Can a Virginia lawyer join a networking group whose members trade client leads, where membership depends on how many leads you pass?

Plain-English summary

The opinion addresses a networking group whose members pay a fee, meet weekly, give short promotional pitches, and pass "leads" (potential clients) to other members, where continued membership often depends on the number of leads a member passes. The committee distinguishes this from a lawyer referral service (LEO 1348) and stresses that it is not discouraging bona fide referral services or professional networking; its concern is the specific lead-for-membership structure.

The committee concludes that the leads exchanged among members are things of value, so a structure that requires passing leads to keep membership amounts to a quid pro quo exchange of value for referrals in violation of Rules 7.3(d) and 7.2(c), and possibly Virginia's statutory prohibition on "running and capping." It adds that the arrangement can compromise the lawyer's professional independence under Rule 5.4(c), because a lawyer beholden to the group may feel pressure to take a matter outside the lawyer's competence or to steer a client to a member rather than a better-suited non-member. Passing leads can also create a personal-interest conflict under Rule 1.7(a)(2), and disclosing a client's identity and need to the group can violate Rule 1.6 confidentiality.

Answering the four questions, the committee concludes: (1) it is unethical to participate in the lead-sharing organization described; (2) it is not unethical to own an interest in such an organization so long as the lawyer is not a member; (3) there is no violation when a lawyer participates as a title insurance agent or in another professional capacity through an ancillary business, so long as no Rule of Professional Conduct is violated; and (4) the fourth question, about restrictions on the member's presentation, is moot given the answer to the first. The committee notes that several other states reached the same conclusion.

In practice

Under the Virginia rules as they stood when the opinion issued, the committee holds that a lawyer may not participate as a member in a lead-sharing organization that conditions membership on passing leads, because the reciprocal referrals are things of value traded for referrals in violation of Rules 7.3(d) and 7.2(c) and may compromise the lawyer's independence under Rule 5.4(c), create a personal-interest conflict under Rule 1.7(a)(2), and risk a Rule 1.6 confidentiality breach. The opinion holds that a lawyer may own an interest in such an organization without being a member, and may participate in it through a non-legal ancillary business (for example, as a title insurance agent) so long as no rule is violated. It frames the prohibition as limited to organizations that base membership on a commitment to provide referrals, and as not reaching ordinary lawyer-to-lawyer referrals or professional, educational, or community networking out of which referrals may develop.

Common questions

Q: Can a Virginia lawyer join a BNI-style lead-sharing group where members trade referrals?

A: Not where membership depends on passing leads. The opinion concludes that arrangement trades things of value for referrals in violation of Rules 7.3(d) and 7.2(c), and it is unethical to participate.

Q: Is ordinary lawyer-to-lawyer referral or professional networking prohibited?

A: No. The opinion states it is not discouraging bona fide referral services or membership in organizations for education, community action, or social goals out of which referrals may develop; its prohibition is limited to groups that condition membership on a commitment to provide referrals.

Q: Can a lawyer own a lead-sharing company without joining it?

A: Yes. The opinion concludes there is nothing unethical in a lawyer owning an interest in a lead-sharing organization, for-profit or not, as long as the lawyer is not a member.

Q: Can a lawyer take part as a title insurance agent or other non-legal professional?

A: The opinion concludes a lawyer may participate in the organization in a non-legal professional capacity through an ancillary business, such as a title insurance agent, provided the lawyer does not violate any Rule of Professional Conduct.

Background and rules framework

The opinion interprets the Virginia advertising and solicitation rules, Rule 7.3(d) and Rule 7.2(c) (Model Rules 7.2 and 7.3), which bar a lawyer from giving anything of value to secure employment or reward a recommendation, subject to exceptions for permitted advertising and the usual charges of a lawyer referral service. It also applies Rule 5.4(c) (Model Rule 5.4) on professional independence, Rule 1.7(a)(2) (Model Rule 1.7) on personal-interest conflicts, and Rule 1.6(a) (Model Rule 1.6) on confidentiality, and references Virginia's "running and capping" statutes (Va. Code §§54.1-3939, 54.1-3941) and prior opinion LEO 1348.

Citations and references

Rules of Professional Conduct:

• Model Rule 7.2 / Va. Rule 7.2(c) and Model Rule 7.3 / Va. Rule 7.3(d) (giving value for recommendations; referral-service exception)
• Model Rule 5.4 / Va. Rule 5.4(c) (professional independence of the lawyer)
• Model Rule 1.7 / Va. Rule 1.7(a)(2) (personal-interest conflict)
• Model Rule 1.6 / Va. Rule 1.6(a) (confidentiality)

Statutes:

• Va. Code §§54.1-3939, 54.1-3941 (prohibition on "running and capping")

Other opinions cited:

• Va. LEO 1348: lawyer referral services
• Md. Ethics Docket 2007-16; Mass. Bar Op. 08-01; Or. Formal Op. 2005-175; N.Y. State Bar Op. 791: same conclusion in other states

See also

• ABA Formal Op. 474: Referral Fees and Conflicts of Interest
• Alabama Ethics Op. 1991-43: For-Profit Referral Hotline

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1846.pdf

Original opinion text

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

Committee Opinion
February 2, 2009
Committee Revised
December 29, 2010
LEGAL ETHICS OPINION 1846

IS IT ETHICAL FOR A LAWYER TO BECOME
A MEMBER OF A LEAD-SHARING
ORGANIZATION?

