Maryland Bar Ruling Banning NonLawyer/Lawyer Referral Groups Discriminates Against Solo and Small Firms

Sometimes a bar association issues a decision that’s so impervious to the realities of legal practice that you have to wonder whether those who drafted it ever practiced law.  That’s my thought about the Maryland Disciplinary Committee’s recent Ethics Decision, Ethics Docket 05-11,  Participation in For-Profit Referral Organization with Non-Attorneys and discussed further in this article from the ABA e-report (4/22/05), Referral Clubs May Cause Trouble.  I take issue with so many aspects of the decision, from the cowardly way that it addresses a particular referral group, BNI, but doesn’t mention it by name to the decision’s failure to trust lawyers enough to exercise good judgment in making referrals to its willingness to ignore the same type of lawyer/non-lawyer networking activity that takes place every day at large law firms.  But before I launch into my extended tirade, I should point out the following.  First, I’ve been a member in good standing of the Maryland bar since June 2002 – and I hope that nothing that I write here changes that!  Second, I considered joining BNI and attended a couple of meetings a few years ago – but I didn’t feel that it had much to offer my regulatory practice (though a number of my colleagues with probate, small business and family law practices have praised it).  Third, I’ve discussed the decision with other solos and many disagree with my position, so I want to emphasize that the views here are mine only; I do not speak on behalf of solo and small firm lawyers as a group.

A.  The Maryland Decision

Here’s an excerpt from the Maryland decision that gives a good overview:

The Maryland Bar was asked to comment on the ethics networking and referral organization. This organization has multiple chapters around the world. Each chapter consists of various professionals and business people who seek to obtain referrals and learn marketing techniques. Only one person from any given profession or line of business can join any individual chapter. The particular chapter that has approached you includes, among others, a beauty consultant, heating and air conditioning contractor, investment advisor, and AFLAC insurance agent.

The chapters hold weekly meetings. At these meetings, there is usually a general presentation on how to better market your business. A chapter officer may also draw attention to other seminars that are taking place in the area that address marketing techniques. This is followed by a detailed presentation by one member educating the others about his or her business. Finally, at the end of the meeting, members exchange referrals they have obtained for each other (if any) during the course of the past week.

The referral organization is a for profit entity. It earns its revenue through annual membership fees paid by each member. The members do not pay fees to each other and the organization does not make any referrals. You characterize the organization’s role as helping to bring people together to make “free referrals among themselves.”

You further state that there is no requirement that you provide referrals to other members, or that you obtain referrals from them. You write that it is “theoretically possible to join a chapter only for the various educational programs they provide.” The organization has no quotas and there are no “quid pro quo referrals.”

You ask whether participation in this organization would violate Rule 1.7, 5.4 or 7.2 and, if not, are there any limits on the extent to which you would be permitted to participate. In the Committee’s judgment, participation in this organization would violate the current Rules of Professional Conduct.

Essentially, the committee found the following problems with the referral group.  First, the committee found that the group’s practice of encouraging cross referrals violated ethics rules by which attorneys cannot give “something of value” in exchange for receiving a referral.  Here, the “something of value” would be the lawyer’s promise to make referrals to other group members in exchange for referrals to the lawyer.   Second, the committee found that  membership in the group would compromise a lawyer’s independent judgment because lawyers would make referrals not based on the merits of another service provider, but rather, because the group allegedly obligated lawyers to make the referral.  Finally, the committee found that having a non-attorney distribute a lawyer’s business card was essentially an end-run around the bar on in-person solicitations.

The Committee concluded its decision with these words:

Nor is the Committee persuaded that attorneys can carve out a separate, ethically compliant, niche for themselves in this organization. Although the organization’s web site advises lawyers that they are directed to follow their profession’s own ethical guidelines, the Committee is not naive.
Participation in this organization is intended to harness the efforts of others to market your legal services. The possibility of joining solely for the educational benefits strikes the Committee as purely “theoretical.”

B.  Critique

1.  Committee Does Not Name the Association At Issue

My first complaint is why the Committee didn’t simply name the group at issue – BNI.  It’s pretty easy to figure out that the Committee was addressing membership in BNI by searching Google for the descriptive words used in the Committee’s decision.  Was the Committee afraid that it might be sued for defamation for inaccurately portraying BNI policies?  Was it concerned that someone from BNI might challenge the decision and the Committee would have a court appeal on its hands.   A specific request was made to the Committee regarding a particular group, namely BNI, something that’s fairly easy to figure out from the decision.  And the decision addresses the group’s particular practices.  Other referral groups might have different practices; the Committee’s decision seems specific to the particular policies and practices of this group.  Why not come out and say so?

