Opinion #135. Membership in a National Network of Participating Lawyers

Issued by the Professional Ethics Commission

Date Issued: November 10, 1993

FACTS

A Maine lawyer has inquired whether the Bar Rules would prevent his joining a national network of lawyers whose practice includes active participation in the foreclosure of mortgages. Prospective members provide a resume and other information regarding their experience in the foreclosure field sufficient to determine whether they meet the Network’s membership criteria. Information supplied by the Network indicates that the Network seeks to identify lawyers who are “reliable, ethical, financially responsible” and “who recognize the crucial needs of the mortgage servicing industry. . . .”

The Network is a nonprofit corporation, but charges dues to its members. Members in good standing are listed in a directory in the form of a three‑ring binder, containing information submitted by each of its members in the various states. The directory is provided by the Network to the members and to mortgage companies, free of charge. If a mortgage company needs a foreclosure attorney in another state, the mortgage company could look up the names of the Network members in that state and contact that lawyer directly. In some cases a mortgage company might call the office of the Network and ask for the name of a foreclosure attorney in another state. The Network would provide the names of its member or members in that state, but could also provide the names of qualified attorneys who are not members of the Network. No one is required to engage the services of a member of the Network by reason of being a member of the Network or a user of its directory of foreclosure attorneys. Although members pay annual dues to the Network, the amount of the dues is not related to the number of clients that might contact a member as the result of the member’s affiliation with the Network.

OPINION

For the reasons stated below, the Commission is of the opinion that the arrangement described above is not prohibited by the Maine Bar Rules. More specifically, the Commission is of the opinion that this arrangement is a permissible form of “directory” advertising and is not a prohibited payment to a third party to recommend the employment of a lawyer.

Throughout the history of the regulation of lawyer conduct, the Bar has had an ambivalent approach to the subject of advertising and solicitation by lawyers. On the one hand, the Bar has consistently prohibited lawyers from paying third parties—variously described as “runners,” “touters,” or other “channelers” of law business—to recommend the employment of lawyers by clients. On the other hand, the Bar, with equal consistency, has tolerated the practice of advertising and solicitation by lawyers through “law lists” or “directories.” As the following summary of the history of the Bar’s approach to these practices illustrates, lawyer advertising through “law lists” or “directories” has long been recognized as an exception to the rules that governed advertising and solicitation by lawyers. This historical review also demonstrates that the Maine Bar Rule that prohibits lawyers from paying third parties to recommend the employment of lawyers does not encompass the practice of lawyer advertising through the use of “law lists” or “directories.”

The History of the Prohibition Against Paying Third Parties to Procure Employment by a Client

The practice of lawyers paying third parties to procure employment by clients has been consistently prohibited by Bar rules since the adoption of the original American Bar Association Canons of Professional Ethics (the “Canons”) in 1908.[1] As originally adopted, Canon 27 declared that it was “unprofessional” to solicit business by circulars or advertisements, and that it was “equally unprofessional to procure business by indirection through touters of any kind. . . .” Canon 28 similarly declared that it was “disreputable” for a lawyer to pay or to employ “agents or runners” or other persons in order to influence potential clients to retain a lawyer.

The American Bar Association Model Code of Professional Responsibility, which became effective on January 1, 1970, carried forward a similar prohibition. Like the earlier Canons, original Disciplinary Rule 2‑103(B) of the Model Code provided:

Except as permitted under DR 2‑103(C), a lawyer shall not compensate or give anything of value to a person or organization to recommend or secure his employment by a client, or as a reward for having made a recommendation resulting in employment by a client.[2]

The History of Lawyer Advertising Through “Law Lists” of Directories”

The history of lawyer advertising and solicitation through the use of “law lists” or “directories” is set forth in Henry S. Drinker’s Legal Ethics (1953) (hereinafter “Drinker”), at 266, as follows:

