Can Montana lawyers form a private for-profit lawyer referral service?

Plain-English summary

An attorney proposed a regional referral service of several solo practitioners, funded by flat annual or per-referral fees used for advertising and overhead, organized as an LLC operating "not-for-profit" though not qualifying as a nonprofit, with a pro bono participation requirement and the service accepting liability for negligent referrals. The committee concludes the proposal is not permitted.

Rule 7.2(c) states the general principle that a lawyer may not give anything of value for recommending the lawyer's services, with exceptions for the reasonable cost of advertising and the "usual charges of a not-for-profit lawyer referral service or other legal service organization." The committee finds the proposed service, despite its laudable features (notably the pro bono requirement), lacks the components of a genuine not-for-profit referral program. The missing components turn it into essentially a for-profit referral program for solo practitioners in a region, which the rule does not allow. The committee notes the same conclusion would hold under the then-proposed new Rule 7.2(b) submitted to the Supreme Court.

In practice

Under Rule 7.2(c) as it stood at the time, the opinion treats a private regional referral service that charges member attorneys as prohibited; the rule permitted paying only the usual charges of a not-for-profit referral service. Montana's advertising rules were renumbered after this 2003 opinion, so the current rule text differs from the version the opinion quotes.

Common questions

Q: Can Montana lawyers set up a private for-profit lawyer referral service?

A: No. The opinion concludes such a service violates Rule 7.2(c), which allows paying only the usual charges of a not-for-profit referral service.

Q: Does a pro bono requirement make the service permissible?

A: No. The committee called the pro bono requirement laudable but found the service still lacked the components of a genuine not-for-profit program and operated as a for-profit referral service.

Q: What does Rule 7.2(c) permit a lawyer to pay for?

A: The reasonable cost of advertising and the usual charges of a not-for-profit lawyer referral service or other legal service organization.

Background and rules framework

The opinion interprets Rule 7.2 (Advertising; Model Rule 7.2), specifically the bar on giving value for recommendations with the not-for-profit referral exception. Montana follows the Model Rules without adopting the comments.

Citations and references

Rules of Professional Conduct:

• Model Rule 7.2 / Mont. R. Prof. Cond. 7.2(c) (paying for recommendations; not-for-profit referral exception)

See also

• MT Ethics Op. 960227: Impermissible Referral Service
• AL Ethics Op. 1991-43: For-Profit Referral Hotline

Source

• Landing page: https://www.montanabar.org/For-Attorneys/State-Bar-Resources/Ethics-Opinions
• Original PDF: https://www.montanabar.org/Portals/MONTANA/030716.pdf

Original opinion text

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

ETHICS OPINION
The following ethics opinion was issued on July 3, 2003, by the Ethics Committee of the State
Bar of Montana in response to a question submitted by a Bar member:

FACTS:
Attorney proposes creating a regional lawyer referral service comprised of several sole
practitioners. The attorney members will be charged either a flat fee per year or a fee per referral
to belong to the service. All the fees generated will be used to pay for advertising and overhead.
The service will require member attorneys to participate in pro bono legal services. The referral
service will be organized as an LLC, but will operate as a not-for-profit LLC, though attorney
acknowledges that it does not fit into the nonprofit corporate classification (i.e., formed for the
“public good”). Attorney adds that in the event the lawyer referral service made a negligent
referral, the referral service would accept liability.

Attorney’s reasons for creating the referral service are to network the solo practitioners, provide
more efficient public access to attorneys within a focused practice area and reduce the solos’
advertising expenses.

QUESTION PRESENTED:
Is the private lawyer referral service network proposed permitted under Montana’s Rules of
Professional Conduct?

SHORT ANSWER:
No. It is prohibited by Montana’s current Rule 7.2 (c) of the Rules of Professional Conduct and
would be prohibited under the proposed new Rule 7.2 (b) currently under consideration by the
Montana Supreme Court.

DISCUSSION:
The current Rule 7.2 (c) of the Montana Rules of Professional Conduct states the general
principle that lawyers are not permitted to pay others for channeling professional work, with
some exceptions:

   RULE 7.2 ADVERTISING
   (c) A lawyer shall not give anything of value to a person for recommending the lawyer’s
   services, except that a lawyer may pay the reasonable cost of advertising or written
   communication permitted by this rule and may pay the usual charges of a not-for-profit
   lawyer referral service or other legal service organization.

Restrictions on referral services are explained in Comment [6] of the Model Rules:

   A lawyer referral service...is any organization that holds itself out to the public as a
   lawyer referral service. Such referral services are understood by laypersons to be

    consumer-oriented organizations that provide unbiased referrals to lawyers with
    appropriate experience in the subject matter of the representation and afford other client
    protections, such as complaint procedures or malpractice insurance requirements.
    Consequently, this [Model] Rule only permits a lawyer to pay the usual charges of a not-
    for-profit or [in the case of the Model Rule] qualified lawyer referral service. A qualified
    lawyer referral service is one that is approved by an appropriate regulatory authority as
    affording adequate protections for prospective clients. See, e.g., the American Bar
    Association’s Model Supreme Court Rules Governing Lawyer Referral Services and
    Model Lawyer Referral and Information Service Quality Assurance Act (requiring that
    organizations that are identified as lawyer referral services (i) permit the participation of
    all lawyers who are licensed and eligible to practice in the jurisdiction and who meet
    reasonable objective eligibility requirements as may be established by the referral
    service for the protection of prospective clients; (ii) require each participating lawyer to
    carry reasonably adequate malpractice insurance; (iii) act reasonably to assess client
    satisfaction and address client complaints; and (iv) do not refer prospective clients to
    lawyers who own, operate or are employed by the referral service.)

A 1989 Report of the ABA Standing Committee on Lawyer Referral and Information Service
concluded that the two important functions of a lawyer referral service are to screen inquiries and
to provide the client with an unbiased referral to an attorney who has experience in the area of
law appropriate to the client’s need.
The attorney’s proposal, while in many ways laudable (particularly the pro bono requirement),
does not satisfy the necessary components of a not-for-profit referral program.

The missing components have the effect of turning the proposed program into essentially a for-
profit referral program for solo practitioners in a specific region. This conclusion also applies
under the proposed new Rule 7.2 (b)[1], currently submitted to the Supreme Court, for which the
Court accepted comments until September 1, 2003.

CONCLUSION:
The proposed lawyer referral service is not permissible under Rule 7.2 (c) of Montana’s Rules of
Professional Conduct.

                           THIS OPINION IS ADVISORY ONLY

Notes

1 RULE 7.2: ADVERTISING

    (c) (b) A lawyer shall not give anything of value to a person for recommending the lawyer’s
    services except that a lawyer may:
             (1) pay the reasonable costs of advertisements or communications permitted by this
             Rule;
             (2) pay the usual charges of a not-for-profit lawyer referral service or legal service
             organization plan or a not-for-profit or qualified lawyer referral service. A qualified lawyer
             referral service is a lawyer referral service that has been approved by an appropriate
             regulatory authority; and
             (3) pay for a law practice in accordance with Rule 1.17.