of the Rules of Professional Conduct that would allow under certain circumstances a lawyer to refer clients to lawyers or non-lawyer professionals under a reciprocal referral agreement ("agreement") would violate Virginia's statutory prohibition on "running and capping."

Response

It is my opinion that conduct permitted under the proposed amendment would violate the statute because the amendment would implicate both the person working for the lawyer under § 54.1-3939 and the lawyer if he engages in reciprocal referrals with another lawyer, which would make them both runners and cappers under § 54.1-3941.

Background

You indicate the issue has arisen because the Virginia State Bar ("Bar") is considering a proposed amendment to the Rules of Professional Conduct. The proposed amendment addresses Rule 7.2, which governs "Advertising" by lawyers. It would create an exception to the prohibition against a lawyer obtaining anything of value in return for another person referring the lawyer to a potential client under Rules 7.2(c) and 7.3(d).

Applicable Law and Discussion

Section 54.1-3941 provides: "It shall be unlawful for any person to act singly or in concert with others as a runner or capper for an attorney." Section 54.1-3939 provides the following definitions:

"Agent" means any person who acts for another with or without compensation at the request, or with the knowledge and acquiescence, of the other in dealing with third persons.

"Runner" or "capper" means any person acting within the Commonwealth as an agent for an attorney in the solicitation of professional employment for the attorney.

"Solicitation of professional employment" means obtaining or attempting to obtain, for an attorney, the opportunity to represent or render other legal services to another person, for which services the attorney will or may receive compensation. Solicitation of professional employment shall not include conduct (i) limited to mere statements of opinion respecting the ability of an attorney, (ii) pursuant to a uniform legal aid or lawyer referral plan approved by the Virginia State Bar or (iii) pursuant to any qualified legal services plan or contract of legal services insurance.

The proposed amendment to Rule 7.2 states as follows:

(c) A lawyer shall not give anything of value to a person for recommending the lawyer's services except that a lawyer may:

(4) refer clients to another lawyer or a nonlawyer professional pursuant to an agreement not otherwise prohibited under these Rules that provides for the other person to refer clients or customers to the lawyer, if:

(i) the reciprocal referral agreement is not exclusive, and

(ii) the client is informed of the existence and nature of the agreement;

Applying the statutory definitions above, I conclude that the amendment would allow conduct that would constitute running and capping in violation of § 54.1-3941. The reciprocal agreement envisioned by the amendment, moreover, would make the attorney liable under § 54.1-3941 if the attorney acted "in concert" with another lawyer to obtain business for that other lawyer.

A previous opinion of this office addressed running and capping in the context of the relationship between attorneys and real estate brokers. Specifically, the issue concerned instances where the broker included a lawyer's name on prepared contracts. This Office concluded that the arrangement constituted running and capping under then current statute. The language of the broker's contract implicated both the broker, who was obtaining clients for the attorney, and the attorney, who would be able to infer from the form of the contract that the broker was serving as his agent. The opinion noted that a broker would be liable under the statute even if he acted with a home purchaser's authority to select an attorney without the attorney's knowledge.

The instant facts are analogous. If the pre-printed contracts used by real estate brokers, which had attorneys' names on them, violated the prohibition on running and capping, the agreements described in the amendment would violate the statute because these agreements are designed expressly for the purpose (in part) of obtaining clients for lawyers.

An earlier version of the running and capping statute also has been addressed by the courts. The Supreme Court of Virginia denied the appeal of an injunction issued by the circuit court that found an arrangement in which a labor union was referring its members to union-approved lawyers violated the statute. On appeal, however, the United States Supreme Court reversed, finding that the statute unconstitutionally limited the union's First Amendment rights, including helping union members prosecute their rights under federal statutes.

On remand to the Virginia circuit court, the court entered another injunction forbidding "solicitation" but allowing the union to recommend attorneys. The Supreme Court of Virginia reversed, stating that the United States Supreme Court ruling did not permit that distinction. Under the Supreme Court of Virginia's ruling, a lawyer may still be prohibited from soliciting, joining in or authorizing running and capping where the First Amendment concerns addressed by the United States Supreme Court are not present. There is no other controlling case law on the issue of Virginia's running and capping prohibition.

The scenario that would be created by the amendment is distinguishable from the situation presented to the United States Supreme Court in Brotherhood of Railroad Trainmen, where a labor union had the First Amendment right to express its opinion about lawyers by recommending them to union members, in order to help those members protect their rights under federal law. That case did not involve the kind of express, reciprocal agreements envisioned in the proposed amendment, which would constitute the soliciting, joining in, or authorizing of running and capping that the Supreme Court of Virginia says still may be proscribed even after the U.S. Supreme Court decision.

Comment 8 to the proposed amendment only reinforces my conclusion. That Comment shows that the proposed amendment would allow a lawyer to refer a client to a healthcare professional (for example) with the "expectation" that the professional would reciprocate by sending clients to the attorney for legal representation. This would make the healthcare professional an "agent" of the attorney for obtaining business.

Conclusion

Accordingly, it is my opinion that conduct authorized by the proposed amendment would violate Virginia's "running and capping" prohibition.

With warmest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General