Avvo headquarters in Seattle

An opinion by New Jersey legal ethics authorities that deemed Avvo off-limits to lawyers in the state will not be reviewed by the state Supreme Court.

In an order dated June 1 and obtained by the Law Journal on Monday, the court denied a petition for certification by Consumers for a Responsive Legal System, an organization that represents Avvo and other online companies providing lawyer referrals.

The organization, called Responsive Law for short, had asked the court to review the June 2017 opinion, jointly issued by the Advisory Committee on Professional Ethics, the Committee on Attorney Advertising and the Committee on the Unauthorized Practice of Law, which found that Avvo facilitates improper fee-splitting and may not be utilized by New Jersey lawyers.

Opposing the petition were the Attorney General’s Office, representing the committees, and the New Jersey State Bar Association.

Responsive Law executive director Tom Gordon said in a statement Monday that the court, “by summarily declining to review the decision … has abrogated its responsibility to engage in active supervision of the bar’s anti-competitive conduct.”

“According to the U.S. Supreme Court’s [North Carolina State Board of Dental Examiners v. Federal Trade Commission (2015)] decision, active supervision by a disinterested government agency is a prerequisite for antitrust immunity when policy decisions are made by market participants,” Gordon said. “The real losers here, though, are the people of New Jersey, who are being prevented from finding affordable lawyers online using the same tools they use to find doctors, babysitters, and mechanics.”

Now-former State Bar president Robert Hille, of McElroy, Deutsch, Mulvaney & Carpenter in Morristown, filed a brief on behalf of the bar urging the court to pass on the case. The NJSBA issued a statement Monday from current president John E. Keefe Jr. of the Keefe Law Firm in Red Bank. 

“The court’s decision to let stand the joint opinion is an important one that provides clarity for New Jersey lawyers and protects consumers,” Keefe said.

“The association has increasingly grown concerned about the number of organizations that have sought to open the door to fee sharing, which could interfere with a lawyer’s independent professional judgement, and with the concept of organizations providing legal services when they are not bound by the same ethics rules that guide attorneys,” he said, adding that the court’s denial of certification “has ensured that a client’s interests are paramount and that they are represented fairly and impartially by lawyers adhering to our long-established rules governing professional conduct and ethics.”

Representing the state was Deputy Attorney General Steven N. Flanzman. The Attorney General’s Office, through a spokesman, declined to comment on the case.

The June 21, 2017, opinion was issued in response to an NJSBA inquiry asking whether lawyers may “participate in certain online, non-lawyer, corporately owned services.” The inquiry named Avvo, LegalZoom and Rocket Lawyer specifically.

The shortcomings of LegalZoom and Rocket Lawyer could be fixed simply by registering with the state, the committees held. But they found ethical trouble with the very structure of Avvo’s “pay-for-service” programs. The opinion decreed that “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).”

According to the opinion, Avvo offers “Avvo Advisor”—through which customers buy 15-minute phone conversations with a lawyer for a $40 flat rate, of which Avvo keeps a $10 marketing fee—and “Avvo Legal Services,” which allows customers to pay flat fees to Avvo for legal services provided by affiliated lawyers, after which Avvo pays the lawyer but keeps a marketing fee.

“The participating lawyer receives the set price for the legal service provided, then pays a portion of that amount to Avvo,” the committees 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.”

The opinion also held that marketing fees 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), and 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.

In its petition for certification to the Supreme Court filed last September, Responsive Law, represented locally by Jeremy Meyer of Cleary, Josem & Trigiani’s Red Bank office, said: “Innovative business models such as lawyer-client matching services have the potential to narrow the enormous access to justice gap that consumers face. The joint opinion would chill this innovation and others like it, leaving millions of New Jersey residents with fewer ways to find legal help.” It also contended that the opinion, authored by lawyers in regulation of lawyers, raised antitrust issues.

Opposition briefs came last February.

The state called Responsive Law’s points about the impact on the legal marketplace “speculative and overstated,” and the opinion “narrowly drawn” so not to broadly ban all such services. The state also disputed the antitrust claims, and said Avvo’s business structure “steers consumers to lawyers participating in Avvo’s plans due to Avvo’s direct financial interest in maximizing the aggregate amounts of fees collected.” The brief added, “Avvo’s financial interest exists even if a referral is not in the consumer’s best interest.”

The bar, in its own brief, said the opinion was “clear and straightforward” and “require[d] no further review.”