Category: Regulation

Reject the “Professional Speech” Doctrine?

Josh King2 Comments

I’ve written quite a bit about the regulation of professional speech (most recently here), and how this area is curiously under-developed from a First Amendment perspective. The closest thing we’ve seen to the Supreme Court addressing professional speech regulation is the 1985 case of Lowe v. SEC, and that case – like most lower court cases dealing with professional speech – has far more to do with the government’s right to require licenses than it does with how the government can restrict the speech of licensees.[ref]Although the First Amendment implications of whether to require a license have also not been adequately addressed by the courts. While laws of general applicability – like a business license requirement – are fine, laws requiring a license before engaging in expressive activity may also run afoul of the First Amendment. The Bars may have some issues here, as the giving of legal advice – an expressive activity – is limited, on pain of criminal sanction, to those possessing licenses issued by the state.[/ref]

Meantime, we’ve had Supreme Court cases addressing the First Amendment implications of everything from “crush films” to violent video games to drug-promoting messages in the schoolyard. Hell, we’ve had NINE Supreme Court cases plunging the depths of the First Amendment constraints on attorney advertising regulation.

So why so little attention to the Constitutional dimension of regulating non-advertising professional speech? Especially when some 30% of the population now works in a profession requiring a license from the government?

There ARE cases, winding their way up the appellate ladder, that may cause SCOTUS to address the question within the next few terms. But I’ve just come across this recent law review article penned by Widener Law School Dean Rodney Smolla (First Amendment scholar and author of, among other things, the two-volume resource “Law of Lawyer Advertising“) that makes the case that there should be no “professional speech doctrine.”

Rather than subject professional speech regulation to “intermediate scrutiny” analysis (the approach taken by the 11th Circuit in the infamous “Docs v. Glocks” case), such speech should be protected to the same extent as core political speech, Smolla argues. Referring to the Paul Sherman article I wrote about here, Smolla makes the case persuasively that regulation of professional speech should be subject to strict scrutiny – the same standard applied to almost all other forms of content-based speech regulation. While this is the hardest test for regulation to pass, Smolla makes an interesting observation: that in all of the traditional consumer-protection contexts upon which occupational speech regulation is defended, the strict scrutiny test is actually easily met:

No special “professional speech” doctrine is needed, however, to protect the consumers of professional services from expression by professionals that is false, misleading, criminal, tortious, or palpably unethical in some traditional sense (such as speech
covering up a conflict of interest). Application of the strict scrutiny test will already allow for such regulation.

So what’s the basis for regulation beyond these areas? Smolla continues:

What is then left over is the very thin, conclusory, and paternalistic argument that consumers who receive advice from professionals, including advice that often implicates important matters of public discourse, need the heavy hand of the state to protect them from over-reaching and abuse.

The First Amendment, however, is grounded in exactly the reverse set of assumptions. The First Amendment presumes that people are their own best judge of what to say or not say, or listen to or not listen to. Clients do not have to listen to the advice they are receiving, or even continue the relationship.

Exactly right. For as Smolla points out, classic professional speech regulations – like prohibitions on breaching attorney-client privilege or requirements that doctors obtain informed consent – don’t point to a need for a relaxed regulatory standard: they are simply evidence that meaningful regulation can survive strict scrutiny. And perhaps this way of thinking can offer a path to clearing out the excesses of less-meaningful occupational speech regulation.

What if We Just “Certified” Lawyers Instead of Licensing Them?

Josh King

Last week, I attended the FTC’s second Occupational Licensing Roundtable in Washington, D.C. The Roundtable – titled “The Effects of Occupational Licensure on Competition, Consumers, and the Workforce: Empirical Research and Results” – consisted of economists delving into the costs of occupational licensing. The prognosis is grim. Licensing requirements cost society a great deal (primarily in the form of higher prices and lack of economic freedom for workers to pursue a trade), while returning negligible benefits. Although most comments submitted to the Roundtable addressed other, more recently-licensed professions, Avvo and Responsive Law both submitted comments briefly summarizing some of the empirical data on the cost of legal licensing.

