Ethics Opinon 1975-17
December 19, 1975
SUBJECT: ETHICS OF PROPOSAL ESTABLISHING A NONPROFIT ORGANIZATION TO HANDLE CONSUMER COMPLAINTS INCLUDING REFERRALS TO ATTORNEYS WHEN THE COMPLAINTS CANNOT BE OTHERWISE RESOLVED.
An attorney has been asked to assist in establishing an entity, possibly nonprofit, with the purpose of investigating and resolving various consumer complaints at no charge or for a nominal fee. In those cases in which a resolution satisfactory to the entity and the consumer cannot be obtained, the customer would be referred to a lawyer, if the entity felt that litigation was warranted. The entity would advance all costs of suit and would be reimbursed out of the recovery, if any; however, the customer would ostensibly be the attorney's client and all fee arrangements would be between them.
The request does not set out the relationship between the organizer of an entity and the attorney.
It appears that the proposal is inconsistent with the Rules of Professional Conduct of the State Bar of California, effective January 1, 1975, unless the referral to an attorney was made through a qualified legal aid or lawyer reference service. The committee draws no conclusion concerning whether the entity would be engaging in the practice of law as a result of any of its activities in attempting to resolve questions.
Rules 2-101, 2-102 and 2-103 of the Rules of Professional Conduct provide, in part, a follow:
"Rule 2-101. General Prohibition Against Solicitation of Professional Employment. A member of the State Bar shall not solicit professional employment by advertisement or otherwise. Conduct permitted by Rules 2-102 through 2-106 shall not be deemed solicitation within the meaning of this rule.
Rule 2-102. Publicity in General
(A) A member of the State Bar shall not prepare, cause to be prepared, use or participate in the use of, any form of public communication that contains professionally self-laudatory statements calculated to attract lay clients; as used herein, 'public communication' includes, but is not limited to communication by means of television, radio, motion picture, newspaper, magazine or book.
(B) A member of the State Bar shall not publicize himself, his partner, or any other attorney, lawyer or counselor at law as a member of the State Bar through newspaper or magazine advertisements, radio or television announcements, display advertisements in city or telephone directories, or other means of commercial publicity, nor shall he authorize or permit others to do so in his behalf except as permitted under Rule 2-103 and 2-104."
"Rule 2-103. Professional Notices, Letterheads, Office and Law Lists.
(A) A member of the State Bar or firm of which he is a member shall not use professional cards, professional announcement cards, office signs, letterheads, telephone directory listings, law lists, legal directory listings or similar professional notices or devices except that the following may be used if they are in modest and dignified form:
(1) A professional card of a member of the State Bar identifying him by name as a lawyer and giving his addresses, telephone number and the name of his law firm . . .
(2) A brief professional announcement card . . .
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(6) A listing in a law list or legal directory certified by the American Bar Association or by the State Bar of California as being in compliance with appropriate rules and standards . . . . A law list is every list of attorneys at law, legal directory or instrumentality maintained or published primarily for the purpose of circulating or presenting the names of attorneys at law as probably available for professional employment.
(7) A listing of a member of the State Bar identifying him by name and as a lawyer and giving his addresses and telephone numbers, either alphabetically or under a single classification used to designate 'attorneys' or 'lawyers' in a membership roster, register directory, or other membership list of a service club, charitable organization, fraternity, school alumni association, business, professional or trade association of which he is a member if the list is published for the information of and distribution to the organization's members, identifies as lawyers all members who are members of the State Bar, is not in distinctive type or form as to particular names, and is published without any special charge required to be paid for the listing.
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Rule 2-104 provides, in part, as follows:
"Rule 2-104. Recommendation of professional employment.
(A) A member of the State Bar shall not recommend employment, as a private practitioner, of himself, his partner or associate to a nonlawyer who has not sought his advice regarding employment of a member of the State Bar.
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(C) The participation of a member of the State Bar in a lawyer reference service established, sponsored, supervised and operated in conformity with the Minimum Standards for a Lawyer Reference Service in California . . . [is not a violation of these rules] . . ."
(D) The furnishing of legal services by a member of the State Bar pursuant to an arrangement for the provision of such services to the individual member of a group, as herein defined, at the request of such a group, is not of itself in violation of these Rules of Professional Conduct if the arrangement:
(1) permits any member of the group to obtain legal services independently of the arrangement from any attorney of his choice,
(2) is so administered and operated as to prevent
(a) such group, its agents or any member thereof from interfering with or controlling the performance of the duties of such member of the State Bar to his client,
(b) such group, its agents or any member thereof from directly or indirectly deriving a profit from or receiving any part of the consideration paid to the member of the State Bar for the rendering of legal services thereunder.
