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Trying to get access: ARDC proposes new regulations for attorney referral platforms to open up the middle class of potential clients

May 11, 2020
By Tatiana Walk-Morris

In 2011, Kevin Trabaris signed up for Avvo, an online attorney referral service, as he branched out to start his own firm. Trabaris, a corporate and commercial finance transactional attorney, soon discovered that the platform funneled small businesses and consumers to him.

Reflecting on the experience, Trabaris, who is now partner and financial services chair at Culhane & Meadows, believes such platforms have value for other practice areas. Trabaris admittedly works with more lenders and other financial institutions.

“There’s certainly a lot of lawyers [whose] practice areas, for instance… personal injury — there’s a whole variety of different practice areas that could be helped by using the site, but mine isn’t really one of them,” Trabaris said.

As digital platforms emerge to connect consumers with attorneys seeking clients, the Illinois Attorney Registration & Disciplinary Commission has proposed new regulations for attorney referral platforms, which will impact how attorneys using these platforms can do so in an ethical manner.

In 2020, consumers, in theory, can search online for an attorney for a legal predicament and find results within a fraction of a second. But despite the presence of bar association and digital attorney referral services, the gap between consumers in need of legal assistance and the attorneys equipped to represent them persists. And as it stands, the current rules don’t allow non-lawyers, including tech firms, to share fees with attorneys, said Michael Downey, a St. Louis-based legal ethics attorney at Downey Law Group.

Though pro bono legal clinics can help low-income and impoverished individuals, they often are bound by income restrictions and don’t have enough pro bono lawyers to meet the demand, said Trisha Rich, partner and co-chair of Holland & Knight’s Legal Profession Team.

But what about the lower-middle to moderate earners? In 93 of 102 Illinois counties, more than half of their civil cases had at least one self-represented litigant in 2015, according to the ARDC’s 2018 study of client-lawyer matching services.

“If you make — usually, it’s under $40,000, but every program gets to set its own requirements. The difference between $40,000 and $45,000 isn’t changing your life, but it could mean you’re not eligible for pro bono aid,” said Rich, who also serves on the Chicago Bar Foundation’s Task Force on the Sustainable Practice of Law & Innovation. “We just don’t have enough lawyers to fill that gap.”

Though some attorneys believe that it remains to be proven whether there is an access to justice problem, Rich said many judges are likely to confirm they see many people enter their court without legal representation.

It’s complicated

But as online referral services emerge, they further complicate an already complex relationship between attorneys and advertising. Historically, lawyers had substantial advertising restrictions until a 1977 Supreme Court case in Bates vs. State Bar of Arizona that held that lawyers had a First Amendment right to advertise, and consumers in need of legal services have an interest in learning their legal needs and which lawyers could serve them, Downey said.

After launching an inquiry into inefficiencies within the legal market in April 2017, the Illinois ARDC’s 14-page proposal outlines amendments to the Rule 7.2 governing professional conduct, amend Supreme Court Rule 730 to create a legal framework for attorney referral services and introduce Supreme Court Rule 220 to include attorney-client privilege protections for attorney referral services.

The proposal allows intermediary services to disclose fixed prices on routine legal services, a modification which may cause some controversy, because attorneys’ rate of pay will decline, according to Illinois ARDC Administrator Jerry Larkin. However, it remains up to the attorney to determine whether a legal service will be routine or to increase the price for that potential client. Additionally, platforms can define what qualifies as a simple legal service, Larkin added.

Middle-income consumers may not think to call bar associations to access their referral services, and it’s unusual for them to simply open their checkbooks to pay hefty hourly attorneys’ fees, Larkin said.

“There’s some parts of the dynamic between lawyers and clients that, for moderate-income people, don’t work,” he said.

Ready to work

There is a concern that as these platforms provide pricing transparency, they could drive down prices too low – leading some attorneys to do sub-par work for lower wages, Downey said.

“When you start to think about what are we doing to help the clients, the lawyer’s statement of ‘I can’t prepare a will for $200’ is a very legitimate concern,” Downey said. “But there’s also a very legitimate concern from the client of ‘I can only pay $200 for a will. And if I can get help from this technology company to do it and maybe a lawyer that they work with, at least I have a will that hopefully will work.’”

Unlike veteran attorneys with long resumes and client connections, there are plenty of law school graduates struggling to find sustainable jobs and would want to work with emerging tech companies, Downey adds.

There are lawyers willing to provide legal advice for a lower rate in exchange for tech services managing their online presence, handling the advertising and collecting fees, Downey said. The platforms provide the added benefit of collecting clients’ identification and payment information, which will cut down on how long of a conversation an attorney will have with new leads, he said.

As Illinois joins other states such as California, Utah, New York and Arizona in working out how to use online referral services, organizations, including the Illinois State Bar Association and the Chicago Bar Association, have weighed in on how much regulation should be required of these sites.