Personally, I don’t see how the Committee’s decision can withstand a
constitutional challenge on First Amendment speech and free association
grounds.  As I discuss later, the Committee bars participation in BNI with a broad brush where it could have narrowly tailored the decision or addressed violations on a case by case basis.   A  single attorney is unlikely to  have the  time or inclination to serve as a  test  case.  But a well funded organization like BNI might be up to the challenge.

2.  Why Can’t the Bar Trust Our Judgment?

Let’s face it, when we attorneys make a referral, our reputation is on the line.  Even if Brenda-the-Beauty-Shop owner or Isidor-the-Insurance-Agent promises me all the clients in the state, I’m not going to refer them to one of my clients if I can’t vouch for the quality of their service.  Because if I refer people to incompetents, that’s going to hurt my business in the long run.  At the same time, a group like BNI allows me to get to know Brenda or Isidor, to learn about their business and ask questions about their practices.  And if based on these contacts, I believe that Brenda or Isidor have something to offer my clients, I’ll gladly refer them.

Similarly, as a lawyer, why can’t I be trusted to explain my professional obligations to others.  Why can’t I tell Tommy-the-Tow Truck driver that he really should not give out my card if he’s called to the scene of an accident – because that would constitute an improper in-person solicitation.  But what’s wrong with Barry-the-Broker recommending me to one of his clients who wants to sue a business partner?  That happens all the time; why is it wrong for Barry to make the recommendation if he meets me through BNI as opposed to meeting me at a fancy trade association dinner?

Certainly, there will be lawyers who abuse the system.  But it seems to me that the bar can deal with abuses on a case-by-case basis.  If for example, a lawyer refers an inept painter to a client and the painter botches the job, the client can file a complaint against the lawyer or sue for negligent referral.  That’s a far better way to address possible violations than to prohibit participation in nonlawyer groups with one broad stroke.

3.  People Refer All the Time – But Now the Bar Makes It Too Hard for Solo and Small Firms to Have Access to NonLawyers

For many solo and small firm lawyers, BNI provides the only forum for meeting non-lawyers in different fields.  Outside of possibly joining a Chamber of Commerce, there are few networking groups where general practice lawyers can meet and get to know other business people.  By contrast, in biglaw practice, lawyers have a chance to meet and network with people all the time.  If I join a couple of $500/year energy regulatory trade associations and get active in committee work, I may meet accountants or engineers who’ll refer me cases and vice versa.  In fact, in my field, lawyers and non-lawyers (economists, engineers and accountants) routinely work together for trade associations and bring each other in and out of cases – even though arguably, there might be another firm or engineer who’s better for the job.  Hey, engineers and nonlawyers can even join the Energy Bar Association and even certain ABA Committees.  So why is that type of lawyer-nonlawyer interaction OK?  Because it’s sanctioned by the Bar?  What bothers me is that the Maryland Bar decision deprives solo and small firm lawyers of a vital networking tool that is regularly used by our large firm counterparts – and that’s just not fair.

4.  How Is BNI Different from Bar Referral Services

The Bar runs referral programs as well.  Lawyers often pay a fee to sign up and may, depending upon the bar, be obligated to share a cut of the earnings yielded from the case.  Don’t those lawyers give something of value to get a referral?  Or is that different because the Bar is running the program – and if so, why?

5.  No Sense of Reality By the Bar

What angers me most about the Maryland decision is the cavalier nature of its approach.  The decision expresses no empathy towards lawyers who participate in BNI and  may lose a substantial source of revenue as a result of the decision.  It offers no alternatives to replace this type of networking, nor does it acknowlege that most lawyers can be trusted not to violate these rules.  In fact, the Committee goes to the other extremes and assumes that lawyers will not even have the ability to limit their participation in BNI to educational purposes and not partake in the practices that the Committee finds objectionable.  (this alone ought to be reason enough to make the decision subject to challenge – the Committee won’t even let Maryland lawyers attend meetings to learn more about how other people market?  Ridiculous!  I wonder if I violated any rules by attending Lex Think.  There were nonlawyers there after all; we did get to know each other and exchange ideas…)

Yes, ethics are important, but it’s also important to apply ethics rules with reference to real practice, not theory.  And ethics rules must be applied in a way that doesn’t disproportionally impact one segment of the bar.  Finally, the bars need to regulate in a way that entrusts lawyers to exercise discretion and to live up the standards that the Professional Rules set.  In this case, the Maryland Bar technically may have done the ethical thing, but it’s certainly not the right thing or the fair thing.  And that makes this ethics decision plain wrong.