Page 19 - MDPs - Chapter 14 - Multidisciplinayr Practice and Partnershps
P. 19
Referral fees are permitted when they are reasonable and not related to a particular transaction or
matter.48 For example, firms lending funds to other firms and accepting referrals as payment and payment
of a bonus for each referral by an employee are prohibited. The service provider, such as PSI, cannot
charge a transactional fee for each referral but it can charge a percentage of the overall transaction. If the
amount is excessive, the fee may be suspect.
PSI offers the possibility of referrals both from the public and from other professionals. WSG offers
professionals the opportunities to get to know others, share information and, in particular, place
information about them in the database. Each receives a fee. Are these referral fees prohibited by bar
regulations?
In Alabama State Bar Association v. R.W. Lynch,49 the court dealt with facts similar to PSI. In that case a
number of independent attorneys created a commercial for legal services. When clients called a telephone
number, they were referred to the attorneys who had paid for the ad. This was held not to be a referral
service, but permissible advertising. Since payments are not based upon the number or size of the
referrals, John’s participation in PSI should pose no referral ethical issues.
WSG is different in that it is more of a networking organization. Attorneys can participate in a networking
group provided that the membership fee is fixed and not based upon work generated, the referral function
is not the sole purpose, the lawyer does not accept clients based upon referrals from other members,
lawyers do not solicit members and the lawyer does not set up a booth at the networking convention.50
In short, as an organization whose objective is promoting professional activities, WSG should not violate
the ban on payments for referrals and would not be involved in fee splitting.
[4]—Advertising Marketing Directories — Organization and Lawyers
John joined PSI not only because of the resources that PSI makes available but he knows that
PSI/Microsoft, in order to retain members, must spend considerable amounts on advertising to
“guarantee referrals.” Judy’s firm pays indirectly a portion of the advertising for WSG whose budget is $5
million. What rules, if any, apply to PSI, WSG and their members related to advertising?
Each profession has their rules of permitted advertising.51 To be viable, PSI, the service provider, must
attract a large number of consumers of services. This requires a concerted marketing effort. While in the
United States attorneys now have fairly liberal advertising privileges, lawyers in many other jurisdictions
are prohibited from marketing.”52 The professionals could be responsible for the advertising of the service
provider.
The first issue is whether John and Judy are advertising or whether the activities of PSI and WSG are
independent of the members. In the United States advertising is permitted if it not false and misleading.53
48 ABA Model Rule 7.2(c).
49 655 So. 2d 982 (Ala. 1995).
50 Md. State Bar Ass’n. On Ethics, Op. 88-78 (1988).
51 Multidisciplinary Practice of law - hazards of dual practice with respect to advertising, solicitation and reasonableness of fees. 13 CBA Record
47(2) (Nov. 1999).
52 Altof, Lawyer Advertising on the Internet (Practical and Ethical Considerations of Internet Advertising) 453 Wash St. Bar News, 32 (11 Dec 1999)
53 Bates v. State Bar of Arizona, 433 U.S. 350, 97 S.G. 2691, 53 L.Ed. 2d 810 (1977).
14
matter.48 For example, firms lending funds to other firms and accepting referrals as payment and payment
of a bonus for each referral by an employee are prohibited. The service provider, such as PSI, cannot
charge a transactional fee for each referral but it can charge a percentage of the overall transaction. If the
amount is excessive, the fee may be suspect.
PSI offers the possibility of referrals both from the public and from other professionals. WSG offers
professionals the opportunities to get to know others, share information and, in particular, place
information about them in the database. Each receives a fee. Are these referral fees prohibited by bar
regulations?
In Alabama State Bar Association v. R.W. Lynch,49 the court dealt with facts similar to PSI. In that case a
number of independent attorneys created a commercial for legal services. When clients called a telephone
number, they were referred to the attorneys who had paid for the ad. This was held not to be a referral
service, but permissible advertising. Since payments are not based upon the number or size of the
referrals, John’s participation in PSI should pose no referral ethical issues.
WSG is different in that it is more of a networking organization. Attorneys can participate in a networking
group provided that the membership fee is fixed and not based upon work generated, the referral function
is not the sole purpose, the lawyer does not accept clients based upon referrals from other members,
lawyers do not solicit members and the lawyer does not set up a booth at the networking convention.50
In short, as an organization whose objective is promoting professional activities, WSG should not violate
the ban on payments for referrals and would not be involved in fee splitting.
[4]—Advertising Marketing Directories — Organization and Lawyers
John joined PSI not only because of the resources that PSI makes available but he knows that
PSI/Microsoft, in order to retain members, must spend considerable amounts on advertising to
“guarantee referrals.” Judy’s firm pays indirectly a portion of the advertising for WSG whose budget is $5
million. What rules, if any, apply to PSI, WSG and their members related to advertising?
Each profession has their rules of permitted advertising.51 To be viable, PSI, the service provider, must
attract a large number of consumers of services. This requires a concerted marketing effort. While in the
United States attorneys now have fairly liberal advertising privileges, lawyers in many other jurisdictions
are prohibited from marketing.”52 The professionals could be responsible for the advertising of the service
provider.
The first issue is whether John and Judy are advertising or whether the activities of PSI and WSG are
independent of the members. In the United States advertising is permitted if it not false and misleading.53
48 ABA Model Rule 7.2(c).
49 655 So. 2d 982 (Ala. 1995).
50 Md. State Bar Ass’n. On Ethics, Op. 88-78 (1988).
51 Multidisciplinary Practice of law - hazards of dual practice with respect to advertising, solicitation and reasonableness of fees. 13 CBA Record
47(2) (Nov. 1999).
52 Altof, Lawyer Advertising on the Internet (Practical and Ethical Considerations of Internet Advertising) 453 Wash St. Bar News, 32 (11 Dec 1999)
53 Bates v. State Bar of Arizona, 433 U.S. 350, 97 S.G. 2691, 53 L.Ed. 2d 810 (1977).
14
