Insurance Brokers, Investment brokers….law Brokers?

We are hearing so much these days about the changing landscape of legal services. See ‘The End of Lawyers?’ by Richard Susskind http://www.susskind.com/endoflawyers.html, or the writings of Jordan Furlong – http://www.law21.ca/consulting-services/ (also see his SLAW contributions).

One recurrent theme in the legal press now is that lawyers enjoy a legislated monopoly over the provision of certain services which do not require legal expertise.

An example often cited is that, apparently, in the 18th century British Prime Minister William Pitt gave solicitors exclusive rights over real estate conveyancing in order to mollify them and gain their support on an issue of the day.

Many writers on this topic warn that lawyers should not expect they will continue to enjoy these monopolies indefinitely. The question of lawyers’ exclusivity, including over will preparation and conveyancing, is presently under review in the UK. There, supermarket chains among others, are vying for the right to offer conveyancing and other routine legal services to their customers.

Is the Ontario rule of professional conduct that prevents lawyers from paying a referral fee, except to other lawyers, one of these antiquated, unjustifiable rules that has the effect of protecting the legal market for lawyers?

If not, what “mischief” does it prevent? How does it benefit the public?

Rule 2.08(8) of the Ontario Rules of Professional Conduct stipulates:

(8) A lawyer shall not (a) directly or indirectly share, split, or divide his or her fees with any person who is not a licensee, or (b) give any financial or other reward to any person who is not a licensee for the referral of clients or client matters.

This rule prevents the development of a brokerage industry for legal services, such as exists for the insurance industry. Under such a system, the public could hire a person intimately familiar with the legal marketplace, to help them analyze the type of legal service they need and find the best lawyer for the job, at the best price. Clients such as corporations not large enough to have in house counsel, who use a variety of legal services – employment, corporate, leasing – might be particularly well-served: rather than automatically refer all their matters to their existing lawyer out of habit, they would have the option of working with a broker who could assist them in navigating the seas of legal service providers for the most competitive ones.

There are obvious economies and efficiencies to this approach. Best of all for the client, if lawyers were permitted to pay the broker a commission on the fees generated, the broker’s service, like the insurance broker’s services, would be free to the client.

It is true that some brokers would become sales people for particular lawyers, but, providing the commissions are fully disclosed, the public is capable of seeing this, just as it sees that investment brokers and insurance brokers have their particular allegiances.

If people are willing to engage brokers to connect them to an appropriate legal service provider, and to assist in delivering competitive legal retainer contracts, what basis is there for the LSUC Rules of Professional Conduct to prohibit it?

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Comments

  1. Referral fees are only allowed for licensees. After Bill 14, The Access to Justice Act, this also includes paralegals in Ontario.

    In some jurisdictions referral fees are outright prohibited for anybody.

    The underlying public policy as I understand it has a lot to do with restricting the solicitation of legal services to legal professionals alone, which presumably protects the public.

  2. john o'sullivan

    Thanks Omar

  3. I would have thought that the ban on referral fees is also motivated by a desire to ensure that legal services are offered honestly and without conflict of interest and that the public has a full choice of lawyers (or licensees) to choose from, since lawyers are not ‘buying’ their clients from those who refer them. Thus there is no financial incentive for someone to stir up a lawsuit or other legal work in order to profit from it. It’s a bit of a lay person’s equivalent of a ban on champerty, maintenance, or barratry.

  4. john o'sullivan

    I am sure John Gregory is right, that there is an anti-champerty foundation to this rule. But is preventing people stirring up litigation in the hope of earning a referral fee, a realistic fear? Is it appropriate in the new world that permits contingency litigation? Is it disproportionate when compared to the potential benefits to the public of law-brokerage?