In this hypothetical, an attorney wishes to become a member of a lead-sharing organization,
which can be either a for-profit or not-for-profit association, in which members pay a $500
membership fee, and meet once a week. The membership fee is not distributed, in whole or in
part, back to any member, but rather pays administrative costs of the organization and goes
towards the profit of the association. Part of the oath associated with membership is that each
member will maintain a high degree of professionalism in dealing with their leads, including,
inter alia, timeliness and quality of services. Membership is often dependent on the number of
leads a member passes. During the meetings, members take turns giving a 30-second
promotional, stating any of the following: their name, professional title, industry, place of
employment, and who would represent a “good lead” for them. On an alternating basis, one
member per meeting gets to present a fifteen minute presentation in which they can discuss any
aspect of their industry they deem appropriate. The presentation may be educational, a plea for
business, etc. The meeting then involves members passing leads to other members. These leads
represent potential clients and may have been actively solicited by the lead-passing member
whether they know of a particular professional in the lead-receiving member’s industry. The
lead-receiving member has no control over how the lead was generated, but the lead-receiving
member retains full control over their representation of the client, and need not disclose any
details of that relationship to any other person or entity. At the end of the meeting, the 30-second
promotional process is usually repeated.
QUESTIONS PRESENTED:
1) Is it ethical for a lawyer to become a member of a lead-sharing organization and use that
organization to receive leads for legal services from other members of the organization?
2) Can a lawyer have an ownership interest in a lead-sharing organization that is either forprofit or not-for-profit?
3) Under the same set of hypothetical facts, can a lawyer be a member of a lead-sharing
organization when the lawyer is also a licensed title insurance agent, or any other business
professional, that provides services through an ancillary business, and solicits business only with
respect to real estate closings and title insurance sales or referrals directed to his non-legal
business?
4) Assuming that the lawyer may participate in this lead-sharing organization, are there any
restrictions on what may be included in their 15-minute presentation?
APPLICABLE RULES & OPINIONS

Committee Opinion
February 2, 2009
Committee Revised
December 29, 2010
The rules applicable to these questions are Rule 7.3(d) and 7.2(c), which qualify that a lawyer
may not give anything of value to another for securing employment by a client; Rule 5.4(c),
regarding the professional independence of the lawyer; Rule 1.7(a), regarding general conflict’s
analysis; and Rule 1.6(a), that qualifies client confidentiality. Also pertinent to the Committee’s
analysis is LEO 1348.
ANALYSIS
The Committee believes that the arrangement as described in this hypothetical does not fall
within the parameters of a lawyer referral service as described in LEO 1348. Further, the
Committee would like to preface its analysis by stating that this opinion is not intended to
discourage the development and use of lawyer referral services. 1 Nevertheless, the Committee
believes that the arrangement as described in this hypothetical may create undisclosed conflicts
of interest, compromise a lawyer’s professional independence, and risk violation of the
solicitation rules.
The Committee’s analysis starts with Rule 7.3(d) and Rule 7.2(c) and the basic prohibition
against a lawyer giving anything of value to a person or organization for securing employment
by a client or as a reward for having made a recommendation resulting in employment by a
client. 2 This prohibition is designed to prohibit lawyers from compensating another for
recommendations or as a reward for influencing a prospective client to employ the lawyer. The
Committee considers the “leads” or referrals exchanged among members of this group to be
things of value. The Committee finds that this practice of reciprocal referrals amounts to quid
pro quo payment for services, in violation of Rules 7.3(d) and 7.2(c) and possibly in violation of
1

Rule 7.3 Direct Contact With Prospective Clients and Recommendations Of Professional Employment
Comment [7] The legal profession has developed lawyer referral systems designed to aid individuals who
are able to pay fees but need assistance in locating lawyers competent to handle their particular problems. Use of a
lawyer referral system enables a layman to avoid an uninformed selection of a lawyer because such a system makes
possible the employment of competent lawyers who have indicated an interest in the subject matter involved.
Lawyers should support the principle of lawyer referral systems and should encourage the evolution of other ethical
plans which aid in the selection of qualified counsel.

2

Rule 7.3 Direct Contact With Prospective Clients and Recommendations Of Professional Employment
(d) A lawyer shall not compensate or give anything of value to a person or organization to recommend or
secure employment by a client, or as a reward for having made a recommendation resulting in employment by a
client, except that the lawyer may pay for public communications permitted by Rule 7.1 and 7.2 and the usual and
reasonable fees or dues charged by a lawyer referral service and any qualified legal services plan or contract of legal
services insurance as authorized by law, provided that such communications of the service or plan are in accordance
with the standards of this Rule or Rule 7.1 and 7.2, as appropriate.
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:
(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 services organization; and
(3) pay for a lawyer practice in accordance with Rule 1.17.

