Ruling puts spotlight on lawyer referral services

A recent appellate court ruling that an online company matching attorneys with clients improperly failed to register with the State Bar highlights the need for California to update how it regulates the legal industry, including lawyer referral services, experts have said.

The underlying case focused on LegalMatch.com, a South San Francisco-based company that connects consumers seeking legal help with attorneys across the country who have purchased a LegalMatch subscription.

A 1st District Court of Appeal panel unanimously ruled last week LegalMatch must comply with the California bar's standards for lawyer referral services irrespective of whether the company "exercises judgment on an individual's legal issues before communicating that information to a lawyer."

"Rather, a referral occurs when an entity directs or sends a potential client to an attorney," wrote Justice Tracie L. Brown. Jackson v. LegalMatch.com, DJDAR11045, (Cal. App. 1st Dist., Nov. 26, 2019).

Gillian Hadfield, a University of Toronto law professor, called the court's published opinion "very unfortunate" because it prioritized formalism ahead of the need for greater access to justice for consumers.

"The court is reinforcing the tremendous barriers to access the legal profession -- with help like this from the courts and ultimately legislatures -- has put in place," Hadfield wrote in an email. "There is no evidence whatsoever that a service like this -- obviously crafted as carefully as possible to avoid the risk of giving any legal opinion on what would be an appropriate referral or service provider -- harms consumers."

"This decision speaks volumes about why it's critical that California follow the lead of other states and the advice of its own State Bar task force and reform the regulatory regime for lawyers," she continued.

The bar's Task Force on Access Through Innovation of Legal Services is studying ways to bolster access to justice, including by potentially permitting nonlawyers to own or invest in legal services providers.

Task force member Joanna Mendoza said the panel is also "seeking more ways that technology can assist users of legal services, and it would seem that this would include technologies that match consumers with attorneys."

"We want to make it easier to innovate and provide needed legal services while not overburdening services with unnecessary regulation," Mendoza wrote in an email. "At the same time, we need to balance that with public protection, and this includes making sure that important matters, such as confidentiality, are maintained."

The task force aims to provide final recommendations to the bar's Board of Trustees by March 31.

Robert C. Fellmeth, executive director of the Center for Public Interest Law, said the 1st District ruled correctly in the LegalMatch case on what constitutes lawyer referral services. But he said the opinion did not address the broader need for greater regulation of such services.

Having the referral offerings register with the bar and pay the associated fees gives the impression that significant vetting of attorneys involved with the services is taking place, he said.

"That does not seem to be the case and makes it, in my judgment, basically flawed," said Fellmeth, whose center is based at the University of San Diego School of Law.

He suggested referral entities be required to provide objective information about the lawyers they refer, such as their disciplinary history, whether they have suffered any malpractice judgments and how long they have been in practice.

The bar does require all lawyers who participate in certified referral services carry malpractice insurance. Most lawyer referral services are operated by local bar associations or nonprofit legal services programs, but for-profit organizations are permitted as well.

State Bar Executive Director Leah T. Wilson said the bar was reviewing the 1st District's opinion, but the agency agrees current law mandates lawyer referral services be certified by the bar.

"The State Bar also recognizes that, in 2019, the public has evolving expectations regarding the methods that would make it easier for them to identify attorneys available to address their legal needs; these expectations often involve the use of technology," Wilson said in a statement. "The State Bar encourages entities such as LegalMatch.com to review the existing rules for certified State Bar lawyer referral services to help identify any unnecessary barriers to the marketplace for responsible attorney matching services."

While LegalMatch does not appear to have ever applied to become a certified lawyer referral service in California, the bar reviewed the website in 2002 and determined it was not a referral service, bar spokeswoman Teresa Ruano said.

"As constructed at that time, it appeared to be a prepaid legal plan that offered prospective clients a list of attorneys from whom to make a selection," Ruano wrote in an email.

Ruano said in 2008 or 2009 LegalMatch "requested an audit by the State Bar" to determine whether it was a referral service.

"Because of resource constraints and likely also because the entity was not applying to be a certified lawyer referral service, it does not appear that an audit was performed," she said.

Attorney Jason Lohr, who represented the Los Angeles-area lawyer involved in the legal battle with LegalMatch, said the 1st District's ruling should prompt more services to register with the State Bar.

"This case makes pretty clear that in California, at least, there is going to be some oversight to that activity," said Lohr, a partner at Lohr Ripamonti & Segarich LLP in San Francisco. "The beneficiaries here are folks who need to find an attorney and go online to use one of these services."

The LegalMatch case may also produce some benefits for lawyers who have used the service. As part of a putative class action cross-complaint, Lohr said his client is seeking refunds for California lawyers who paid subscription fees to LegalMatch while it was operating unlawfully by not registering with the bar.

The cross-complaint filed by Dorian L. Jackson also requests LegalMatch be enjoined from continuing to offer lawyer referral services in California until it complies with state law.

The 1st District's opinion overturned San Francisco Superior Court Judge Curtis Karnow's ruling that LegalMatch did not engage in referral activity as defined in Business and Professions Code Section 6155. The appellate court ordered the trial court to evaluate whether Jackson had unclean hands in light of its different interpretation of the lawyer referral statute.

Calls to LegalMatch were routed to a voicemail system that said it was full and could not accept more messages.

One of the attorneys that represented LegalMatch, Gordon Fauth of Berkeley-based Litigation Law Group, did not respond to requests for comment.