Can a lawyer join a barter exchange that gives the lawyer's name to other members and keeps part of the lawyer's membership fees and trade credits?

Plain-English summary

The inquiry described a barter exchange arrangement that tried to cure the problems identified in Opinion 410, which had held that one-on-one bartering is permissible but participation in a barter association that takes a percentage of purchases is improper. In the new arrangement the attorney was guaranteed no business, the exchange paid no bonus for recommending new members and took no fee on transactions between a member attorney and the attorney's clients, the attorney could refuse any exchange member as a client, the attorney's membership could not be cancelled or recalled by the exchange, and various conflict and withdrawal protections were built in. The exchange would, however, provide a member attorney's name, address, and phone number to other members on request.

The Committee found these provisions did not alter the fundamental problem from Opinion 410: under a barter exchange, the attorney pays value in effect to obtain promotion of the attorney's services by the exchange. That result persists even though no business is guaranteed, no payment is tied to the attorney's legal services, and member information is given only on request, because for membership to be meaningful the arrangement must contemplate that members wanting a lawyer will ask the exchange for member-attorney names.

The Committee concluded that the essence of the membership is a transfer of value by the attorney to the exchange (membership fees and a percentage of trade credits) in return for the exchange making the attorney's name available and facilitating barter payments for legal services. That violates DR 2-103(C) (a lawyer shall not give anything of value to recommend or secure his employment) and DR 2-103(E) (a lawyer shall not knowingly assist an organization that recommends, furnishes, or pays for legal services to promote his services), and no facts showed the exchange qualified under the DR 2-103(E)(1) through (5) exceptions. The opinion does not apply to a barter arrangement that is an integral part of qualifying legal-service organizations. The vote was 9-0.

Currency note

This opinion was issued in 1986, under the former Texas Code of Professional Responsibility, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. The Disciplinary Rules have since been amended, and Texas never adopted the ABA's Ethics 2000 framework. The current Texas rules on paying for the recommendation of a lawyer's services are in Rule 7.03, with the closest ABA analog Model Rule 7.2. Subsequent rule changes or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer join a barter exchange that lists or names member attorneys?

A: Per the opinion, no, where the attorney pays the exchange membership fees and a portion of trade credits and the exchange provides his name to other members. The Committee concluded this is paying for promotion of the lawyer's services, violating DR 2-103(C) and DR 2-103(E).

Q: Did fixing the Opinion 410 problems change the result?

A: No. The Committee found that even with no guaranteed business, no fee on the attorney's legal services, and names given only on request, the arrangement still involves paying value to the exchange to promote the attorney's services.

Q: Does the opinion bar all barter by lawyers?

A: No. The Committee noted Opinion 410 allowed one-on-one bartering, and this opinion does not apply to a barter arrangement that is an integral part of a legal-service organization meeting DR 2-103(E)(1) through (5).

Background and rules framework

The opinion interprets DR 2-103(C) of the former Texas Code of Professional Responsibility (no giving anything of value to recommend or secure employment) and DR 2-103(E) (no knowingly assisting an organization that recommends, furnishes, or pays for legal services to promote the lawyer's services, except qualifying organizations under (1) through (5)). The closest current concepts are Texas Rule 7.03 and Model Rule 7.2 on paying for recommendations. The analysis turns on treating barter membership fees and trade-credit percentages as payment for the exchange's promotion of the lawyer.

Citations and references

Rules of Professional Conduct:

• MR 7.2 (recommendation of a lawyer's services; payment for recommendations)
• DR 2-103(C), DR 2-103(E), Texas Code of Professional Responsibility

Other opinions cited:

• Texas Professional Ethics Committee Opinion 410 (lawyer participation in a barter association)
• ABA Informal Opinion 1430 (problems with barter exchanges under the Code)

See also

• TX Ethics Op. 446: Referrals From a Financial Planning Organization
• TX Ethics Op. 469: Fee Discounts for Steering Subsidiaries

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-435/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_435.pdf

Original opinion text

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

QUESTION PRESENTED

Would an attorney's participation in a barter exchange arrangement be permissible under the Texas Code of Professional Responsibility where the attorney pays a membership fee to the exchange, a portion of trade credits paid by the attorney to non-attorney exchange members is retained by the exchange, and the exchange makes available to other exchange members on their request the names of attorney members of the exchange but where there is no other factor in the arrangement as to which a question was raised in Ethics Opinion 410?

