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THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK

FORMAL OPINION 1994-3

COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS

April 13, 1994

ACTION: FORMAL OPINION

TOPIC: Legal referral services.

OPINION:

DIGEST: Attorney may not participate in a for-profit private legal referral service unless authorized under DR 2-103(D).

CODE: DRs 2-103(B), 2-103(C); 2-103(D); EC 2-15.

QUESTION

May an attorney participate in a legal referral service that is operated for profit and not sponsored or approved by any bar organizations?

OPINION

A law firm has been approached by a representative of a referral service, who has asked if the law firm would be interested in participating. The service has been organized to provide referrals for doctors, lawyers and accountants. It will advertise in print and on radio and will refer clients who call an "800" number to member attorneys. The referral service intends to screen each of its listed attorneys to verify that they are members in good standing of the bar. Participants in the referral service will be charged either (1) a flat monthly listing fee plus additional fees for any clients referred to that attorney, or (2) a fee for each referral made to the attorney during the month (up to a fixed maximum amount). The referral service is not operated, sponsored or approved by any bar association.

With certain limited exceptions, DR 2-103 prohibits an attorney from paying a fee or giving "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." DR 2-103(B). DR 2-103(D) lists the type of referral services that are excepted from this prohibition: legal aid offices or public defender offices, military legal assistance offices, lawyer referral services "operated, sponsored or approved by a bar association," or a "bona fide organization which recommends, furnishes or pays for legal services to its members or beneficiaries" provided specific conditions are satisfied.

The Code of Professional Responsibility encourages the use of referral services because they can assist clients in selecting qualified counsel. EC 2-15. However, DR 2-103(D) limits the type of referral services to which attorneys can make a payment in exchange for a reference. Thus, if a referral service is a for-profit, private corporation the purpose of which is to advertise and solicit clients in exchange for referral fees from lawyers and other professionals, and if that organization does not fall within any of the categories listed in DR 2-103(D), it is not a referral organization from which an attorney may properly accept a referral in exchange for the payment of a fee. See generally Ad Hoc Committee on Private Legal Referral Services, "Regulation of Private Legal Services - A Recommendation," 44 Record Assn. Bar City N.Y. 3, 7-9 (1989).

Another concern is DR 2-103(C), which provides:

A lawyer shall not request a person or organization to recommend or promote the use of the lawyer's services . . . other than by advertising or publicity not proscribed by DR 2-101. . . .

(The approved bar association referral services and other organizations enumerated in DR 2-103(D) are exempt from this rule.) Unless the attorney knows the nature, extent and content of the advertisements a for-profit referral service will place, the attorney cannot ensure that the service will comply with the advertising requirements of DR 2-101 as required. See N.Y. State 597 (1989) (an attorney may not enter into an advertising contract in which the advertiser, without including the name, office address and telephone number of the lawyer, suggests in generic ads that viewers call an "800" number, and for a monthly fee, refers all calls from a designated geographical area to that lawyer, as the service arrangement both violates the requirement that all advertising made by an agent of the lawyer conform to court rules on advertising and constitutes a prohibited referral). *

* Accord Iowa 91-18 (1991) (lawyer may not pay membership dues to an organization whose purpose is to secure mutual referrals among members in exchange for the payment of dues); Kentucky E-344 (1991) (lawyer may not participate in a for-profit lawyer referral service); South Carolina 86-13(B) (1986) (lawyer may not participate in a lawyer referral service which is operated by private corporation for profit). Compare Alabama 86-78 (1986) (lawyer may participate in lawyer referral service operated by not-for-profit agency created by state legislature) and Nebraska 87-2 (1987) (lawyer may accept cases from not-for-profit referral services if lawyer does not give anything of value for services).

CONCLUSION

The question is answered in the negative.