How may a Florida lawyer pay a for-profit lawyer-matching or referral service without improperly splitting fees?

Plain-English summary

Responding to Board of Governors inquiries, the opinion addresses which methods of paying a for-profit qualifying provider are permissible. It applies Rule 4-7.22(d), which lets lawyers participate with for-profit qualifying providers only if specific requirements are met, and Rule 4-7.22(d)(2), which bars participation where the provider's fee constitutes a division of legal fees. The opinion ties this to Rule 4-5.4, explaining that the no-fee-sharing rule exists to preserve the lawyer's independent professional judgment and to discourage improper solicitation; the comment to Rule 4-7.22 treats a fee calculated as a percentage of the lawyer's fee, or based on the success or perceived value of the case, as an improper division.

The opinion surveys how other states have treated lawyer-matching and group-advertising arrangements, noting a general acceptance of fixed periodic fees and per-click or per-impression charges (paid for exposure rather than for referrals) and a general rejection of per-case charges that vary with the value of the matter and of percentage-of-fee charges.

The opinion then sets out factors and examples. Generally permissible: a reasonable, pre-arranged fixed charge per time period; a reasonable fixed per-click charge; a reasonable fixed charge per matter referred that is not contingent on outcome and does not vary with the amount at issue; and a charge per matter referred that varies by matter type only where demonstrably different marketing and administrative costs explain the difference. Generally impermissible: a charge that is a percentage of the lawyer's fee or the client's recovery; a charge based on the perceived value of the case; or a flat charge per case accepted, including one that differs by matter type. Participation must also be assessed case by case and may raise other ethics concerns beyond fee splitting.

In practice

Under the Florida rules as they stood at the time of this 2018 opinion, charges reasonably based on the provider's marketing and administrative costs plus a reasonable profit, and imposed regardless of whether the lawyer is hired, weigh in favor of permissibility. The opinion also generally permits a reasonable fixed charge per matter referred under its stated conditions, while treating a flat charge per case accepted as generally impermissible. It stresses that compliance is a case-by-case determination and that a permissible fee structure alone does not guarantee that participating with a particular provider is proper.

Common questions

Q: Can a Florida lawyer pay a matching service a percentage of the fee earned?

A: No. The opinion treats a charge calculated as a percentage of the lawyer's fee, or of the client's recovery, as an improper division of fees prohibited by Rules 4-5.4 and 4-7.22(d)(2).

Q: Is a flat "per case" or "per lead" fee allowed?

A: The opinion generally permits a reasonable, pre-arranged fixed charge per matter referred that is not contingent on outcome and does not vary with the amount at issue. A charge that varies by matter type may also qualify if based on demonstrably different marketing and administrative costs. It generally rejects a flat charge per case accepted, including one varying by matter type, as well as charges based on perceived case value.

Q: Are pay-per-click and fixed monthly advertising charges acceptable?

A: Generally yes. The opinion treats a reasonable fixed periodic charge and a reasonable per-click charge as permissible because they pay for exposure rather than for the referral or the fee generated.

Background and rules framework

The opinion interprets Rule 4-7.22 (qualifying providers and lawyer referral arrangements, related to Model Rule 7.2) and its subdivision (d), together with Rule 4-5.4 (professional independence and the bar on fee sharing with nonlawyers, Model Rule 5.4) and Rule 4-1.7(a)(2) (personal-interest conflicts, Model Rule 1.7) of the Rules Regulating The Florida Bar.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4 / Fla. Rule 4-5.4 (professional independence; fee sharing with nonlawyers)
• Model Rule 7.2 / Fla. Rule 4-7.22 and 4-7.22(d) (qualifying providers; referral arrangements)
• Model Rule 1.7 / Fla. Rule 4-1.7(a)(2) (personal-interest conflicts)

Other opinions cited:

• Arizona Ops. 11-02, 99-06; Indiana Op. 1-18; Kentucky Op. E-429; New Jersey Ops. 732, 43; New York City Op. 2000-1; New York State Ops. 1131, 1132; Maine Op. 174; Ohio Op. 2016-3; Oregon Op. 2007-180; Pennsylvania Op. 2016-200; South Carolina Ops. 16-06, 01-03, 01-01; South Dakota Op. 98-10; Utah Ops. 17-05, 15-05

See also

• Florida Bar Op. 17-1: Fee Division With a Nonlawyer-Owned Out-of-State Firm
• TX Ethics Op. 704: Texas Lawyer Joining a D.C. Firm With a Nonlawyer Partner