The Law Lists had their origin some time prior to the adoption of the original Canons in 1908. Several prominent and highly respectable lawyers had compiled for their own use and that of their friends at the bar a list of competent and reliable lawyers in different cities to whom they might refer matters requiring legal service in such localities, which lists were later taken over, in some cases, by their descendants, in others by persons purchasing the right to publish the list. The publishers of these lists instituted the practice of making a charge to the listees for the privilege of being listed either exclusively, or with a limited number of other lawyers in their locality, the amount charged being related to the amount of business normally available in the locality and to the number of other listees therein. The lists selected the lawyers listed as those whom they undertook to recommend as competent and reliable for the service in which the list specialized. Some of the lists bonded their listees and required them to report all items coming to them over the list, being thus able to revise their listing fees from time to time as the business received by the various listees increased.[3]

The practice of lawyer advertising and solicitation through the use of law lists is described in C.W. Wolfram’s Modern Legal Ethics (1986) at 775 as follows:

*Law Lists* are collections of the names of lawyers and other information about them gathered into book form for the use of subscribers. The most famous is the Martindale‑Hubbell multivolume collection, which attempts to include the names and some minimal other information about all admitted lawyers in the United States and, for a minority of selected lawyers, indicates a particularly high “rating”. Other law lists are keyed to particular areas of legal service, such as personal injury or collection work. All are published by private concerns that make their money by charging selected lawyers a sizable fee for the privilege of advertising information, such as the lawyer’s credentials, representative clients, special abilities, and honors. The size of the fee that the listing company can charge depends upon the amount of business that is generated for listed lawyers by circulation of the publication. In some types of practice, lawyers may receive substantial referral business through advertising in a law list.

When the original Canons were adopted in 1908, a number of law lists were well known and extensively used. Drinker at 266, n. 29. The first mention, however, of law lists in the Canons was in the 1933 amendment to Canon 43, allowing the insertion of a lawyer’s professional card in “reputable law lists.” Id. at 265. Thereafter, in 1937, Canon 27 was amended to provide for law lists. Id. at 216. That same year a Special Committee on Law Lists was appointed to formulate Rules and Standards governing law lists, on compliance with which the Committee would issue a Certificate of Compliance, thereby making the list a “reputable” or “approved” law list in which, under Canon 27, a member of the American Bar Association might properly be listed. Id. at 266.

As Drinker has explained, these amendments to the Canons which permitted the practice of lawyers paying to have themselves advertised and recommended were an obvious exception to the rules prohibiting advertising and solicitation:

The recognition of Law Lists in the Canons, by which a lawyer is permitted to pay a considerable sum for the express purpose of having himself advertised as available and recommended as a lawyer, constituted an obvious exception to the rule of the profession condemning advertising and solicitation.

Drinker at 267.

Consistent with the original Canons, as amended, the 1969 Model Code of Professional Responsibility similarly permitted lawyers to include biographical and other informative data in “reputable” law lists or legal directories, and conclusively established that status for lists approved by a special committee of the American Bar Association. See original D.R. 2‑102 (A)(6). That degree of regulation of law lists survived until 1977. In 1977, the American Bar Association deleted D.R. 2‑102(A)(6). This abrupt termination of the ABA’s involvement in regulating lawyer advertising through the use of law lists is explained in C.W. Wolfram, Modern Legal Ethics, at 775, as follows:

The involvement of the American Bar Association in regulating law lists ended abruptly in 1977. Under the threat of antitrust suits [citation omitted], the ABA in that year dropped any reference to law lists in the Code as part of the process of amending the provisions on advertising. The 1983 Model Rules similarly contain no regulatory mention of law lists. Those publications, like telephone directories and other publications, are treated today simply as other accepted kinds of lawyer advertising.

Maine Bar Rule 3.9(f)(2)

By Order dated May 1, 1979, effective May 15, 1979, the Supreme Judicial Court of Maine adopted the Maine Code of Professional Responsibility, including Maine Bar Rule 3.9(f)(2). That Rule provides as follows:

A lawyer shall not compensate, or give anything of value to, a person or organization to recommend or secure employment by a client, or as a reward for having made a recommendation resulting in employment by a client, except that a lawyer may pay for public communication permitted by these rules and may pay the usual and reasonable fees or dues charged by a lawyer referral service operated, sponsored, or approved by a bar association.

