Can a lawyer use an online bidding platform that takes a percentage of the legal fee and vets the participating attorneys?

Plain-English summary

The inquirer considered contracting with a company that runs a website where attorneys bid against each other for clients. Under its structure, the client pays 50% of the eventual legal fee to the service, which deducts 15% of that before paying the rest to the winning bidder, then collects and forwards the remaining 50% after the work is reviewed. The service screens applicant attorneys by verifying licensure and good standing, interviewing them for "cultural fit and client service," and evaluating their "basic contract drafting and review skills," and its website claims its attorneys are vetted and are experts in helping clients sign favorable contracts.

On fee sharing, the opinion applies Rule 5.4(a), which bars sharing legal fees with a nonlawyer to protect the lawyer's independent professional judgment. Because the service is non-lawyer-owned and retains 7.5% (15% of 50%) of the total legal fee, the opinion concludes that paying it under this structure is sharing a legal fee with nonlawyers, and that collecting from the client first does not avoid the rule (citing N.Y. State 942 (2012) and N.Y. City 2014-1 (2014)).

On referral fees, the opinion applies Rule 7.2(a) and its Comment [1], under which a communication recommends a lawyer if it endorses or vouches for the lawyer's credentials, abilities, competence, or character. The opinion explains that verifying licensure and good standing alone would not be a recommendation, but that the service's claims to assess "basic contract drafting and review skills" and to offer "experts" go further and constitute an improper recommendation, aligning the result with N.Y. State 1132 (Avvo), N.Y. State 1213, and N.Y. State 1267. The opinion notes the bidding model leaves the final choice to the client, but concludes the operative question is whether the service endorses the lawyers' qualifications, which it does.

Finally, the opinion applies Rule 1.5(d)(4), which forbids nonrefundable retainers, and concludes that if the service provides no mechanism to return the unearned portion of an advance fee when the lawyer is discharged before completing the work, that failure would be an additional violation (citing Matter of Cooperman, 83 N.Y.2d 465 (1994)).

In practice

Under this opinion, a lawyer may not participate in an online bidding service that takes a percentage of the legal fee, because that is fee sharing with a nonlawyer barred by Rule 5.4(a), and where the service vets and vouches for the lawyers' skill, the payment is also a prohibited payment for a recommendation under Rule 7.2(a). Per the opinion, a structure that cannot return unearned advance fees would additionally violate Rule 1.5(d)(4).

Common questions

Q: Is letting a platform keep a percentage of the legal fee fee-splitting?

A: Per the opinion, yes. A non-lawyer-owned service that retains a percentage of the legal fee shares a legal fee with a nonlawyer in violation of Rule 5.4(a), and collecting from the client before paying the lawyer does not avoid the rule.

Q: Does it matter that the platform "vets" the lawyers?

A: Per the opinion, yes. Verifying licensure and good standing alone would not be a recommendation, but claiming to assess the lawyers' drafting skills and to offer "experts" endorses their qualifications and makes the payment an improper payment for a recommendation under Rule 7.2(a).

Q: What is the problem with the platform's handling of advance fees?

A: Per the opinion, if there is no mechanism to return the unearned portion of an advance fee when the lawyer is discharged before finishing the work, that would violate Rule 1.5(d)(4)'s prohibition on nonrefundable fees.

Background and rules framework

The opinion interprets New York Rule 5.4(a) (no fee sharing with nonlawyers), Rule 7.2(a) (no payment for recommendations) and Rule 7.2(c) (paying for client leads), and Rule 1.5(d)(4) (no nonrefundable fees), and references Rule 5.8. These correspond to ABA Model Rules 5.4, 7.2, and 1.5.

Citations and references

Rules of Professional Conduct:

• New York Rules of Professional Conduct 1.2, 1.5(d)(4), 5.4(a), 5.8, 7.2(a)
• ABA Model Rules 5.4, 7.2, 1.5 (analogues)

Cases:

• Matter of Cooperman, 83 N.Y.2d 465 (N.Y. 1994), nonrefundable retainer agreements violate public policy

Other opinions cited:

• N.Y. State 942 (2012); N.Y. City 2014-1 (2014): nonlawyer retaining part of the client's fee is impermissible fee splitting
• N.Y. State 1132 (2017); N.Y. State 1213 (2021); N.Y. State 1267 (2024): vouching for lawyers' qualifications is a recommendation

See also

• NYSBA Ethics Op. 1267: Paying a Lawyer-Matching Website
• ISBA Op. 25-02: For-Profit Referral Service
• CA COPRAC Op. 2019-199: Online Directory Profiles

Source

• Landing page: https://nysba.org/ethics-opinion-1271/