Three committees of the New Jersey Supreme Court ruled that New Jersey lawyers may not participate in Avvo's legal service programs that match litigants with attorneys because of illicit fee-sharing and referral fees.
Avvo facilitates improper fee-splitting, according to the June 21 opinion, issued by the Advisory Committee on Professional Ethics, the Committee on Attorney Advertising and the Committee on the Unauthorized Practice of Law.
“New Jersey lawyers may not participate in the Avvo legal service programs because the programs improperly require the lawyer to share a legal fee with a nonlawyer in violation of Rule of Professional Conduct 5.4(a), and pay an impermissible referral fee in violation of Rule of Professional Conduct 7.2(c) and 7.3(d),” the opinion says
“The Committees further find that LegalZoom and Rocket Lawyer appear to operate legal service plans through their websites but New Jersey lawyers may not participate in these plans because they are not registered with the Administrative Office of the Courts in accordance with Rule of Professional Conduct 7.3(e)(4)(vii).”
Avvo's business model has also been found to violate ethics rules in Pennsylvania, South Carolina, and Ohio.
Impermissible marketing fee
Avvo offers “Avvo Advisor,” where clients buy a 15-minute phone call with a lawyer for a $40 flat rate. Avvo keeps a $10 of that as a "marketing fee." According to the opinion, it is a “pay-for-service plan” that violates Rule of Professional Conduct 5.4(a), which prohibits fee-sharing.
“The participating lawyer receives the set price for the legal service provided, then pays a portion of that amount to Avvo,” the committee said. “The label Avvo assigns to this payment (“marketing fee”) does not determine the purpose of the fee. … Here, lawyers pay a portion of the legal fee earned to a nonlawyer; this is impermissible fee sharing.”
Marketing fees that lawyers pay to Avvo are not for advertising but amount to an “impermissible referral fee” by the definition contained in RPCs 7.2(c) and 7.3(d), according to the opinion.
“When the lawyers pay a fee to the company based on the retention of the lawyer by the client or the establishment of an attorney-client relationship, the answer to the inquiry is simple: the company operates an impermissible referral service,” the committees said.
The committees also found that Avvo's practice of holding the lawyer's fee until the service is provided violates an attorney's requirement to maintain a registered trust account per Rule 1:28(a)-2.