This is not to say that we believe attorneys should be wholly unregulated. Many of the costs of licensing stem from the breadth of the legal monopoly and the numerous restrictions on lawyer marketing and service delivery. These costs could be ameliorated simply by adopting a simpler, narrower licensing regime. But I was struck by a point of consensus by the Roundtable participants: that certification could replace licensure and deliver a massive benefit to consumers (in the form of lower cost, more innovation, and better access) while not meaningfully impacting public protection.

h/t The Locker Room

How would this work in the law? In a world of “certified” lawyers, only those possessing the qualification could use the title “lawyer.” But others could do most or all of what lawyers do, so long as they didn’t try to pass themselves off to the public as certified lawyers. There might be areas (like representing parties in litigation) where providing services would be limited to those possessing certification, but such areas would be few and far between.

Shocking? Not really; that’s largely how legal practice works today in many parts of the world, including England. In a world of certification, clients would have nearly all of the same public protective benefits of licensing while enjoying massively more choice in legal service offerings. It would even be better for lawyers, as certification should be more portable between states than licensure is (and lawyers could choose to still practice in another state regardless, assuming they are willing to forego certification). What’s more, local court-based certifications could flourish, getting back to one of the original purposes of geographic licensing – ensuring that local lawyers are experienced with local law and court procedures.

Lots of food for thought, and the FTC’s continued work in this area will bear close watching.

LegalTech Startup TikD Sues Florida Bar

Josh King1 Comment

So the same day I ponder the question of ethics opinions and antitrust, a lawsuit gets filed against the Florida Bar – alleging antitrust violations related to, in part, an advisory ethics opinion!

This will bear watching. The plaintiff in the case is “Tikd,” an innovative service that helps consumers get legal help – with highly predictable outcomes – when dealing with routine traffic tickets. And the lawyers for Tikd are Ray Abadin (who was President of the Florida Bar just a couple of years back) and Pete Kennedy, the Austin, TX antitrust lawyer who successfully represented LegalZoom and Zlien in various UPL fights with states bars.

The ethics opinion at issue apparently deals with both UPL and fee-splitting concerns with Tikd, and it’s not even clear the opinion even exists. But Tikd says its competitors are spreading the word that the opinion is out there, and the Bar isn’t disavowing it – or even meeting with Tikd to discuss the matter.

For the Florida Bar, this is yet another illustration of the problem with ethics opinions in areas involving competition and advertising. Bars are wired to give conservative advice, but what they really should be doing in these areas is not opining at all. Rather, they should flip the script and adopt a policy that affirmatively encourages innovation in the delivery of legal services, and only looks to enforce the Rules in reaction to evidence of public harm.

Ethics Opinions and Antitrust

Josh King

So a couple of weeks ago I was at the ABA’s Third Annual UPL School in Chicago – a gathering of those bar authorities dedicated to rooting out the unauthorized practice of law. And I have to say – it was a strangely chastened bunch. The specter of North Carolina Dental Board v. FTC hung heavy in the air, and many in attendance claimed that they no longer issue advisory opinions or cease-and-desist letters. Rather, they do one of two things when they get complaints: dismiss, or file a lawsuit.

This isn’t a bad thing. Advisory opinions and C&D letters can have a toxic, chilling impact, stopping all sorts of activities that are well outside the boundaries of the legal monopoly. In fact, this is the sort of practice that got the North Carolina Dental Board into hot water – dentists using C&D letters to shut down tooth-whitening services. And it’s what we see in the more egregious examples of UPL enforcement. Being more cautious when wielding the regulatory club isn’t a bad thing, so long as regulators don’t overcompensate and abandon ALL attempts to enforce UPL.[ref]Despite my skepticism about the breadth of the legal monopoly, I’ll readily acknowledge that there are consumer-impacting UPL practices out there, among them non-lawyers pretending to be licensed and the various related forms of “notario” fraud.[/ref]

But I have to wonder: is the UPL side of the regulatory house not talking to the legal ethics side? Because the same issues exist there. North Carolina Dental stands for the proposition that Bar regulators can lose their state action antitrust immunity for anti-competitive behavior. And what’s more, this potential liability also carries through to the individual members of the Bar boards and committees that make these determinations.

Advertising ethics opinions – and advertising review boards, in those states that employ them – can have the same sort of anti-competitive impacts as UPL letters and opinions. In all such cases, potential competitors are being elbowed out or burdened. The fact that in the advertising context those competitors are primarily fellow members of the Bar doesn’t make a difference. Bar Ethics Committees – which are comprised of market participants – are issuing ethics opinion that limit competition. The do so by chilling the ability of other members of the Bar – members who may not enjoy Bar leadership positions – to offer information about legal services to the public. They may even limit non-lawyer competition with Bar lawyer referral services.

