This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.

Avvo, LegalZoom and Rocket Lawyer a No-Go in NJ

New Jersey lawyers who participate in Avvo, LegalZoom or Rocket Lawyer legal service plans are running afoul of ethics rules, according to a joint advisory opinion issued by the Supreme Court. The Advisory Committee on Professional Ethics, Committee on Attorney Advertising and Committee on the Unauthorized Practice of Law issued a joint opinion that Avvo’s legal service programs improperly require a lawyer to share a legal fee with a nonlawyer and pay an impermissible referral fee, and that LegalZoom and Rocket Lawyer are not registered with the Administrative Office of the Courts. The opinion was issued in response to an inquiry from the New Jersey State Bar Association.

“The New Jersey State Bar Association has in recent years frequently expressed concern about the growing number of organizations that have sought to open the door to fee sharing, which could interfere with a lawyer’s independent professional judgment,” said NJSBA President Robert B. Hille. “The opinion provides clarity and practical guidance for New Jersey attorneys about whether and to what extent they can practice in such programs.”

The opinion analyzed the following four questions:

Does the lawyer’s participation in these services constitute impermissible fee sharing with nonlawyers in violation of the Rules of Professional Conduct 5.4(a)?

Does participation in these services interfere with a lawyer’s independent professional judgment in violation of RPC 7.2?

Are Avvo, LegalZoom and Rocket Lawyer impermissible attorney referral services in violation of RPC 7.2?

Do the services violate Rule 1:28A-2, which requires lawyers to establish an IOLTA account in which to hold client funds until they are earned, by having a nonlawyer company hold such funds instead and/or by allowing a nonlawyer company to have direct access to a lawyer’s trust or bank accounts?

While the committees rejected the notion that these services unduly interfere with the lawyer’s professional judgment or that Avvo’s fee arrangement does not violate R. 1:28A-2, they found that Avvo’s pay-for-service plan violates RPC 5.4(a) because the participating lawyer accepts a fee for the legal service provided and then pays a “marketing fee” to Avvo. Citing other cases where a referral fee was disguised as a credit for future legal services and contained in an inflated medical bill, the committees found that a lawyer’s payment of a portion of a fee to a nonlawyer is impermissible fee sharing.

The committees concluded this does not hold true for LegalZoom or Rocket Lawyer, which offer legal services programs by way of a monthly subscription fee for “free” consultations with lawyers. To support that conclusion, the advisory opinion noted that the fees are paid directly to the company, not to the participating lawyers, and the participating lawyers receive a lump per-capita amount for providing limited-scope services.

Avvo’s marketing fee also runs afoul of RPC 7.2(c) and (d) because the “marketing fee” paid by the lawyers to Avvo after a legal service is performed is not for the “reasonable costs of advertising,” rather it is an impermissible referral fee.

“The fee ‘bears no relationship to advertising,’” according to the advisory opinion, citing ACPE Opinion 481 (May 1981); Joint ACPE Opinion 716/UPL Opinion 45 (June 2009). “Rather it is a fee that varies with the cost of the legal service provided by the lawyer, and is paid only after the lawyer has completed rendering legal services to a client who was referred to the lawyer by Avvo.”

The committees rejected Avvo’s explanation that they do not specifically refer lawyers, but list all lawyers—participating or not—on its pages. “Avvo is conflating its two services—the attorney-referral service and the attorney-directory service. Only those lawyers participating in the ‘Avvo Legal Services’ plan can provide users with the requested legal services. It is irrelevant that other lawyers can be found on the general lawyer directory.”

The committees found no such impermissible marketing or referral fees by LegalZoom and Rocket Lawyer. Nevertheless, as of the date of the opinion, the two companies were not registered as legal service plans with the Administrative Office of the Courts, as required by RPC 7.4(e)(4)(vii). As a result, New Jersey attorneys may not participate in these plans.

Visit the New Jersey Courts at judiciary.state.nj.us to learn more.

Senate Judiciary Committee to Consider Superior Court Nominations

The Senate Judiciary Committee will consider superior court nominations this Thursday, including that of Governor Chris Christie’s chief counsel, Gregory Acquaviva. Acquaviva was named chief counsel in March to replace former NJSBA Trustee Thomas Scrivo, who returned to private practice. The following is a full list of judicial nominees for the superior court:

Atlantic County:

Rodney Cunningham, Galloway*

Pamela D’Arcy, Galloway

Cape May County:

Marlene Susan Sheppard, Ocean City

Christine Smith, Upper Township*

Hudson County:

Martha D. Lynes, Kearny*

Hunterdon County:

John J. Burke III, Annandale*

Monmouth County:

Gregory L. Acquaviva, Neptune*

Morris County:

Ralph E. Amirata, East Hanover

Barbara J. Stanton, Mendham*

Robert M. Vinci, Mendham*

LaTovia K. Jenkins, Butler

Ocean County:

Valter H. Must, Toms River*

Deborah S. Hanlon-Schron, Toms River

Sussex County:

Lorraine M. Augostini, Sparta*

Also up for consideration to be an administrative law judge is Patricia M. Caliguire of Skillman Somerset County.

Those marked with an asterisk are members of the association.