Monday, 12 June 2017 00:00

VA Bar Backs Off Restrictions on Fixed Fee Legal Services

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In the face of opposition from Responsive Law, the Virginia State Bar (VSB) has backed off from a proposed ethics opinion that would have restricted Virginians’ ability to use affordable fixed-fee legal services.

The proposed opinion would have declared that lawyers were acting unethically by participating in programs where a company advertises their services for discrete tasks—such as creating a will, reviewing a lease, or filing for an uncontested divorce—and charges a fixed flat fee for those services. The opinion was clearly directed at Avvo Legal Services, which has begun to roll out such services in markets nationwide.

In the proposed opinion, the VSB’s Standing Committee on Legal Ethics opined that lawyers could be violating legal ethics rules by paying a marketing fee to a company like Avvo, which it considered a violation of the prohibition on lawyers sharing fees with non-lawyers. It also said that it would be unethical for Avvo to maintain possession of client fees while a client waits for the lawyer to complete the work for which they were hired. Instead, the committee claimed, such money should be held in the lawyer’s client trust account.

Responsive Law submitted comments to the committee opposing the proposed opinion. We noted that clients were likely to be better protected against misappropriation of their fees under Avvo’s model than by a client trust fund. A client trust account, we noted, “is not a subterranean vault guarded by a goblin at Gringotts Wizarding Bank; it’s a paper (or electronic) construct to which the lawyer has complete access.” By contrast, under Avvo’s model, it holds the fees until the client indicates that the lawyer has satisfactorily completed the work.

Our comments also noted that a lawyer’s payment of a marketing fee to Avvo is a reasonable business expense, much like a credit card processing fee, and is also a totally reasonable way for lawyers to advertise that causes no harm to consumers. Rather than looking for technical violations of the ethics rules, the VSB should consider whether the increased access to legal services such services provide outweighs a theoretical harm that has not been demonstrated.

Finally, we pointed out that attempts by the VSB to restrict innovative new business models is a potential violation of the U.S. Supreme Court’s recent ruling in North Carolina State Board of Dental Examiners v. Federal Trade Commission. In that case, the Court held that self-regulating professions cannot hide behind “state action” immunity from antitrust law when the regulators are market participants. Several elements of the proposed opinion relied upon bar rules that are anticompetitive, making antitrust liability a strong possibility for the VSB, the Ethics Committee, and their individual members.

Aside from Avvo and one individual lawyer, Responsive Law was the only entity to submit comments opposing the proposed ethics opinion. In response to those comments, the Ethics Committee voted not to submit the proposed opinion to the Bar Council. VSB Ethics Counsel James McCauley told Virginia Lawyers Weekly (sub. req’d) that the committee now plans to “go back and study the affected rules.”

To read Responsive Law’s comments to the VSB, click here.

Read 306 times Last modified on Monday, 12 June 2017 10:35

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