Ethics in Brief

Ethics in Brief is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association.


Rainmaking Between the Lines

As a young lawyer I was fortunate enough to work for a gentleman who was not only a successful lawyer but who had a prior highly successful career in the retail shoe business.  From this mentor, I learned not only the law side of lawyering but a lot about the business side of lawyering, because he brought a shoe salesman’s outlook to the practice of law.

One of the bits of wisdom imparted to me was that as long as you had work coming in the door, you could always find someone to do the work.  It was an early lesson in the primacy of what is called “rainmaking” in our profession.  For private practice lawyers at every level, getting clients is the key upon which everything else turns.  If the rain doesn’t fall, no crops will grow.

Not surprisingly, a substantial part of the black letter law of ethics in California, the body of law every lawyer needs to be familiar with, the Rules of Professional Conduct and the Business and Professions Code sections of the State Bar Act, address the ethics of getting clients.  Among the most important are the prohibitions on buying cases.

One of the most important is Rule of Professional Conduct 1-320, entitled “Financial Arrangements With Non-Lawyers.”  Most lawyers are familiar with the (A) part of the Rule, which prohibits a lawyer from splitting a fee with a non-lawyer except in very limited exceptions, one being of special interest.  But most lawyers seem to overlook the (B) part of the Rule:

A member shall not compensate, give, or promise anything of value to any person or entity for the purpose of recommending or securing employment of the member or the member's law firm by a client, or as a reward for having made a recommendation resulting in employment of the member or the member's law firm by a client.

The aim of Rule 1-320 is to prevent lawyers from simply buying cases, a practice that is also called “capping” from the Latin phrase “per capita” meaning paying a price per case, a practice that is also made a criminal offense by Bus. & Prof. Code section 6152.  The ideal is that the important decision about who the client/consumer should choose as their lawyer should not be influenced by marketing but by a deliberative process on the client/consumer’s part that involves a careful consideration of the skills and legal acumen of the lawyer.

It is a concept that looks backward to a society that viewed the relationship between an attorney and client as something more than an arrangement for the provision of a commodity called “legal services.”   Times have changed.  We live now in an atomized mass society where goods and services are not brought to us by our neighbors but by large corporate entities who can utilize vast economies of scale to bring the price down, even as we sacrifice the value of interpersonal interaction.

The legal profession has not yet completely caught up but we have made some progress.  The problem of meeting the needs of clients for qualified lawyers in this new atomized mass society was recognized and addressed in 1987 by enactment of Business and Professions Code section 6155, which provides for the creation of authorized Legal Referral Services (LRS).  The statute allows for legalized capping by entities that meet the stringent requirements for becoming an authorized Legal Referral Service.  Rule 1-320(A)(4)  specifically authorizes a California lawyer “to pay a prescribed registration, referral, or participation fee to a lawyer referral service established, sponsored, and operated in accordance with the State Bar of California's Minimum Standards for a Lawyer Referral Service in California.”

The LRS statute authorizes the State Bar to adopt very minimum standards to effectuate its goals of “ensuring that panel membership shall be open to all attorneys practicing in the geographical area served who are qualified by virtue of suitable experience.”  In practice, those rules, found beginning with Rule 3.800, Rules of the State Bar of California, have proven to be unduly burdensome for those seeking to operate such a LRS for profit.   Almost all of the Authorized Legal Referral Services are operated by non-profit entities such as local bar associations.   I have counselled lawyers who wished to establish for-profit Legal Referral Services, in some cases to formalize informal referral arrangements that had existed for years.  They have uniformly found it to be too much work.

But the need for legal services is great and the marketing imagination of lawyers and marketing consultants is great as well, so unauthorized Legal Referral Services of many kinds flourish. The latest versions are the so-called “lead generators” who sell information to attorneys about customers who typically respond to web sites or email messages seeking individuals with specific legal problems.  Is a lead generator an LRS?   While it broadly states that any individual or entity that may “operate for the direct or indirect purpose, in whole or in part, of referring potential clients to attorneys” must be an authorized LRS, it also defines that “certifiable referral activity involves, among other things, some person or entity other than the consumer and advertising attorney or law firms which, in person, electronically, or otherwise, refers the consumer to an attorney or law firm not identified in the advertising.”  Under this definition it is hard to see how a lead generator is not an LRS.

There are probably thousands of lead generators out there and they and the lawyers that rely on them seem mostly untroubled by potential disciplinary action by the State Bar.  The State Bar did prosecute attorneys for participating in an unauthorized LRS 20 years ago and has not shown any willingness to do so in the recent past.  Part of it may be the sheer volume of activity; cracking down now on uncertified LRS activity seems a little like King Canute commanding the tide not to come in.  But there remains an unquantifiable risk for attorneys who choose to use lead generators or other referral services that in a specific case a client will complain and trigger the close scrutiny of the State Bar.  The prudent attorney who does not want to bear that risk should strive to conduct his or her rainmaking within the strict lines of the State Bar Act and Rules of Professional Conduct.

-- David Cameron Carr

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**