Like D.R. 2‑103(B) of the ABA Model Code from which it derived, Maine Bar Rule 3.9(f)(2) prohibits a lawyer from paying a person or organization to recommend or secure his employment by a client. Like the Disciplinary Rules of the Model Code, as amended in 1977, the Maine Bar Rules contain no regulatory mention of “law lists” or “directories.”

Were it not for the history of the separate treatment accorded “law lists” by the ABA Canons and Model Code over the years prior to the adoption of the Maine Bar Rule 3.9(f)(2), it could be argued that the prohibition of that Rule is cast in terms that are broad enough to include within its scope a prohibition on lawyer advertising and solicitation through the use of law lists, for inclusion in which lawyers pay dues or a fee. But history shows that the regulators of the Bar have consistently tolerated advertising by lawyers through the use of law lists, and that paid advertising through the use of “law lists” or “directories” has been an obvious and long‑standing exception to Bar rules otherwise prohibiting advertising and solicitation. When, in 1979, the Maine Code of Professional Responsibility was adopted, the ABA had already deleted from the Disciplinary Rules all regulatory mention of “law lists” or “directories.”[4]

Under these circumstances, the Commission is persuaded that if the drafters of the Maine Bar Rules intended to prohibit the practice of lawyers paying for advertising in law lists and directories—a practice that was not prohibited by the Disciplinary Rules of the ABA Model Code when the Code of Professional Responsibility of the Maine Bar Rules was adopted—they would have done so explicitly, but they did not. On the contrary, as explained in the Reporter’s Notes to Rule 3.9 of the Maine Bar Rules, the drafters decided not to replace “the now discredited prohibition of professional advertising with a limited list of acceptable communications,” and instead drafted a Rule that “recognizes the right to advertise in general and forbids only those practices that would be regarded as improper in virtually any context. . . .” See Reporter’s Notes to Maine Bar Rule 3.9.

For the reasons stated above, the Commission is of the opinion that the prohibition of Maine Bar Rule 3.9(f)(2) does not extend to lawyer advertising through the use of “law lists” or “directories,” even though lawyers pay a fee or dues to advertise through such publications. More specifically, based on the historical developments described above, the Commission is of the opinion that paid lawyer advertising, through the use of “law lists” or “directories,” constitutes payment for “public communication permitted by these rules” within the meaning of Maine Bar Rule 3.9(f)(2). Accordingly, a lawyer’s participation in the network‑directory arrangement at issue here does not violate Maine Bar Rule 3.9(f)(2), and is permissible under the Maine Bar Rules, provided that a lawyer’s directory information does not violate any other provisions of Maine Bar Rule 3.9 governing lawyer publicity, advertising, and solicitation, and provided that the Network, if it receives requests for the names and directory information of Network lawyers, provides the requesting party the names and directory information of those lawyers, and does not otherwise recommend the employment of those lawyers. In closing, in the interest of full disclosure, the Commission wishes to note that all of its members are listed in Martindale‑Hubbell law directory, and several of its members are listed in other law directories.

DISSENT

Two members of the Commission are unable to agree with the majority of the Commission that law lists should be allowed as an unwritten exception to the prohibition of Bar Rule 3.9(f)(2) on compensating a person to recommend an attorney’s employment. We therefore dissent from that opinion.

The majority opinion appears to concede that paying the publisher of a law list to recommend an attorney’s employment violates the literal wording of the rule. The opinion takes the view, however, that if an abusive practice has existed for a long enough period of time, it may be permitted to continue.

The obvious purpose of Rule 3.9(f)(2) is to prevent lawyers from purchasing endorsements of their services. Although the rule may have been drafted with paid runners in mind, it is clearly broad enough to encompass the membership program established by the Foreclosure Network.

