Marketing Plus Referrals for a Fee - Feeder Operations by Any Other Name - July 2007 - Professional Conduct and Legal Ethics

• Publication year: 2007
• Pages: 75
• Citation: Vol. 36 No. 7 Pg. 75

36 Colo.Law. 75 Colorado Lawyer 2007.

2007, July, Pg. 75. Marketing Plus Referrals for a Fee - Feeder Operations by Any Other Name - July 2007 - Professional Conduct and Legal Ethics

The Colorado Lawyer

July 2007

Vol. 36, No. 7 [Page 75]

Articles

Professional Conduct and Legal Ethics

Marketing Plus Referrals for a Fee - Feeder Operations by Any Other Name

by Stephen G. Masciocchi

Professional Conduct and Legal Ethics articles are sponsored by the CBA Ethics Committee. Articles published here do not necessarily reflect the legal interpretation of the Committee.

Article Editor:

Susan Bernhardt, Denver, of Netzorg, McKeever, Koclanes & Bernhardt LLP - (303) 864-1000, sbernhardt@ nmkb.com

About the Author:

Stephen G. Masciocchi is a partner and appellate practitioner at Holland & Hart LLP. He is chair of the firm's Ethics and Conflicts Committee and a member of the CBA Ethics Committee.

Lawyers increasingly are asked to subscribe to creative marketing ventures that funnel clients to them for a fee. Though these ventures come in different forms and use varying methods, they often are little more than feeder operations involving prohibited referral fees. They also present other ethical pitfalls.

Most lawyers understand that they cannot directly pay or accept referral fees. In the clearest example, one lawyer cannot accept a fee (or anything of value) for referring a client to a second lawyer, and the second lawyer cannot pay a fee (or anything of value) to the first. Likewise, a lawyer cannot agree to charge a client a reduced fee in exchange for the client's referral of another client to the lawyer.(fn1)

Thanks to the Internet and creative marketing arrangements developed by nonlawyers, the issue can become muddled Consider the following scenarios

1. Company A provides Web-based services to businesses, including business plans and a forms bank. It also recommends its clients to attorneys and other professionals. In exchange for an annual fee, an attorney may sign up to receive exclusive referrals for a specific zip code. When a client enters the zip code, the client is taken to a Web page that includes the attorney's photograph, biography, contact information, and a link to the attorney's website. An attorney may sign up to receive referrals from multiple zip codes and must pay a separate annual fee for each, the price of which varies by zip code.

2. Company A also places Internet and television advertisements urging injured viewers who need legal representation to call a personal injury hotline. When a viewer calls, Company A screens the caller and obtains basic information about the nature of the claim and caller's location. It then refers the caller to a lawyer who has paid a flat fee to receive up to twenty-five referrals for this type of personal injury matter in the caller's location.

3. Group B - a group of insurance agents, investment advisors, and certified public accountants - seeks a lawyer or law firm to join a "partnership" that will provide integrated financial planning, estate planning, and accounting services to clients. The lawyer can become a member of Group B for a monthly fee. Members are entitled to participate in group advertising and marketing. The lawyer's affiliation with Group B will be displayed in its marketing materials and on its website, where Group B will be referred to as a "partnership of financial professionals." When a client contacts Group B seeking estate planning advice, its secretary will transfer the incoming call to the lawyer and forward mail and e-mail from the client to the lawyer.

4. Firm C is a tax negotiation firm owned by nonlawyers. It solicits clients through advertisements and by cold calls to taxpayers who have received delinquency notices from the Internal Revenue Service (IRS). After initial intake, Firm C assigns a client to one of its employees who represents clients before the IRS. The firm seeks to hire attorneys to represent clients in more difficult cases before the IRS. The attorneys will charge clients an hourly fee and will be paid a salary plus bonuses based on the number of hours billed to clients. The attorneys have the option of maintaining a separate law office.

All of these scenarios involve or may involve prohibited referral fees, even though the exchange of fees for referrals is less direct...