As with UPL, there are ways Bars can regulate such advertising activity without taking on antitrust risk. Doing so requires an open, transparent, and evidence-based showing that the consumer protection justifications for its restrictions outweigh the anti-competitive effects. Or at least “active supervision” by actual state government actors. But that’s not the typical closed ethics opinion approach, which we continue to see even now two years after the decision in North Carolina Dental. A handful of states – like Virginia, North Carolina, Oregon, and Washington – at least seem to be aware of this concern. But it’s odd that the cautious approach on the UPL front has yet to be matched by most regulators on the legal ethics side.

Speech Restrictions on Judges

Josh King

More on occupational speech restrictions: I’ve come across this recent piece by Texas A&M law prof Lynne Rambo, dealing with First Amendment issues around judicial speech.  Rambo’s article notes that “surprisingly, most of the state and federal courts deciding judicial discipline cases based on extrajudicial speech have not addressed the constitutionality of the code provisions involved.”

No kidding! That’s because there’s been precious little judicial guidance in general when it comes to the tension between the First Amendment and occupational speech restrictions, and next to none where lawyers and judges are concerned (this, despite the law being the most speech-intensive of the licensed professions). Nonetheless, what little there is out there points in the general direction of occupational speech being regulated subject to the same intermediate scrutiny standard applicable to commercial speech.

We also know that occupational speech regulation only goes so far. Lawyers don’t waive their First Amendment rights as a condition of Bar membership; they are free to opine and express themselves any way they want (or at least, to the same extent as any other citizen) as long as doing so doesn’t involve their clients or matters.

But what about judges? Is there something special about their roles that would lend itself to greater reach for occupational speech regulation? Professor Rambo makes the case in the affirmative, arguing that judicial speech – even far off the bench – should be regulated via the Pickering test applicable to public employees.

What’s the Pickering test? It’s a balancing test, which looks at the the interests of the employee in commenting on matters of public concern and the interests of the State – as the employer – in promoting the efficiency of the public services it performs through its employees. It doesn’t apply to things an employee might say as part of his or her job (it’s not a First Amendment violation for a government employer to discipline an employee for those), but rather only to those things a government employee says OUTSIDE of the job that may cause problems for the government employer’s mission.

That’s not much of an issue for most government employees, but it’s different for judges given their position in society. Judges are highly esteemed and viewed as neutral arbiters. The courts are very attuned to ensuring that judges avoid even the appearance of bias. A judge could be highly competent – and a paragon of objectivity – but that judge staking out positions on one “side” or another of contentious issues in the community will cause no end of trouble for the court.

As Rambo notes, the interest of the government employer in the Pickering test is “promoting the efficiency of the public services it performs through its employees.” She suggests that in the judicial context this means something more: protecting the judiciary from extrajudicial statements by judges that compromise “either the actual or the perceived independence, integrity or impartiality of the court.”

That sounds right, particularly since the “efficiency” of the government institution that is the court is best measured not by how quickly it churns through cases but rather by how independent and impartial it can be – both in reality AND appearance. And that means that judges – unlike lawyers – may be subject to occupational speech regulation that reaches far beyond the confines of the courtroom.

North Carolina Defeats First Amendment Defense to UPL

Josh King1 Comment

North Carolina – which has one of the most specific definitions of “the practice of law” going – has just won an unlicensed practice of law victory over an association that wanted to provide legal services to its members.

The outcome wasn’t a huge shock; North Carolina, like all states, prohibits non-lawyers from practicing law. As the association (whose ostensible purpose was to provide legal advice and counsel to small and mid-sized employers) is a corporation, it can’t practice law. That also means it can’t hire lawyers to provide legal services to the public. Easy win.

But in getting to this outcome, North Carolina had to overcome an objection that’s rarely seen: that the state’s UPL restrictions violate the First Amendment.

There’s a tension between professional regulation and the First Amendment, for much of “the practice of law” involves expressive acts. But while this has been heavily litigated in the professional advertising context, there’s been precious little judicial guidance where “occupational speech” regulation is concerned.

So it’s notable that this case addresses the issue, and perhaps understandable that the decision would botch the analysis so badly.