The Network indorses individual lawyers in at least two ways. It screens applicants for membership through an evaluation of their experience and competency in the foreclosure field. Therefore, whenever the Foreclosure Network sends its exclusive membership list to a lending institution, it is, in effect, recommending the employment of its local members for a consideration paid in the form of its membership fee. Thus it is unlike Martindale‑Hubbell and legal directories which publish in a nonselective manner the names of all attorneys who are active in a particular area of practice regardless of whether they have purchased the directory or paid for a display advertisement.[5]

The second method by which the Foreclosure Network provides endorsements is more direct. When it receives inquiries from lending institutions as to whom they should hire to undertake a particular foreclosure proceeding, it recommends a member of the Network in the area where the foreclosure work is to be performed. In effect, the Network explicitly recommends the employment of an attorney from its exclusive membership lists.[6]

An endorsement would not violate the rule unless it was given for consideration. Thus, if the Foreclosure Network were to circulate its list of attorneys considered to be qualified in the foreclosure field to prospective clients without exacting payment from the attorneys whose names appear on the list in the form of a membership fee, the rule would not be violated.[7]In the present instance, however, even the most highly qualified practitioners in the foreclosure field would not be listed nor would their names be provided in response to inquiries from prospective clients unless they had paid the specified membership “dues” for the privilege. It is, therefore, apparent that the Network’s endorsement is available at a price and will not be given solely on the basis of the merit of the attorneys who are active in the foreclosure field.

Even though the Foreclosure Network’s membership plan constitutes a form of endorsement of its members, the circulation of its membership list might nevertheless be considered to be a “public communication” and therefore permissible as an exception to the bar imposed by Rule 3.9(f)(2). Section 3.9(a) defines a ”public communication” as “any communication through mass media, direct mail, or other means including professional cards, announcements, letterheads, office signs, and similar accoutrements of a law office.”

It could be argued that, since the membership list is circulated to subscribers and would presumably be available to any member of the public who wanted to see it, it ought to be viewed as a “public communication” within the meaning of Rule 3.9(f)(2). Were it so, however, the rule itself would be swallowed by the exception.

Presumably everyone would agree that if an attorney paid a hospital attendant to hand his business card to accident victims, the rule would be violated. It is doubtful that anyone would argue that the result should be different even if the hospital attendant were to walk through the emergency room wearing a blown‑up version of the attorney’s card as a sandwich board even though this would appear to be a “public communication.” Similarly, a paid letter from a prominent citizen indorsing the quality of a lawyer’s legal services would not be immunized from the application of the rule simply because it was published as a newspaper advertisement.

In the definition of a “public communication” found in Section 3.9(a), the examples given include business cards, letterheads, and office signs. Each of the forms of public communication identified is an obvious form of advertising originated by the attorney in question. If an ad were presented on television or radio, through a paid announcer, the fact that a message was a paid advertisement initiated by the attorney himself would still be apparent. The “public communication” exception should therefore be limited to circumstances in which it is apparent that, like a business card, the communication has been initiated by the lawyer himself as a form of advertising and should not be read to include endorsements given by others.

The distinction suggested is based on the same policy that underlies Rule 3.9(d). That rule bars lawyers from compensating a media representative for providing him with publicity in the guise of a news item. Similarly, the suggested interpretation of the term “public communication would exclude paid professional publicity masquerading as a disinterested endorsement. In the present case, the Foreclosure Network has created the misleading appearance that its recommendation of attorneys who are expert in foreclosing mortgages is untainted by monetary considerations when, in fact, only those attorneys who have paid the required membership fee are eligible for inclusion on their referral list.

The historical analysis provided in the majority opinion purporting to show that “law lists” have always been considered as a permitted form of advertising is somewhat misleading. In the first place, no attempt has been made to distinguish between law lists such as Martindale‑Hubbell which would not offend Rule 3.9(f)(2) and those which purport to offer disinterested lists of outstanding attorneys in various categories which are in reality limited to those who will pay a membership fee. It does little to advance the argument to point out that law lists like Martindale‑Hubbell have been around for many years since such lists do not require payment by the lawyers who are being rated.

In 1979, when the Maine Supreme Court first adopted the Maine Bar Rules, the version of the A.B.A.’s Model Code of Professional Responsibility which had been adopted by the Maine Bar Association prohibited advertising except for several stated exceptions. These included:

(6) A listing in a reputable law list or legal directory giving brief biographical and other informative data. A law list or directory is not reputable if its management or contents are likely to be misleading or injurious to the public. . . . A law list is conclusively established to be reputable if it is certified by the American Bar Association as being in compliance with its rules and standards. . . . *Id*., 2‑102 (A)(6).

