Opinion 99-12
(December 1999)

The inquirer is an attorney who may enter in an agreement to receive referral commissions from a pre-paid legal services plan. Some of the "leads" he provides will be the inquirer's business clients. The inquirer asks if either arrangement outlined below violates the Pennsylvania Rules of Professional Conduct (the "Rules"). The text of the proposed agreement follows: 


In consideration of the inquirer furnishing X, an Independence Sales Associate with Y Company (a provider of pre-paid legal services) with leads and contacts, the inquirer shall be entitled to be compensated as follows:

A. If the inquirer elects to become an Independent Sales Associate with Y Company,
he shall be entitled to receive compensation from Y Company for sales commissions and residuals generated from membership enrollments in Y Company if such membership resulted from contacts and/or leads furnished to Y Company by the inquirer either directly or indirectly, in the same manner and to the same extent as any other Independent Sales Associate with Y Company.

B. In the alternative, should the inquirer elect not to become a Sales Associate with Y Company, he shall be entitled to receive from X, $25 for each person enrolled as a member in Y Company, but will not be entitled to receive any residuals generated by such enrollments, if the member was enrolled through any contacts and/or leads furnished to X by the inquirer, directly or indirectly. Further, the attorney will suffer no "charge backs", as to any enrollee who ceases to retain his/her membership in Y Company after initially becoming a member of Y Company.

The payment relationship as set forth in the above agreement does not violate any of the Pennsylvania Rules of Professional Conduct. However, the Committee draws the inquirer's attention to the following concerns arising under several of those Rules.

The main ethical concern posed by the inquiry concerns the relationship between the inquirer and those of his business clients that he signs up for the plan. There could be a perception by such business clients the inquirer is endorsing the pre-paid plan so that the economic interest on the part of the inquirer must be disclosed to the client and the conflict waived, pursuant to the provisions of Rule 1.8a. In addition, because at least part of the potential pool of customers for the pre-paid plan is the inquirer's clients, the inquirer must be careful not to betray any confidences to the pre-paid sponsor, i.e. not use confidential information about the client to the disadvantage of the client, since this is prohibited by Rule 1.8b.

Finally, since any payments received pursuant to such an agreement, although not appearing to be fees for legal services, nevertheless might come from some of the inquirer's law clients, Rule 5.7 ("Responsibilities regarding Nonlegal Services" would be triggered. Pursuant to that rule, should the inquirer fail to adequately distinguish for the client the non-legal nature of the inquirer's role in this business, that business relationship between the inquirer and the client will be governed by the Rules and treated as an attorney-client relationship for ethical purposes.

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.