How’s that? The North Carolina case cites to a recent Fourth Circuit decision, Moore-King v. County of Chesterfield[ref]708 F.3d 560 (4th Cir. 2013).[/ref] for the proposition that professional regulation of speech is not subject to the First Amendment.

That’s quite obviously wrong. Even regulation of professional advertising speech is subject to First Amendment scrutiny. And there have been a number of cases recently involving regulation of doctors’ speech while treating patients – those cases have taken First Amendment coverage as a given, even as they wrestled with whether intermediate or strict scrutiny of the regulations should apply.

In fact, the Moore-King case involved a licensing requirement for fortune-tellers, and it stands for a much more limited proposition than that adopted by the District Court in North Carolina: that “generally applicable licensing provisions” don’t raise First Amendment concerns. This in no way means that all professional regulation is outside the scope of the First Amendment.

What’s more, not even all licensing requirements get a pass from First Amendment scrutiny. The Fourth Circuit in Moore-King takes pains to distinguish the County’s straightforward licensing requirements from regulations that banned the sale of fortune-telling services, and also notes that the government does not have “carte blanche” in creating these regulations.

None of which is to say that the  North Carolina court reached the wrong decision – it likely did. The Bar has a generally applicable licensing scheme, and it’s hard to imagine that a wholesale challenge to the practice of licensing lawyers would ever succeed. But it’s important to recognize the limits of this occupational licensing exception, and reinforce the fact that attorneys do not check their First Amendment rights at the door as the price of being called to the Bar.

Finally, while the legality of a license requirement for attorneys may be a settled question, the same cannot be said for the contours of that legal monopoly. For it’s one thing to have a generally applicable licensing requirement before people can represent others in court, but it’s quite another to extend that requirement to any and all who would sell advice and counseling on matters that seem “legal.”  Most in the legal profession take it for a given that such “legal advice” is restricted to the monopoly of lawyers, but that seems far from clear given the First Amendment issues in play.[ref]And watch the Institute for Justice, which is litigating several cases involving First Amendment challenges to occupational licensing restrictions. The latest of these – just filed in Florida – deals with restrictions on providing compensated dietary advice.[/ref]

SF “Soda Warning” Law Nixed

Josh King1 Comment

Sugar-water-purveyors and nanny-state-haters alike can cheer: San Francisco’s disclaimer requirement for soda advertisers has been killed off by the Ninth Circuit.

What kind of disclaimer? A prominent box containing this text:

WARNING: Drinking beverages with added
sugar(s) contributes to obesity, diabetes, and
tooth decay. This is a message from the City
and County of San Francisco.

Your tax dollars at work, San Francisco!

I’m not a big soda drinker, but my interest is the compelled speech angle – the attorney ad rules are replete with disclaimer requirements. In fact, the seminal Supreme Court case on compelled speech (Zauderer v. Office of Disciplinary Counsel) involved attorney advertising.

The opinion striking San Francisco’s law (American Beverage Assn. v. City and County of San Francisco) offers a terrific overview of the compelled speech doctrine. And as the opinion notes, the state has wide latitude to compel advertisers to “speak” uncontroversial facts – as long as that compulsion isn’t too burdensome.

In analyzing the San Francisco ordinance, the Ninth Circuit opinion does a neat little flip of Zauderer, where “technically truthful” advertising was found to still be deceptive because it omitted key information:

Applying this principle to disclosure requirements, a literally
true but misleading disclosure creates the possibility of
consumer deception.

Nice! The decision goes on to find that while the the San Francisco warning is technically true – there is a consensus, at the population level, that added sugar contributes to obesity, etc. – it also suggests that this is true at the individual level, “regardless of the quantity consumed or other lifestyle choices.” And as such, the disclaimer is at best a “disputed policy view.” As the court notes:

Zauderer does not allow the state to require corporations to provide one-sided or misleading messages, or to use their own property to convey an antagonistic ideological message.

The court also found that the disclosure requirement was unduly burdensome, as the disclaimer would have comprised 20% of subject advertisements. And, interestingly, it didn’t even bother with a second level of analysis to see if the more exacting intermediate scrutiny test would save San Francisco’s law – it simply gave the law the kibosh.

In any event, the opinion is nice exposition of the constitutional test in this often-confusing area. And what’s more, it offers something for state bar regulators to keep in mind when thinking about the viability of their own disclaimer requirements.