Source

• Landing page: https://www.floridabar.org/etopinions/opinion-18-1/
• Original PDF: https://www-media.floridabar.org/uploads/2019/01/FL-Bar-Ethics-Op-18-1-2.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 18-1
December 14, 2018
Advisory ethics opinions are not binding.
The opinion provides guidelines on permissible and impermissible payments to a for- profit qualifying provider. RPC: 4-5.4, 4-7.22 Ethics Opinions: Arizona Ethics Opinion 11-02 (2011); Arizona Ethics Opinion 99-06 (1999); Indiana Ethics Opinion 1-18 (2018); Kentucky Ethics Opinion E- 429 (2008); New Jersey Ethics Opinion 732 (2017); New Jersey Ethics Opinion 43 (2011) New York City Bar Opinion 2000-1 (2000); New York State Ethics Opinion 1132 (2017); New York State Bar Association Ethics Opinion 1131 (2017); Maine Ethics Opinion 174 (2000); Ohio Ethics Opinion 2016-3 (2016); Oregon Ethics Opinion 2007-180 (2007); Pennsylvania Ethics Opinion 2016-200 (2016); South Carolina Ethics Opinion 16-06 (2016); South Carolina Ethics Opinion 01-03 (2001); South Carolina Ethics Opinion 01-01 (2001); South Dakota Ethics Opinion 98- 10 (1999); Utah Ethics Opinion 17-05; Utah Ethics Opinion 15-05 (2015) Other Authority: Annotated Model Rules of Professional Conduct, 8th Edition (2015); Simon, “Fee Sharing Between Lawyers and Public Interest Groups,” 98 Yale L.J. 1069 (1989) The Board of Governors of The Florida Bar has received inquiries regarding which methods of payment by Florida Bar members to for-profit qualifying providers are permissible. Lawyers are permitted to participate with for-profit qualifying providers only if the qualifying providers meet specific requirements set forth in Rule 4-7.22(d). Lawyers may not participate with a for-profit qualifying provider if that qualifying provider charges a fee that constitutes a division of legal fees. See Rule 4-7.22(d)(2). See also, Rule 4-5.4. The comment to Rule 4-7.22 provides further guidance: A lawyer may not participate with a qualifying provider that receives any fee that constitutes a division of legal fees with the lawyer, unless the qualifying provider is The Florida Bar Lawyer Referral Service or a lawyer referral service approved by The Florida Bar pursuant to chapter 8 of these rules. A fee calculated as a percentage of the fee received by a lawyer, or based on the success or perceived value of the case, would be an improper division of fees. Additionally, a fee that constitutes an improper division of fees occurs when the qualifying provider directs, regulates, or influences the lawyer’s professional judgment in rendering legal services to the client. See e.g. rules 4-5.4 and 4-1.7(a)(2). Examples of direction, regulation or influence include when the qualifying provider places limits on a lawyer’s representation of a client, requires or prohibits the performance of particular legal services or tasks, or requires the use of particular forms or the use of particular third party providers, whether participation with a

particular qualifying provider would violate this rule requires a case-by-case determination. The prohibition against fee sharing found in Rule 4-5.4 is based on preservation of the lawyer’s independent professional judgment against interference by a third party with whom the lawyer partners or divides legal fees. See, Annotated Model Rules of Professional Conduct, 8th Edition (2015); Simon, “Fee Sharing Between Lawyers and Public Interest Groups,” 98 Yale L.J. 1069 (1989). Prohibitions against fee sharing and paying for referrals also discourage improper solicitation of clients. See, Simon, above. Rule 4-7.22(d)(1) explicitly prohibits a lawyer’s participation with a qualifying provider that violates rules on lawyer advertising and solicitation. Other states have addressed how entities that connect lawyers and prospective clients are paid. While opinions of other states may be helpful, they are not dispositive of how Florida will address a particular issue. This issue is complicated by the fact that many states prohibit for- profit lawyer referral services. States have permitted lawyers to participate in Internet sites that do not charge the lawyer, but instead profit from charges to consumers or selling advertising to others. See, New York City Bar Opinion 2000-1 (2000) (lawyer may participate in website where clients post legal projects, lawyer “bids” on legal projects, but only consumer is charged by website); Maine Ethics Opinion 174 (2000) (lawyer may be listed on a website where website charges consumers for using the website and obtains revenue from advertising posted on the website). Two states have opined that a fixed monthly or annual fee (or other set periodic fee not related to cases generated) is permissible. See, Oregon Ethics Opinion 2007-180 (2007) (lawyer may pay based on fixed annual or other set periodic fee not related to particular work generated from advertising, but may not pay based on number of referrals, retained clients, or revenue generated from advertisements) and South Carolina Ethics Opinion 01-01 (2001) (Lawyer may pay Internet service for advertising services based on a set monthly or yearly fee or based on the number of hits on the lawyer’s information, but may not direct the Internet site user to a particular lawyer and may not pay any part of legal fees from clients who were referred). A majority of states that have addressed payment of a fixed amount “per click” or “per hit” have concluded that lawyers may participate in a group advertising program charging a fixed amount “per click” or “per hit.” Those opinions conclude that the payment is for exposure, and not for the referral of clients, the hiring of the lawyer by particular clients, or the amount of fees paid to the lawyer. See, Arizona Ethics Opinion 11-02 (2011) (lawyer may pay website on a pay per lead or pay per click basis); Kentucky Ethics Opinion E-429 (2008) (lawyer may pay group marketing program based on number of “hits” but not per referral); New Jersey Ethics Opinion 43 (2011) (pay per lead or per click is not prohibited). One state has concluded that a lawyer may participate in a website in which lawyers “bid” on projects posted by consumers and pay for each “bid,” because the lawyer pays to bid regardless of whether selected by the consumer. Utah Ethics Opinion 15-05 (2015). Another has advised that lawyers may pay per referral to participate in a for-profit, Internet based service that matches lawyers with prospective clients. New York State Bar Association Ethics Opinion 1131 (2017). However, two states have concluded that payment per referral is prohibited. See, Kentucky Ethics Opinion E-429 (2008) (lawyer may pay group marketing program based on number of “hits” but not per referral); Oregon Ethics Opinion 2007-180 (2007) (lawyer may pay may not pay based on number of referrals, retained clients, or revenue generated from advertisements).

