Avvo Loses in N.Y., but Big Win May be on Horizon in N.C.

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By Samson Habte

The New York state bar’s ethics committee on Aug. 8 issued the latest in a string of advisory opinions that caution attorneys not to participate in an Avvo Inc.-branded online program that matches lawyers with potential clients (N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 1132, 8/8/17).

Though the opinion marked another regulatory setback for Avvo—a Seattle-based technology company that has described its mission as “making legal services easier, more transparent, and accessible for consumers"—a pending proposed ethics opinion and an ethics rule amendment from the North Carolina state bar’s ethics committee may signal the beginning of a more permissive treatment of Avvo’s services.

The New York opinion addressed Avvo Legal Services, which connects consumers seeking limited-scope legal services with attorneys who provide those services for a flat fee, and then pay a “marketing fee” to Avvo that varies based on the cost of the service provided.

Joining at least four other bar panels, the New York committee found that ethics rules prohibit lawyers from participating in Avvo Legal Services.

Publicized Losses, Unheralded Victories

Josh King, Avvo’s chief legal officer, said lawyers who have been using the client-matching service should rest easy.

The negative opinions—which came from bar panels South Carolina, Ohio, Pennsylvania, New Jersey, and now New York—have “been issued so far by entities that don’t have any disciplinary authority,” King told Bloomberg BNA, and there hasn’t been a single instance in which a lawyer has faced professional discipline for participating in Avvo Legal Services.

King also said Avvo hasn’t seen “much of an impact on our legal services business in the other states where these have been issued.”

King also noted that while the ethics opinions disapproving of Avvo Legal Services have gotten a great deal of media coverage, the company has also been on the winning side of some less-heralded regulatory debates in two states.

In one of those states, Virginia, the state bar’s ethics committee withdrew a proposed opinion that had also concluded that lawyers could not participate in Avvo Legal Services without violating professional conduct rules.

More promisingly for Avvo, a subcommittee of the North Carolina state bar’s ethics committee met on July 26 and unanimously approved a proposed ethics opinion that, if adopted, would be the first from a state bar to conclude that lawyers may ethically participate in Avvo Legal Services.

The developments in North Carolina may prove to be even more groundbreaking because in addition to the proposed opinion, the state’s ethics panel also approved a proposed amendment to that jurisdiction’s version of Rule 5.4—which governs fee-sharing with nonlawyers and has been cited as an obstacle in nearly all of the negative ethics opinions addressing Avvo Legal Services.

Alberto Bernabe, a professor at The John Marshall Law School in Chicago and author of a recent law review article on the ethics of Avvo’s matching program, said he was “glad to hear” that Avvo took an active role in the North Carolina bar’s deliberations, as opposed to taking a page from the “Uber playbook” and “not asking for permission.”

“That is the better way to handle these issues,” Bernabe told Bloomberg BNA. “If they manage to get a jurisdiction to change the rule, to allow what they’re doing, then they could be home free,” he added, suggesting that a rule amendment in North Carolina might wind up being just the first domino to fall.

“It is important for Avvo to make sure that the regulatory system allows them to do what they’re trying to do,” Bernabe said.

Narrower Than Past Opinions

The New York committee said lawyers who participate in Avvo Legal Services violate the ethics standard that forbids paying for referrals.

That made the opinion more narrow than those by other bar panels that cautioned lawyers not to participate in Avvo Legal Services. Those opinions cited multiple ethics rules and focused mostly on the prohibition on sharing legal fees with nonlawyers.

King wasn’t particularly encouraged by the fact that the New York panel focused on the “pretty narrow” issue of whether the “marketing fee” lawyers pay to participate in Avvo Legal Services constitutes a referral payment.

The panel’s analysis of that question was “flawed,” King told Bloomberg BNA. “This is not how the narrow prohibition on paying for a recommendation should work,” he said.

Avvo: 1st Am. and Antitrust Ignored

King said the New York committee—like the other ethics panels that have addressed Avvo Legal Services—also failed to consider constitutional and antitrust principles that should inform their analysis of bar regulations.

The New York panel acknowledged that “the questions we have addressed have generated vigorous debate both within and outside the legal profession.”

“The numbers of lawyers and clients who are using Avvo Legal Services suggest that the company fills a need that more traditional methods of marketing and providing legal services are not meeting,” the opinion said.

“But it is not this Committee’s job to decide policy issues regarding access to justice, affordability of legal fees, or lawyer quality,” the panel said. “Our job is to interpret the New York Rules of Professional Conduct.”

King took issue with that statement.

The committee is correct that “it’s not their job to set policy when thinking about access to justice,” King said. “But that doesn’t mean that they’re excused from applying the First Amendment principles that limit how [ethics] rules are supposed to be interpreted.”

The committee’s analysis failed on that front, King said. “The rules are there to protect the public, and rules that limit lawyer speech and that limit consumer access to information about legal services have to be applied through the commercial speech doctrine,” he told Bloomberg BNA.

The committee also failed to weigh antitrust considerations, according to King. He said “even a voluntary bar like New York’s is exposing itself to potential antitrust liability” when it interprets regulations in an anticompetitive manner.

Ratings and ‘Recommendations’

New York’s Rule 7.2(a) generally prohibits paying others to “recommend” a lawyer. The word “recommendation” is not defined in the text of the rule, but a comment says the term encompasses communications that endorse or vouch for a lawyer’s credentials, abilities, character or other qualities.

The comment also addresses “lead generators,” who may receive payment from lawyers so long as they do not “recommend” them, imply that they are doing so, or create a “reasonable impression” that they are doing so.

The committee concluded that Avvo does “recommend,” or create the impression that it is recommending, lawyers who participate in Avvo Legal Services.

Consumers who use the service are allowed to pick from a list of randomly-displayed lawyers in a geographic area, and Avvo does not expressly suggest that consumers hire particular attorneys. But the company “does more than merely list” those lawyers, the committee said.

Rather, it also displays a “rating” for each lawyer, and some Avvo ads “expressly state that the Avvo Rating enables a potential client to find ‘the right’ lawyer,” the committee said. That “at least implies or creates the reasonable impression” that Avvo is recommending lawyers, the opinion said.

To contact the reporter on this story: Samson Habte in Washington at shabte@bna.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bna.com

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