Court approves guidance on fixed-fee programs

By Peter Vieth
BridgeTower Media Newswires

RICHMOND, VA — Virginia has joined five other states that officially discourage lawyers from participating in fixed-fee programs similar to that offered for a time by Avvo Legal Services.

The Avvo fixed-fee program folded this summer, but other attorney-client matching models are on the horizon, and bar regulators are discussing whether some ethics concerns should give way in the interest of making legal services available to more people.

The Virginia Supreme Court, on Nov. 8, approved Legal Ethics Opinion 1885, effective immediately.

The LEO, developed by the VSB Standing Committee on Legal Ethics, was approved 59-6 by the VSB Council last year over objections from a representative of Avvo.
The LEO highlights three major problems with a hypothetical attorney-client matching service modeled on Avvo Legal Services.

One, the business kept the client’s fee until the lawyer had completed the work.

Secondly, the service was setting the fees and defining the scope of the representation, without input from the client or the attorney.

Thirdly, the service demanded its “marketing fee” immediately upon payment to the attorney, violating rules against fee sharing with nonlawyers.

The LEO concludes that a lawyer may participate in a for-profit attorney-client matching service offering limited-scope services for fixed fees, but only under certain conditions.

The lawyer should consult with the client regarding the limited scope of services and be satisfied the services can be competently performed consistent with ethics rules.

“Before accepting a prospective client’s legal matter, the lawyer must exercise independent professional judgment and assure herself that the fee set by the ACMS is reasonable for the legal task to be undertaken for the client….,” the opinion reads.

The opinion says it would be “ethically impermissible” to participate when an advanced legal fee is held by a lay business firm.

“A lawyer who permits a lay business entity to retain and dispose of a client’s advanced legal fees surrenders her ethical obligation to refund unearned legal fees to the client at the termination of representation ….,” the opinion reads.

The opinion also says a lawyer must not participate in a program in which the lawyer pays a for-profit business entity a portion of the legal fee charged as compensation for the lawyer’s having received the client.

Such a payment constitutes an “impermissible sharing of fees with a nonlawyer” and violates the rule barring lawyers from rewarding those who recommend their services, the opinion says.

Avvo out, but debate continues

While the LEO was aimed squarely at Avvo Legal Services – and Avvo openly fought the proposed guidance – Avvo has now left the fixed-fee battlefield.

Avvo was acquired by Internet Brands in early 2018 and Avvo Legal Services closed shop in July. Five other states had posted ethics opinions warning lawyers against participating in such a business model.

But the fixed-fee issue remains in flux, according to VSB Ethics Counsel James M. McCauley. He said debate has arisen about whether lawyers should be allowed to share legal fees with nonlawyer businesses as long as there is no interference with the lawyer’s independence or professional judgment.

Some advocates say bar restrictions could run afoul of antitrust and First Amendment standards. Oregon, North Carolina and Illinois are studying what posture to take on Avvo-like business models, McCauley said.

A start up in the state of Washington called “Basic Counsel” hopes to offer fixed-fee, limited scope legal services without running afoul of ethics concerns.

“They’ve done their homework,” McCauley said, but he cautioned, “There is still a lot of pushback on the fee sharing issue.”

Even Virginia could revisit the issue, McCauley said. Approval of LEO 1885 “does not mean there will not be further discussion and debate whether the rules should be changed. I think there will be,” he said. In a second LEO approved Nov. 8 and effective immediately, the justices provided relief for some lawyers involved in termination of parental rights cases.

In the not-uncommon situation in which a terminated parent fails to appear, fails to communicate and fails to direct an appeal, a court-appointed lawyer for that parent has no duty to file an appeal, the court said in LEO 1889.

“While the parent has a right to appeal an adverse decision, that right has to be exercised first by the client directing the attorney to appeal,” the VSB ethics committee wrote in the LEO.

Also, filing an appeal knowing that the client cannot be found and will not appear in court could violate the rule against frivolous pleadings, the committee noted.