Several states reviewed an Internet based program in which lawyers agreed to accept flat fees that varied for particular types of cases, the entity collected the entire fee from the client, the entity paid the fee to the lawyer after the lawyer has concluded the legal work on the matter, and the lawyer paid a separate “marketing fee” to the entity that varied according to the type of matter referred to the lawyer. Most of those states concluded that lawyers may not pay a set fee for each accepted case. See, Indiana Ethics Opinion 1-18 (2018); New Jersey Ethics Opinion 732 (2017); New York State Ethics Opinion 1132 (2017); Ohio Ethics Opinion 2016-3 (2016); Pennsylvania Ethics Opinion 2016-200 (2016); South Carolina Ethics Opinion 16-06 (2016); Utah Ethics Opinion 17-05. States also generally have advised lawyers against participating with entities that receive a percentage of the lawyer’s fee. See, Arizona Ethics Opinion 99-06 (1999) (lawyer may not participate in website to answer consumer questions where lawyer is charged a one-time fee, a minimum deposit for first 30 questions, a separate fee for each question referred, and a percentage of any fee from a client whose question is referred to the lawyer); South Dakota Ethics Opinion 98-10 (1999) (internet referral service with annual fee and requirement that lawyer pay 10% of legal fees over $100 for referred cases violates rules prohibiting fee-splitting); South Carolina Ethics Opinion 01-03 (2001) (lawyer may not pay Internet service any part of legal fees from clients referred by the service). The board cannot address every possible method of calculating the charges of a qualifying provider, which must be assessed on a case-by-case basis. In determining whether a qualifying provider’s particular method of charging for participation violates Rules 4-5.4 and 4- 7.22(d)(2), the board believes the following factors should be considered. The following factors would mitigate in favor of a conclusion that the charge is permissible:

• the charge is reasonably based on the qualifying provider’s costs for marketing and administration plus a reasonable profit; and
• the charge is imposed regardless of whether the lawyer is hired by the prospective client. The following factors may or may not lead to a conclusion that the charge is permissible, depending on the circumstances, and might require further scrutiny:
• the charge varies and on what basis; and
• the qualifying provider sets the lawyer’s fee and on what basis. The following factors would mitigate in favor of a conclusion that the charge is impermissible:
• the charge is based on the perceived value of the individual matter;

• the qualifying provider collects the lawyers’ fees directly from the consumer, takes a portion of the fee as the charge for the referral or match, then remits the remainder to the lawyer;

• the qualifying provider interferes with the lawyer’s independent professional judgment in representing clients or directs the lawyer’s activities in representing clients; and

• there is sufficient incentive for the qualifying provider to improperly solicit prospective clients or improperly market the service. In applying these facts, the board believes the following would generally be permissible:
• a reasonable, pre-arranged fixed charge per time period such as weekly, monthly, or yearly;
• a reasonable, pre-arranged fixed charge for each time a consumer views information about a specific lawyer, commonly referred to as “pay-per-click”;
• a reasonable, pre-arranged fixed charge per matter referred to the lawyer that is not contingent on the outcome of the matter and does not vary based on the amount at issue in the matter; and
• a reasonable, pre-arranged fixed charge per matter referred to the lawyer that varies based on the type of matter only if the varying charge is based on demonstrably different marketing and administrative costs rather than the perceived value of the case; The board believes the following would generally be impermissible:
• a charge calculated as a percentage of the fee received by a lawyer;
• a charge calculated as a percentage of the client’s recovery in the matter;
• a charge based on the perceived value of the case referred to or accepted by a participating lawyer;
• a flat charge that differs based on the perceived value of the case referred to or accepted by a participating lawyer;
• a flat charge per case accepted by a participating lawyer; and
• a flat charge per case accepted by a participating lawyer that differs based on the type of matter (e.g., personal injury versus family law). In summary, determining whether a particular method of charging for the services of a qualifying provider comply with Rules Regulating The Florida Bar which prohibit a lawyer from sharing fees with a qualifying provider must be determined on a case-by-case basis, which will be guided by the considerations set forth in this opinion. The board cautions that this opinion addresses solely the issue of whether a particular method of charging for the services of a qualifying provider constitute impermissible fee splitting, that the method by which particular qualifying providers operate may raise other ethics concerns under the Rules of Professional Conduct, and that lawyers should not assume that a lawyer may participate with a particular

qualifying provider solely because the qualifying provider’s method of charging for its services falls within one of the methods the board concludes generally would be found to be permissible.