In the Illinois ARDC’s proposed amendment to Rule 7.2, intermediary connecting services are permitted to charge a “reasonable fee” for leads generated through the platform if the fees aren’t contingent upon a percentage of the attorney’s earnings or outcome of the case. The proposed registration requirements would also compel attorney referral services to provide their bylaws, marketing efforts and criteria for rating and reviewing participating lawyers as well as whether attorneys can contest their rating.

The registration requirements in the proposed rule revisions are aimed at protecting both consumers and attorneys from a largely unregulated market of intermediary connecting services, senior appellate counsel at the Illinois ARDC Benjamin Boroughf said.

There are concerns regarding whether attorneys can buy better ratings on attorney referral platforms, Downey said, adding that lawyers can face consequences under the Illinois rules if they cooperate with websites to manipulate their rating.

Working through it

The revised proposal has evolved considerably from its initial form thanks to the input of various groups, including the Illinois State Bar Association, said David Sosin, president of the ISBA. The updated proposal, he said, has put safeguards in place to allow attorneys to use these regulated services.

The underlying ethical issue regarding attorney referral platforms are the fee structures they implement, which can conflict with the legal profession’s prohibition of fee-sharing with non-lawyers, Sosin said. The platforms are entitled to collect a fee for the use of service, but it can’t be contingent upon the amount of work the lawyer performs or percentage of fees the attorney stands to collect, he explained.

The balance that must be struck is protecting the public as well as the safeguarding attorneys’ ability to serve their clients, Sosin said. As Illinois determines how to protect consumers and attorneys using online referral services, it’s also up to the legal profession to keep a critical eye on these sites as well as educate the public on their criteria and rating systems, he said.

In the public comment submitted by the Chicago Bar Association Task Force on Sustainable Practice of Law & Innovation, the group expressed concern over whether regulations would prevent new attorney referral services from entering the market as well as be unfairly applied to the emerging industry.

The CBA’s task force, for example, noted that the Illinois ARDC’s proposal compels intermediary referral services to pay 0.25% of their revenue, a requirement that isn’t applied to other classes such as corporate law firms, corporate legal departments or other entities.

The fees collected under the ARDC’s proposed rule changes will go toward access to justice programs that provide legal assistance to individuals who can’t afford it, Larkin said.

The group also called attention to the registration and reporting requirements, which requires these referral services to report their marketing efforts or their organizing documents. In the CBA task force’s public comment, the group expressed concerns about whether these rules fall in line with the goal of increasing access to affordable legal services.

“The way we’re looking at it is all of these requirements should be somehow connected with a regulatory objective… increasing access to justice. Would requiring these bylaws help protect the public? Do they help protect lawyers’ professional judgment?” said Jessica Bednarz, director of innovation and the Justice Entrepreneurs Project at the Chicago Bar Foundation. “As you read through all these, these are the questions we’re asking ourselves.”

The Illinois ARDC’s proposal also includes a provision prohibiting attorney referral services from interfering with the attorney-client relationship or the attorney’s overall judgment. The CBA’s task force thinks platforms should be able to have some say over how lawyers can use their platforms, and therefore there shouldn’t be a blanket rule prohibiting the platforms from placing restrictions on payments collected through them, said Bob Glaves, executive director of the Chicago Bar Association.

“We commend [the ARDC] in taking this on and trying to address this, and we think they’re being genuine in trying to do it,” Glaves said. “But in the course of trying to answer every possible thing that they think could go wrong and every possible thing that they want to know, it’s gone way beyond the legitimate regulatory objectives are here.”

Avvo and FindLaw did not respond to Chicago Lawyer’s request for comment on how the proposed changes would affect their ability to operate in Illinois.

While the bar associations in Illinois may refer thousands of people per month to attorneys, they do not currently meet the demand of several million middle-income Illinois consumers, Glaves said, adding that not many consumers are aware of nonprofit referral services. In the current market, consumers can find attorneys online, but it’s hard to judge quality, and consumers aren’t accustomed to not knowing how much a service will cost, he says.

Now that the comment period ended on April 3, the Illinois ARDC will enter a 60-day collaboration and consultation period during which the regulatory body would work with stakeholders to work through the proposal in more detail, update the proposal and submit the amended proposal and a report with areas of disagreement to the court, Boroughf said. If the rules go into effect, attorneys won’t be able to use unregistered intermediary referral services, he said.

The CBA task force also is putting together an initial report with recommendations by the end of May. After that the task force will send the proposal to the CBA and CBF to hopefully be approved in June. The group plans to collect public feedback through August, modify its report and submit it to the Illinois Supreme in September, about a year after the organization began looking into this process in October, Glaves said.

“Obviously, people of great means can have access to justice and have access to lawyers, and they pay for it. There are numerous services for people of limited means,” Sosin said. “It’s the responsibility of lawyers to look to innovation to allow people — the great group of people in the middle — to have some access to the law and lawyers in a way that’s affordable.”

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