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Ethics Advisory Opinion 06-13

April 13, 2006

South Carolina Bar Ethics Advisory Opinion 06-13

SC Rules of Professional Conduct: 7.2(c)

Date: November 17, 2006

Law Firm, which has an office located in South Carolina, is a member of a trade association located in State A.  Like all members, Law Firm pays dues to the Association and supports the Association in other ways by providing resources, support for scholarship fundraising, etc., in exchange for the various benefits conferred upon its members.

The Association would like to refer its members who are in need of legal services to Attorney, a South Carolina lawyer practicing at Law Firm.  Attorney and Law Firm would offer legal services to the members of the Association at a discounted rate, either in the form of a professional courtesy adjustment for initial work done or in the form of a percentage reduction of Attorney’s standard fees.

The Association would not participate in any attorney-client confidential communications that may arise after the referral, including but not limited to invoices for work performed, and neither Law Firm nor Attorney would pay the Association any additional fees or dues for any such referrals. 

May Attorney and Law Firm receive referrals from the Association under the conditions above-stated?

Summary of Opinion
The Rules of Professional Conduct do not prohibit Attorney or Law Firm from receiving referrals from the Association, provided Attorney and Law Firm do not give anything of value to the Association in exchange for the referrals.

Rule 7.2 (c) states that “a lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may… (2) pay the usual charges of a legal service plan or a not-for-profit lawyer referral service...”  The Comments to the rule identify a “legal service plan” as a “pre-paid or group legal service plan or a similar delivery system that assists prospective clients to secure legal representation.”  In a similar vein, the Comments define a “lawyer referral service” as being “any organization that holds itself out to the public as a lawyer referral service.  Such referral services are understood by laypersons to be consumer-oriented organizations that provide unbiased referrals to lawyers with appropriate experience in the subject matter of the representation and afford other client protections, such as complaint procedures or malpractice insurance requirements.”  Rule 7.2, Comment 7.

Clearly, in facts above-stated, the Association is neither a legal service plan nor a lawyer referral service, as defined by the Rules of Professional Conduct. Furthermore, based on the facts as stated, Lawyer and Law Firm will not be contributing any additional “thing of value” to the Association in exchange for the referral, above the standard fees or contributions expected of all members of the Association.  Lastly, the referrals would be given to members of the Association upon the member’s request and the member may subsequently choose to contact or not to contact Attorney and Law Firm.  Attorney and Law Firm will not be making initial or unsolicited contact to members of the Association.

While the Lawyer’s arrangement will be within the bounds of the Rules so long as Lawyer does not pay additional fees or provide the association with anything of value in exchange for the referrals (i.e. Lawyer and Association maintain status quo), this Committee reminds all lawyers of previous opinions in which it has addressed the propriety of lawyer participation in groups or organizations from which lawyers may receive referrals: 

In EAO 91-04, the Committee found that where an attorney desired to participate in a community organization purposed to educate and disseminate to the public information pertaining to tax and estate planning, he could not be placed on a reduced-fee referral list in exchange for his management of the organization.  In that scenario, the Lawyer would be explicitly exchanging his management skills and time for the organization’s referrals, which would violate the Rule as providing a “thing of value” for a referral.

Also, in EAO 94-34, the Committee determined that participation by a lawyer in a business exchange group in which a quid pro quo exchange for services was provided to the members would violate the Rule 7.2 because such a quid pro quo exchange would constitute exchanging something for value for a referral. 

While the chamber of commerce is also a “community organization” and a business group, it is distinguishable from both the aforementioned business referral group and the organization that requested the lawyer’s management skills.  Lawyer participation in the chamber of commerce, in which any dues paid to the chamber would not be paid for the purpose of obtaining referrals but rather for the pursuit of civic involvement, would comply with the Rules.

Further, in EAO 98-17, the Committee allowed the inquiring attorney to receive referrals from the inquirer’s client, a mortgage broker corporation, determining the “attorney’s payment for legal services rendered in the representation of the corporation is completely separate from any recommendations made to borrowers.” The Committee did caution “if the attorney gives anything of value in order to be on the referral list, such as discounted fees or extra time, the attorney violates Rule 7.2(c).”  In other words, the Committee determined that referrals from the corporation would be allowed, so long as the attorney did not give the corporation anything of value in order to be on the referral list, such as discounted fees or extra time. 

But, in EAO 01-07 the Committee determined that a lawyer may refer patients to the chiropractic clinic in which his wife owned an interest and may receive referrals from the clinic, provided the cross-referrals were not made as a “quid pro quo reward for referrals received from the clinic.”

Reading the Rules with the previously issued opinions on this topic, the Committee suggests that any lawyer contemplating participation in an organization from which he may receive as a benefit of membership referrals from the organization, the lawyer should carefully consider whether his fees, dues, or other services to the organization could be construed as the giving of something of value in exchange for the referral.

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