The majority opinion concludes that, by abrogating this language, the Maine Court intended to continue it in existence. Nothing in the Reporter’s Notes suggests such a result. On the contrary, the Notes state that:

Rule 3.9 is a new approach to the issue of advertising by lawyers. Rather than replace the now discredited prohibition of professional advertising with a limited list of acceptable communications, the new rule recognizes the right to advertise in general and forbids only those practices that would be regarded as improper in virtually any context. . . .

Since the new Maine Rule 3.9, which had no precedent in other jurisdictions, swept away the structure of the previous rules which allowed lawyer advertising only in limited circumstances, it is incongruous to suggest that any part of the former rule, such as the limited authorization for “reputable” law lists was to remain. A conclusion more in keeping with the wording of the new rule is that those law lists which consisted of straightforward advertising would henceforth be permitted while those which contained endorsements which appeared to be disinterested but were actually given for consideration would be barred by Rule 3.9(f)(2).

If, as the majority assumes, the Court did not mean to deauthorize the use of “reputable” law lists, one may properly inquire whether it also intended to retain the use of the certification process by which the A.B.A. would determine that certain law lists are “reputable”. If not, how would a determination be made that the Foreclosure Networks law list was “reputable” and therefore permissible? The former rule also limited the information which an attorney could publish in an approved law list. The majority opinion does not consider whether these limitations still apply.

Finally, the majority opinion has not adequately addressed the issues presented by inquiries received over the telephone by the Foreclosure Network from commercial lenders as to whom they should employ in a given jurisdiction. The majority states that a response in such a case which identifies a Foreclosure Network member in a particular locale would not violate Rule 3.9(f)(2) if it “does not otherwise recommend employment of those lawyers.” It is unrealistic in the extreme to construe the Network’s response to such an inquiry as anything but a recommendation of employment of the member in question. It is also difficult to see how such a private recommendation could be properly excepted from the application of Rule 3.9(f)(2) as a “public communication.”


FOOTNOTES

[1] Those Canons were adopted by the American Bar Association at its Thirty‑First Annual Meeting at Seattle, Washington, on August 27, 1908. The Canons were applied, as amended, until the adoption of the American Bar Association Code of Professional Responsibility on August 12, 1969, effective January 1, 1970.

[2] The prohibition of Disciplinary Rule 2‑103(B) remained essentially unchanged from the date of its adoption. In August, 1983, the American Bar Association replaced the entire Model Code with the Model Rules of Professional Conduct. A similar prohibition is now contained in Rule 7.2(c) of the Model Rules.

[3] The extent of the practice of lawyer advertising/solicitation through the use of law lists is illustrated in James W. Hurst’s The Growth of American Law (1950), wherein it is noted that “[l]aw list business grew to sizeable proportions. In 1926 one list handled $100,000,000 of forwarded claims, another $40,000,000, another $10,000,000; in 1938 about 200 lists were published in the United States, and they received about $15,000,000 from lawyers who inserted notices in their columns.” Id. at 320.

[4] As noted above, the ABA Model Rules of Professional Conduct, similarly contain no regulatory mention of “law lists,” and treats those publications as other forms of accepted attorney advertising.

[5] Whether an attorney is required to pay a fee to obtain a listing is irrelevant as long as the same opportunity is available to all other lawyers and the publisher does not imply any endorsement of the attorneys who are listed. However, it is clear that willingness to pay a fee to the Foreclosure Network is not sufficient to entitle one to membership since the Network reserves the right to reject applicants who are not deemed “reliable”, “financially responsible”, or who fail to “recognize the crucial needs of the mortgage servicing industry.”

[6] It is disingenuous of the majority to suggest that, when asked directly for a referral, the Network would ever recommend a non‑member to the caller.

[7] If the Network’s principal purpose was, in fact, merely to provide information to prospective consumers of legal services in the foreclosure field, it could presumably finance the development and circulation of its list of qualified practitioners by charging fees to the lending institutions who received the list rather than by exacting dues from the attorneys whose names were included.


Enduring Ethics Opinion