NY Daily Record Since 1908
John E. Bernacki
Competition for clients can sometimes be fierce — especially in this economic climate. For that reason, some attorneys turn to legal marketing firms in an attempt to gain an edge over rival law firms.
While utilizing legal marketers is not a bad idea, when using their services, it is always wise to tread lightly and ensure that you are well aware of your ethical obligations — especially when it comes to compensating the marketing firm. Some types of fee arrangements may, at first glance, seem harmless, but may in fact run awry of fee-sharing prohibitions.
This very topic was addressed in January by the New York State Bar Association’s Committee on Professional Ethics in Opinion 902 (Jan. 13).
In this case, the inquiring attorney, who handled collection matters, sought to retain the services of a legal marketing company. The company planned to expose the attorney to its network of physicians, allowing the attorney to hopefully obtain collection work from them.
Instead of paying a monthly fee, the attorney wondered if it would be ethically permissible to: 1) pay a “fixed fee each time the company makes an introduction and sets up a meeting with a doctor,” or 2) pay an extra “fee to the marketing company if and when the doctor retains the attorney in a certain number of collection cases.”
In other words, the inquiring attorney sought to base payment on the number of potential or actual clients referred to his law firm by the legal marketing firm. Although at first blush, the request sounds reasonable, it turns out that the proposed fee agreement is violative of Rule 7.2 of the Rules of Professional Conduct.
At the outset, the committee noted that although the arrangement had the potential to violate advertising and solicitation rules, but for the purposes of this opinion, it was assumed that it did not do so.
The committee then turned to Rule 7.2 and its application to the facts at hand: “Rule 7.2(a) provides: ‘A lawyer shall not compensate or give anything of value to a person or organization to recommend or obtain employment by a client, or as a reward for having made a recommendation resulting in employment by a client,’ except in two situations not relevant to this inquiry. Comment [1] to Rule 7.2 acknowledges that the rule allows a lawyer ‘to pay for advertising and communications permitted by these Rules,’ but states that lawyers “are not permitted to pay others for channeling professional work.”
Thus, as the committee explained, generally speaking, Rule 7.2 prohibits the payment of money or the exchange of other value for referrals, which is exactly what the inquiring attorney sought to do.
Thus, the committee concluded that payment to the marketing company for potential or actual referrals was impermissible: “The proposed fee arrangements are inconsistent with the text of Rule 7.2(a) and with our prior opinions. Payment of a fee to the marketing firm for an introduction and meeting with a potential doctor client would be a payment to recommend or obtain employment by a prospective client. Paying the firm an additional fee if and when the doctor retains the attorney in a certain number of collection cases would violate the prohibition of rewards for having made a recommendation resulting in employment by a client.”
So, the inquiring attorney is out of luck in this case. Fortunately, he had the wherewithal to seek the committee’s approval prior to entering into a questionable fee arrangement, thus avoiding the possibility of a disciplinary action. Because, as I always say, better safe than sorry.
The Hon. John E. Bernacki is a Pittsford Town Court Justice. His law firm, John E. Bernacki Jr. PC, is located in Pittsford. He can be reached at www.johnbernackilaw.com.