No, the Facial Validity of Ad Rules Doesn’t Get Ethics Committees Off the Hook

Josh King

As I’ve often noted, I take a dim view of ethics opinions that don’t consider the First Amendment implications when dealing with lawyer advertising. I mean, it’s a pretty important thing, the First Amendment, right? And as the First Amendment drives the boundaries of the rules, it . . . seems like a big miss to not pay attention to it.

In response to my making this point during a talk earlier this week, the objection was raised that the rules are just fine; they’ve been tested in court and found to be constitutional. Case closed; ethics committees needn’t worry about anything other than considering how far the rules might be stretched to prohibit various attorney conduct.

I didn’t have the opportunity to respond to this curious argument, but given the bona fides of the attorney who made it (an eminent and smart lawyer, who shall go nameless here), I suspect this argument may have more currency than I would have thought. So, a quick little First Amendment lesson:

IT DOESN’T MATTER if the Rules have already been found to be Constitutional.

Hell, if they hadn’t been so found, they would no longer be the Rules.

In First Amendment law there are “facial” and “as-applied” challenges to rules. The former argues that a law is unconstitutional on its face; it is not possibly amenable to a constitutional interpretation. The latter – which is far more common – argues that the law has been unconstitutionally applied in a particular case.

So the fact that Bar advertising Rules may have survived previous constitutional challenges is only relevant to the extent one is interpreting similar applications of the rule. It is not remotely a clean bill of Constitutional health to all applications of the rule, and certainly not an excuse for ethics committees to turn a blind eye to First Amendment parameters when opining on speech-impacting rules.

I realize, too, that this makes the jobs of ethics committees more difficult. But given the costs to the public and the bar imposed by overreaching opinions in this area, they need to either do this work or get out of the business of issuing ethics opinions on lawyer advertising.

More Ethics Opinions on Avvo Legal Services

Josh King2 Comments

I recently returned from lovely Asheville, North Carolina, where the North Carolina State Bar moved to adopt an ethics opinion favorable to Avvo Legal Services. The Bar also proposed changes to the fee-sharing and trust account rules to specify that mechanical-but-not-client-impacting payments to intermediaries (the bugaboo of too many regulators) are not prohibited under the Rules of Professional Conduct.

The North Carolina EO and Rule Changes – which are moving forward for final comments and, one hopes, adoption – are the culmination of what has been a model process. The Bar appointed a subcommittee to address the issue, and that group took its time. It held numerous meetings, and got input from all corners to understand the issues. The subcommittee also brought to bear a deep understanding of both the public-protection purpose of the Rules, and the constitutional constraints which govern them.

And then there’s the New York State Bar Association.

The NYSBA announced today that it has issued an ethics opinion finding that Avvo Legal Services violates New York’s rules of professional conduct – specifically, the prohibition against lawyers paying third parties to recommend them.

Unlike the North Carolina State Bar, the NYSBA is a voluntary, non-regulatory legal trade association. It opinions are purely advisory. But New York is a big and influential state, and lawyers are sure to have questions about this opinion. And while the NYSBA didn’t run a transparent and public process like North Carolina’s, it did – to its credit – actually take the time to understand how Avvo Legal Services works.

But they still came to the wrong conclusion.

As in most states, the New York Rules of Professional Conduct prohibits lawyers from paying for “recommendations.” The NYSBA opinion finds that attorneys participating in Avvo Legal Services are making “improper payment for a recommendation in violation of Rule 7.2(a).” Yet in reaching this conclusion, the NYSBA stretches the term “recommendation” far beyond its permissible bounds.

As I am constantly going on about, there are First Amendment limitations on the Rules of Professional Conduct. Attorneys have a right to express themselves, and the public has a right to access information about legal services. What this means in practice is that the Rules can’t mean whatever the regulators want them to mean. It means that the Rules can’t be interpreted to broadly gather in anything that might arguably sound like it could “fit” under the rules.

More specifically, attorney advertising restrictions must:

  • Materially advance important state interests, and
  • Do so in a narrow fashion.

That’s not my opinion; it’s the law.

The NYSBA opinion doesn’t grapple with these obvious Constitutional guardrails. Instead, it basically says:

“Hey, if you squint hard enough, and add together Avvo’s objective system of lawyer ratings plus some marketing statements Avvo uses to refer to lawyers in general, that looks kinda like a “recommendation” of every participating lawyer.”

