New Fixed-Fee Legal Service Program Raises Ethical Questions

 Posted on May 12, 2016 in Ethical Issues in Marketing

Earlier this year, the popular legal directory and lawyer rating website Avvo introduced a program that offers limited-scope legal services for an upfront, fixed price. Avvo Legal Services is intended to connect clients needing relatively simple legal guidance with a network of selected attorneys in 18 states, including Illinois, Texas, California, and Wisconsin. Avvo’s CEO, Mark Britton claims that the new program could make the site “the Match.com of legal.”

Reaching an Underserved Market

In theory, the concept seems sound. Many individuals, families, and businesses often find themselves in need of an attorney to help handle a straightforward, albeit important legal matter. However, they may not be able to afford the fees charged by a “typical” attorney, that could equate to hundreds of dollars per hour; and this does not just include lower-income brackets. An average, working middle-class family may struggle to pay for the legal help they need. “They can’t afford a $250-an-hour lawyer,” said Gregory W. Coleman, a partner in a Florida law firm and past president of the Florida Bar. “But they can afford a flat fee for a task they need accomplished.” Coleman also noted, “[Avvo is] reaching a market that we as a profession have been unable to serve.”

Concerns Regarding Fees

When a prospective client visits Avvo’s site, they are provided with a list of available fixed-fee services, grouped by practice area. The services and fees are determined by Avvo and range from business law—start a single member LLC for $595—to landlord-tenant issues—create an eviction notice for $299—to family law—file an uncontested divorce for $995—and dozens of others. The client then selects an attorney from the directory, pays the required fee to Avvo upfront, and is connected with the lawyer.

How the fees are handled from that point forward has become a cause of major concern for many lawyers around the country. Avvo deposits the earned fees monthly into the lawyer’s operating account. In a separate withdrawal, the service takes its portion in the form of a marketing fee on a per-service basis, a fee that varies depending on the client’s purchased package.

Is the Practice Ethical?

A growing number of attorneys believe that the fee structure constitutes a version of fee sharing or fee splitting, which is generally considered an ethical violation by the American Bar Association. Fee sharing is also expressly prohibited in many jurisdictions. Many believe that Avvo’s program violates ethical standards because the marketing fee is determined by the amount of the legal fee, whereas a flat marketing fee would be more acceptable.

Nicole Hyland, an ethics attorney in New York City, says that the practice seems to be in opposition to most ethics opinions of which she is aware. In her experience, when an attorney pays to be listed with a directory, the amount he or she pays should not depend on the number of resulting clients or the amount of resulting earned fees. “Here,” she said, “Avvo’s ‘marketing fee’ appears to be tied to both.” She also added that she does not necessarily think that service is harming clients, and that it might be time for some ethical reform, as lawyers should have more options for marketing their practices.

Looking Ahead

Avvo, as one might expect, claims that the program was designed to meet ethical restrictions, and that it serves a need for both clients and attorneys. For now, the service continues to remain available, and no formal ethics complaints have been reported—at least not widely reported. Skeptics, including Mr. Coleman, wonder what will happen if a young lawyer signs up to participate in the program, collects a few fees, and then is called out by the local or state bar for fee sharing. Only time will tell.

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Sources:

http://www.abajournal.com/magazine/article/is_avvos_fixed_cost_legal_service_a_fee_sharing_violation/

https://www.avvo.com/family/divorce-and-separation/legal-services

http://solopracticeuniversity.com/2016/01/12/is-avvos-new-marketing-fee-really-a-referral-fee-in-sheeps-clothing/

http://www.abajournal.com/news/article/lawyers_can_share_fees_with_lawyers_who_share_fees_with_nonlawyers/