Committee Opinion
February 2, 2009
Committee Revised
December 29, 2010
Virginia’s statutory prohibition on “running and capping.”. 3 The lawyer, in this hypothetical,
would be giving something of value to another organizational member in the form of return
referrals as a term of membership. When membership in a lead-sharing organization is
dependent on the number of leads a member passes, the Committee finds that this type of
membership requires the lawyer to exchange something of value for referrals.
The rationale against permitting a lawyer to make such exclusive or quid pro quo referrals is
that this activity may compromise the professional judgment of the lawyer. Rule 5.4 precludes
the lawyer from allowing another person who recommends the lawyer from directing or
regulating the lawyer’s judgment. 4 A lawyer who is beholden to an organization may feel
obligated to accept a case he is not competent to handle, or conversely, a lawyer may be
obligated to refer a client to a particular member specialist when a non-member specialist may be
better suited to meet the client’s needs. Either of these situations may put the client’s interests at
risk.
The prior analysis deals with a lawyer’s acceptance of leads, however, there are additional
concerns raised by a lawyer’s passing leads. The passing of leads creates potential conflicts of
interest for the lawyer pursuant to Rule 1.7(a)(2). 5 This rule specifically cautions the lawyer
regarding potential conflicts stemming from the lawyer’s personal interests. Participation in a
lead-sharing organization potentially creates such a conflict when the lawyer’s membership is
dependent on the number of leads the member lawyer passes, thereby impacting the lawyer’s
freedom to choose the most appropriate specialty provider for a client.
Other issues triggered by your hypothetical are the confidentiality provisions that protect the
client, even to the level of client identity in some representations. A lawyer may not participate
in a plan that requires the lawyer to disclose information relating to the representation of a client
except in compliance with Rule 1.6. 6 The mere disclosure of a client’s name and specific need
in certain circumstances may be enough to violate the Rule without consent of the client.
3

See Letter from Att’y Gen. of Virginia Kenneth T. Cuccinelli, II to Karen A. Gould, Executive Director, Virginia
State Bar (December 7, 2010) (on file with the Virginia State Bar), which cites to §54.1-3939 and §54.1-3941.

4

Rule 5.4 Professional Independence Of A Lawyer
(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal
services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.

5

Rule 1.7 Conflict of Interest: General Rule
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a
concurrent conflict of interest. A concurrent conflict of interest exists if:
(2) there is significant risk that the representation of one or more clients will be materially limited
by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest
of the lawyer.

6

Rule 1.6 Confidentiality of Information
(a) A lawyer shall not reveal information protected by the attorney-client privilege under applicable law or
other information gained in the professional relationship that the client has requested by held inviolate or the

Committee Opinion
February 2, 2009
Committee Revised
December 29, 2010

CONCLUSION:
In conclusion, the answers to your specific questions are as follows:
1) This Committee finds that it is unethical for a lawyer to participate in a lead-sharing
organization such as the one described in this hypothetical, for all the afore-mentioned reasons.
2) This Committee finds that there would be nothing unethical in a lawyer owning an interest
in a company that is a lead-sharing organization as long as the lawyer is not a member.
3) This Committee finds there to be no ethical violation when a lawyer participates in a leadsharing organization as a title insurance agent or in some other professional capacity, operating
through an ancillary business as long as the lawyer does not violate any of the Rules of
Professional Conduct.
4) Since the Committee has found the lawyer’s participation in this lead-sharing organization
to be unethical, this question is rendered moot.
These same questions have been addressed by the states of Maryland, Massachusetts, Arizona,
New Hampshire, Oregon, New York, and Montana, all of which have come to the same
conclusion that membership in such an organization compromises the lawyer’s independence,
potentially creates undisclosed conflicts of interest, and violates solicitation rules. 7
This opinion is not intended to diminish the importance of the ethical practice of lawyer to
lawyer referrals in the professional world and the benefits of bona fide lawyer referral programs.
Referring clients to other lawyers with expertise in certain areas, or receiving such referrals, goes
a long way toward sustaining the legal profession and the provision of legal services in many
communities. The prohibitions and cautions of this opinion are predicated and indeed limited to
a hypothetical organization which bases membership on a commitment to provide referrals.
Nothing in this opinion is intended to preclude a lawyer’s involvement or membership in
organizations that promote the interplay of lawyers and other professionals for education,
community action, or social goals, out of which networking and referrals may develop.
This opinion is advisory only based upon the facts as presented, and not binding on any court
or tribunal.
disclosure of which would be embarrassing or would be likely to be detrimental to the client unless the client
consents after consultation, except for disclosures that are impliedly authorized in order to carry out the
representation, and except as stated in paragraphs (b) and (c).
7
See, Maryland State Bar Association Committee on Ethics Docket 2007-16 and 2005-11; Massachusetts Bar
Association Ethics Opinion 08-01; New Hampshire Bar Association Ethics Committee Opinion #2005-06/6; Oregon
State Bar Legal Ethics Committee Formal Opinion No. 2005-175; New York State Bar Association Committee on
Professional Ethics Opinion 791-2/1/06; and State Bar of Montana Ethics Committee Opinion 960227.