That’s far, far too broad. To survive First Amendment scrutiny, a prohibition on recommendations must be narrowly limited to those recommendations that actually mislead the public. And the NYSBA opinion acknowledges this in passing, noting its earlier Opinion 799, which found that the “recommendation” line is crossed when the referrer “purports to recommend a particular lawyer or lawyers based on an analysis of the potential client’s problem.”

This is getting at the issue, because such a recommendation – particularly in the absence of transparency and consumer choice – can lead the consumer to believe they are being sent to the best possible attorney for their legal problem, when in fact they are being sent to the one paying the most money.

But instead, the opinion treats “recommendation” as a broad-ranging term into which anything bearing a passing resemblance can fit. That’s not a stand that will survive its first encounter with judicial review.

And this is yet more evidence of a far too common pattern: applying the prophylactic, overly-cautious ethics opinion approach to rules where the Constitution dictates a much lighter hand. It’s a continuation of a decades-long habit of chilling lawyer speech, to the detriment of consumers and lawyers alike.

Why New Jersey Gets it Wrong on Avvo Legal Services

Josh King

OK, so one of the last things I read work-wise, before going off the grid to chase after Amelia Earhart in Kiribati for three weeks, was this joint opinion by three committees of the New Jersey Supreme Court taking issue with Avvo Legal Services.[ref]This trio included the Advisory Committee on Professional Ethics, the Committee on Attorney Advertising, and the Committee on the Unauthorized Practice of Law.[/ref]

I’ve long lambasted the issuance of regulatory ethics opinions on matters related to attorney speech. The principle behind prophylactic ethics opinions – “err on the side of caution when interpreting the ethics rules” – fits very poorly with the First Amendment principles protecting access to information about legal services. Unless regulators engage with these principles, they are doing the bar and the public a disservice whenever issuing advisory opinions in this area.

That said, this New Jersey opinion is better than some on this front, as it addresses the fee-splitting bogeyman head-on. And in so doing, the Committees conclude that Avvo Legal Services “does not insert itself into the legal consultation in a manner that would interfere with the lawyer’s independent professional judgment.” We agree. And this is an important point, as the animating principle behind Rule 5.4 – which prohibits the splitting of fees – is the protection of the attorney’s independent professional judgment.

However, there are three big ways in which New Jersey arrived at the wrong conclusion:

Incoherence on Fee-Splitting

There are two ways of thinking about fee-splitting: let’s call the first the “mechanistic” formulation, and the second the “principled” formulation.

In the former, any agreement to split a legal fee violates the rule. You don’t need to look beyond the terms of the transaction; if the fee is getting split, the rule is violated.

In the latter, the focus is not on the mechanics of the transaction, but on the reality of the arrangement. If the deal with a non-lawyer third party puts the lawyer’s independent professional responsibility at risk, the rule is violated.

So in the “principled” formulation, regulators will look past some technical fee splits (e.g., credit card processing fees) because they do not risk conflicts. And in the “mechanistic” formulation, regulators will look past some conflict-laden business deals (e.g., cross-referral arrangements) because they do not technically involve the splitting of a legal fee.

As Avvo Legal Services does not involve the splitting of a fee – the entire fee is paid to the attorney, and the attorney pays Avvo a separate marketing fee – it shouldn’t run afoul of New Jersey’s rule unless the state follows the “principled” formulation and finds that our program conflicts with the professional independence of lawyer participants.

New Jersey didn’t do that; in fact, it explicitly found that Avvo Legal Services does not create such interference. Yet the opinion still finds that Avvo Legal Services constitutes prohibited fee-splitting. Why?

It’s possible that the New Jersey Committees didn’t fully understand how Avvo Legal Services works. They may have assumed – incorrectly – that Avvo deducts its marketing fee from the legal fee prior to passing it through to the attorney.

However, the rest of the opinion leads me to believe that the Committees are grasping at something more amorphous: a free-floating finding of fee-sharing in the absence of either a technical fee-split OR an indication of risk to a lawyer’s independent professional judgment.

Such a principle would be incoherent and dangerous. It risks subjecting ANY expenditure of money by an attorney to the whims of the regulators. Because ALL legal fees are “shared” at some point. They get shared with landlords, office supply vendors, secretaries, plant waterers, brass polishers, and software programmers. And they get shared in rough proportion to their size because with more legal fees there are more goods and services for lawyers to buy.