(c) unlicensed persons from practicing law thereunder, and
(d) all publicizing and soliciting activities concerning the arrangement except by means of simple, dignified announcements setting forth the purposes and activities of the group or the nature and extent of the legal services or both, without any identification of the member or members of the State Bar rendering or to render such services.
Nothing in this rule shall prohibit a statement in response to individual inquiries as to the identity of the member or members of the State Bar rendering or to render the services giving the name or names, addresses and telephone numbers of such member or members.
As used in this rule a group means a professional association, trade association, labor union or other nonprofit organization or combination of persons, incorporated or otherwise and including employees of a single employer, whose primary purposes and activities are other than the rendering of legal services.
A member of the State Bar furnishing legal services pursuant to an arrangement for the provision thereof shall advise the State Bar thereof within 60 days after entering into the same . . .
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(F) The participation of a member of the State Bar in a legal aid plan or program for the furnishing of services to indigents or pursuant to the plan or program of a nonprofit organization formed for charitable or other purposes which furnishes legal services to persons only in respect of their civic or political or constitutional rights and not otherwise in furtherance of such charitable or other public purposes of such organization and the publicizing of such plans or programs are not, of themselves, violations of these Rules of Professional Conduct provided the name of such member of the State Bar is not publicized. Nothing in this rule shall prohibit a representative of such a plan or program from stating in response to inquiries as to the identity of such member of the State Bar such member's name, address and telephone number.
(G) A member of the State Bar shall not accept employment when he knows or should know that the person who seeks his services does so as a result of conduct prohibited under this rule."
1. The State Bar Rules have long prohibited solicitation by attorneys or by others on their behalf (see former Rules 3 and 21). The present rules continue these prohibitions, while continuing to allow certain exceptions, including those quoted above.
The proposed entity has as one of its primary functions the resolution of disputes between consumers and those providing goods or services to them. An integral part of this function is the litigation of certain claims where the entity determines that such action is warranted. If so, the entity would refer its customers directly to a lawyer, presumably drawn from a list of those lawyers cooperative with or highly regarded by the entity and its staff.
The problem inherent in the proposed entity, with its list of attorneys is the room for abuse; such an entity could be formed and funded for the benefit of a few select attorneys, not necessarily competent to handle matters referred to them. The entity can then advertise to attract business which by its nature may end in litigation, and funnel the customers to a closed group of lawyers, paying costs of suit to encourage the customer to sue and use the attorney suggested.
The Rules of Professional Conduct, quoted above, prohibit such referral system except in a few carefully defined and regulated cases. Those limited situations are approved lawyers reference service, a nonprofit legal aid program under certain limitations, or a nonprofit group on behalf of its members.
Only the latter exception seems remotely related to the entity in question, however the entity would not consist of a stable membership and the legal service is not incidental to the purpose of the entity; no "membership" really exists except as problems arise, and the resolution of disputes is so intertwined with legal services that it could not be incidental to the organization's purpose.
Any referral of customers should be directly to the Lawyers Referral Service which can suggest an attorney from one of its panels of specialization.
Any attorney who is aware that a proposed entity contemplates to establish its own referral system should refrain from assisting that entity in pursuing its goal. To this end, the attorney should not cooperate in establishing such an entity. Similarly, any attorney who accepts recurring referrals from such an entity could, in an appropriate case, be found in violation of Rule 2-104 which limits solicitation, through referrals, to certain qualified groups.
2. The payment of costs of suit by the entity, either as an advance, loan, or gift raises an independent question. Although the "client" may be the customer of the entity, the entity may exercise control over the litigation by paying or refusing to pay for the costs of the suit, such as certain expenses of discovery. By withholding funds the entity can decide some strategy which should be a decision of the attorney and his client. Although the client may pay costs to meet any deficiency, the necessity for such payment may not be made known to the client until after he has committed himself to the litigation.
A.B.A. Informal Opinion No. 1212 (2/72) addresses a related point: the payment of attorneys fees by a third party. The question there presented was that a real estate broker-appraiser engaged a law firm to represent his customer. The broker paid the fee and reimbursed the firm for costs advanced; the opinion concluded that the acceptance of fees from the broker would be improper because of interference with the attorney-client relationships but was silent on the question of costs.
This opinion is advisory only. It is not binding upon the State Bar, the Board of Governors, its agents or employees.
Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.