How Legal Ethics Rules on Non-Fee Splitting Platforms Lead to Unintended Consequences and Ludicrous Results
Today, my blogging buddy Bob Ambrogi posted about a soon-to-be-launching platform Text A Lawyer. Designed to mimic the convenience of Uber, Text-a-Lawyer would allow users to text legal questions via their phones for just $20 and have them answered by a lawyer within minutes. Text-a-Lawyer is a great idea for many reasons. First, because text is more interactive than email, Text-a-Lawyer would allow the lawyer a chance to engage with the client and possibly identify other problems. And, not only does Text-a-Lawyer help solve consumers’ problems, the app can be used to prevent consumers from getting into trouble to begin with. For example, users could text a lawyer to ask whether the terms of the car loan or lease that they’re about to sign off on are valid and fair – and if not, the users could walk away.
Text-a-Lawyer is also an apparently responsible company that has gone to great lengths to ensure that its service is ethically compliant. Kevin Gillespie, the company founder, consulted with national ethics firms to develop an ethically compliant product. For example, the app includes a form that allows the lawyer to run a conflicts check. And the company also came up with what Ambrogi describes as a novel approach to address the perennial fee-splitting-that-isn’t-fee-splitting issue : Text-a-Lawyer collects $20 from the client through Stripe but doesn’t put the charge through until the engagement is complete. At that point, Text-a-Lawyer retains five dollars for administrative fees and lawyers receive fifteen dollars. The theory is that because the funds are never co-mingled, fee-splitting never occurs.
With all due respect to whoever came up with Text-a-Lawyers’s cockamamie work-around, it just doesn’t make any sense. For starters, it’s a distinction without a difference since Text-a-Lawyer still collects the $20 from the client. If the difference is that Text-a-Lawyer doesn’t pay the lawyer from it’s share but instead keeps the money in the Stripe account which will perform an automatic split, I’m not sure why that matters if Text-a-Lawyer is still administering the Stripe account. A hypothetical clearly illustrates the defects in Text-a-Lawyer’s purported solution to fee-splitting. Let’s say that a non-lawyer operates a business finding personal injury clients for lawyers, finds a case and offers it to different lawyers until he finds one who will take the case in exchange for a cut of the proceeds as a finders’ fee. The lawyer settles the case and asks the defendant to cut three checks: one to the client, one to the lawyer and one to the non-lawyer. No commingling here, but we’d all agree that my hypothetical is the type of fee-splitting that ethics rules were intended to prevent.
In short, as a result of a ridiculous decision to characterize Avvo’s platform as fee-splitting, regulators have now created a situation where legal tech companies are splitting hairs and jumping through hoops to comply with ethics regulations – and coming up with solutions that are far WORSE than the original and imaginary problem that the regulators tried to prevent.
As I have urged before, please, stop the madness!!! . The simplest solution to this problem is for regulators to treat the fees collected by UpCounsel, Text-a-Lawyer, Avvo and whatever system may be developed next month for use of their platforms as convenience or administrative fees- just as the bank takes a percentage of fees paid to lawyers by credit card. User-like find a lawyer platforms are nothing more than a form of modern commerce in a digital world. They are NOT fee-splitting. Why won’t the regulators just say so?
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