New Jersey seems to want to have the leeway to apply Rule 5.4 to any transaction it sees fit. But regulation doesn’t work that way: Rule 5.4 is either violated via the letter of the rule (“no sharing of a legal fee”), or via the spirit of the rule (“no third party deals that put attorney independence at risk”). So how can Avvo Legal Services be a problem when it involves neither of these?

What’s a “Lawyer Referral Service?”

New Jersey prohibits attorneys from participating in for-profit lawyer referral services, and the opinion finds that Avvo Legal Services constitutes just such an “impermissible attorney referral service.” Why? Because the marketing fee charged by Avvo Legal Services is based on the legal services provided to the client who Avvo has connected with the attorney.

There’s no analysis of why such a structure is bad for clients, or even how such “cost per action” payment for marketing makes Avvo Legal Services a “lawyer referral service.” As I’ve long pointed out – but as the New Jersey Committees only tacitly acknowledge in the opinion – the key definition of a “lawyer referral service” is the existence of consumer deception inherent in “steering” a potential client to a particular lawyer. And there are actually some ethics opinions that lay this out pretty clearly, including this one:

“Opinion 13 set forth three factors for distinguishing between impermissible referral services and advertising. The first factor is whether the marketer limits access to information or whether, like a “Yellow Pages” directory, the entire list of participating attorneys is available to the consumer. The second factor is whether the marketer, explicitly or implicitly, guides consumers to a specific attorney. In contrast to directories such as “Yellow Pages,” a referral service “is a directing intermediary, not just an encounter between the consumer and the passive information made available by the attorney.” The third factor is whether the marketer serves a public purpose (providing information about attorneys or putting people in touch with attorneys) or primarily a commercial purpose.”

The state issuing that guidance? New Jersey.[ref]See N.J. CAA Opinion 43 (June 2011).[/ref]

Avvo Legal Services has no such opacity or guidance of consumers to a particular attorney; consumers are free to choose from any participating attorney. And New Jersey doesn’t conclude differently. Its opinion simply declares that the cost-per-action nature of Avvo’s marketing fee renders the program a disqualified lawyer referral service. As shown below, that’s not how this whole “lawfully interpreting the rules” business works.

Blowing Off the First Amendment

The opinion includes this gem:

“The First Amendment does not protect lawyers who seek to participate in prohibited attorney referral programs or engage in impermissible fee sharing.”

That’s glaringly wrong. It’s not a question of “protecting” lawyers; it’s a question of how the Constitution dictates that speech-impacting Rules of Professional Conduct be interpreted.

Prohibiting attorneys from participating in lawyer referral services is a form of commercial speech regulation. This means such a prohibition must meet the Central Hudson requirements of necessity and narrowness.

So the New Jersey Bar can’t simply say that lawyers can’t participate in lawyer referral services, and it can’t define “lawyer referral service” so broadly that the term captures ANY new form of marketing that the Bar isn’t entirely comfortable with. The Bar must show a significant government interest driving its rule, and it also must show that its regulation advances that interest in a minimally-speech-restrictive fashion.

The rationale for a special restriction on lawyer referral services has been – as New Jersey’s earlier Opinion 43 and other such opinions note – that such services present a special risk to the public, characterized as they are by a lack of transparency and directive conduct.

That’s fine, but the rule always must be interpreted in light of the limited box in which it sits (i.e., constraining a specifically problematic set of deceptive marketing practices). So if New Jersey is going to find that Avvo Legal Services is a lawyer referral service prohibited to New Jersey attorneys, it’s got to make an empirical finding that something about our program fits within this rationale. Similarly, if New Jersey is going to find that a form of advertising is off-limits because of the method of payment, that conclusion must also be supported by evidence that the practice is harmful to the public.

The New Jersey Committees don’t remotely do that. Rather, their opinion simply concludes that the First Amendment doesn’t apply here.

Such a position ignores the copious volume of cases laying out how the First Amendment limits attorney advertising regulation. And integral to those limits is the recognition of the importance of consumer access to justice and information about legal services. Opinions like this one – which flout these Constitutional limits in seeking to impose broader restrictions – run contrary to both the law and the purpose of the rules.