DISCUSSION

Opinion 410 of this Committee dealt with the general question of a lawyer's participation in a barter association. That opinion held that bartering on a one-on-one basis is ethically permissible, but that "participation in a barter association in which the attorney would exchange his services for barter units that would then be used to obtain goods or services from other members of the association, with a percentage of all purchases being paid to the association, is ethically improper." Opinion 410 concerned a barter association arrangement under which a percentage of all purchases, including purchases of legal services, was paid to the association and the association promised a refund of the association membership fee and dues if a specified level of "units" was not expended for a new member's services during the first year. In addition, the association rules provided for a bonus to association members who introduced new members to the association. Opinion 410 also referred to other factors specified in American Bar Association Informal Opinion 1430 which raised additional problems under the Code of Professional Responsibility: the failure of a barter exchange to contemplate the duty of an attorney to refuse employment in some circumstances, the fact that a lawyer's membership would be subject to cancellation or recall by the barter exchange, the question as to whether a lawyer who terminates membership in a barter exchange would have a duty to continue representation of a client who is an exchange member, and potential conflict of interest problems that could arise if the lawyer were called upon to represent an exchange member against the exchange or against another member or if the lawyer were to represent a nonmember of the exchange against a member.

The barter arrangement addressed in the present opinion seeks to eliminate many of the objectionable factors identified in Opinion 410. An attorney is not guaranteed any amount of business by the exchange. The exchange does not provide any bonus or credit to an attorney who recommends a new member to the exchange. The exchange agrees not to solicit business for the attorney, but the exchange will provide, when requested by other members, the name, address and phone number of member attorneys. The exchange agrees that it will never receive any fee or percentage of trade credits with respect to any transaction between a member attorney and the attorney's clients. Member attorneys are specifically free to refuse to accept any exchange member as a client and the attorney's membership in the exchange is not subject to cancellation or recall by the exchange. The exchange agrees that it will have no right to direct the operation of a member attorney's practice. The attorney and the exchange agree that the attorney shall not knowingly represent the exchange against any other exchange member, one exchange member against another exchange member, or a nonexchange member against an exchange member. The attorney may not pay court costs or expenses in cash and receive trade credits as reimbursement. The attorney and the exchange agree that, upon the attorney's termination of membership in the exchange, the attorney will treat clients that have paid for services through the exchange no differently from any other clients and the attorney will comply with the attorney's obligations under agreements with clients and under the Code of Professional Responsibility. The agreement between the attorney and the exchange will not prevent the attorney from withdrawing from membership in the exchange at any time.

The provisions described in the preceding paragraph do not in the opinion of the Committee alter the fundamental problem addressed in Opinion 410: under a barter exchange arrangement, value is paid by an attorney member of the exchange in effect to obtain promotion of the attorney's services by the barter exchange. This result arises in spite of the fact that the barter exchange does not guarantee any business to the attorney, that there is not payment made to the barter exchange with respect to payments of exchange dollars for the attorney's services, and that the barter exchange only provides the name and other information about a member lawyer when requested by another member of the exchange. In spite of these and other limitations referred to above, the member attorney of a barter exchange nonetheless is making payment to the exchange in the form of membership fees and in the form of a portion of the attorney's payments in trade dollars to other exchange members for goods and services other than legal services. In order for an attorney's membership in a barter exchange to be meaningful as a business matter, the arrangement must contemplate that exchange members who may wish to employ an attorney will ask the barter exchange for the names of member attorneys even if no such information is provided in a membership listing or directory.

The essence of an attorney's membership in a barter exchange is a transfer of value by an attorney to the exchange (in the form of membership fees and/or in the form of a percentage of trade credits paid by the attorney to other members to the exchange) in return for the exchange's making the attorney's name available to other exchange members and facilitating payments through barter for the attorney's legal services. A lawyer's participation in such an arrangement therefore violates Disciplinary Rule ("DR") 2-103(C): A lawyer shall not compensate or give anything of value to a person or organization to recommend or secure his employment by a client, or as a reward for having made a recommendation resulting in his employment by a client; . . . . Such arrangement also violates DR 2-103(E), which provides that "a lawyer shall not knowingly assist a person or organization that recommends, furnishes, or pays for legal services to promote the use of his services or those of his partners or associates." Although DR 2-103(E) authorizes a lawyer's dignified cooperation with certain legal service activities of organizations specified in DR 2-103(E) (1) through (5), no facts have been supplied to indicate that the barter exchange here at issue qualifies under such provisions.

CONCLUSION

It is not permissible under the Texas Code of Professional Responsibility for an attorney to enter into a barter exchange arrangement in which the attorney's identity as a member of the exchange is provided by the exchange to other members of the exchange on their request and in which the attorney pays anything of value to the exchange (including amounts paid to the exchange as membership fees and as a percentage of trade credits expended by or received by an attorney member). This opinion does not apply to any barter arrangement that is an integral part of legal service activities of an organization that meets the requirements of DR 2-103(E)(1) through (5). (9-0 vote)

Tex. Comm. On Professional Ethics, Op. 435 (1986)