April 2020 Ethically Speaking - Jackson v. LegalMatch.com: An Examination of Online Lead Generation Services for Attorneys

by Cathy Tran Moses

Many attorneys have received emails from lead generation companies that seek to match attorneys with potential clients in need of legal counsel. These companies purport to offer valuable benefits to the public. Among other things, these businesses allow individuals who might not be legally sophisticated to be instantly matched with interested attorneys.

As lead generation companies proliferate, questions have emerged regarding whether and how they should be regulated. The California Court of Appeal (First District, Division Four) recently came out with an important decision, Jackson v. LegalMatch.com, 42 Cal. App. 5th 760 (2019), in which the court carefully examined the practices of one such marketing company, LegalMatch. The court held that LegalMatch was a “referral” service that should have been registered with the California State Bar and should have operated in accordance with certain defined standards under California Business & Professions Code section 6155. The court’s detailed, common-sense opinion and approach to the issues may provide a useful guide to other courts or tribunals examining similar online businesses.

The LegalMatch Website

LegalMatch is a San Francisco-based company that operates a website at legalmatch.com. It has operated in all fifty states since 2000, and it advertises itself to be a “legal marketing partner” to attorneys. In order for LegalMatch to connect individuals with attorneys in their area, prospective clients are asked to fill out an intake form online regarding their legal needs. Users must select their specific geographic location and the legal category that relates to their legal issue, such as family law, criminal defense, business, personal injury, employment, or wills, trusts, and estates. Users can choose to provide more detailed information about their particular cases if they wish. LegalMatch’s website states that the intake process should take a user about fifteen minutes to complete.

After users finish providing input about their case and accept LegalMatch’s terms and conditions, LegalMatch takes the information that the users have provided and transmits it to lawyers who have subscribed to LegalMatch. The lawyers then can reach out to the potential client, using LegalMatch’s platform to initiate contact.

The potential clients who are looking for attorneys do not pay any fee for submitting their requests to LegalMatch. LegalMatch instead receives fees from attorneys who pay yearly or multi-yearly subscriptions in order to receive intake information from LegalMatch. The lawyers who subscribe to the service are slotted into their respective geographic locations and categories of expertise. LegalMatch limits the number of lawyers in a geographic location and category of expertise, so as to balance the number of clients and lawyers who are available. LegalMatch does not receive any additional fees whether an attorney-client relationship is ultimately formed or not.

In briefs that it submitted to the court of appeal, LegalMatch emphasized that it does not take an active role in matching attorneys with consumers. LegalMatch portrayed itself as an interactive electronic “Yellow Pages”; it claimed to not screen attorneys or recommend a particular attorney to a user. Instead, LegalMatch insisted that the “matching” that it performed was rote, and was based only on an attorney’s legal field and geographic area.

Court of Appeal Holds That LegalMatch Is a Referral Service

Dorian Jackson purchased a subscription with LegalMatch, initially in the field of business litigation and then in the category of wills, trusts, and estates. LegalMatch sued Jackson in 2015 to collect delinquent payments that he had not paid under his contract with LegalMatch. Jackson cross-claimed, asserting that LegalMatch was an uncertified lawyer referral service that was acting in violation of Business & Professions Code section 6155.

Under section 6155, a business cannot operate “for the direct or indirect purpose” of “referring potential clients to attorneys” unless the service is registered with the State Bar and is operated in conformity with minimum standards for a lawyer referral service established by the State Bar, or is operated in conformity with standards set by the California Supreme Court. A lawyer referral service must satisfy numerous requirements in order to operate in California, including paying significant certification and re-certification fees.

The trial court held that LegalMatch did not engage in “referral” activity because it did not exercise judgment as to a potential client’s legal issues. Jackson appealed.

The court of appeal reversed, agreeing with Jackson that LegalMatch did engage in referral activity. The court came to this conclusion by first turning to the text of the statute. Section 6155 does not define “referral” or “refer.” The court therefore consulted with dictionary definitions of the term, including the one in Black’s Law Dictionary. It concluded that the term “referral” in the statute means the act of simply directing a client to an attorney, and does not require that a referring party make any initial judgment about the client’s circumstances. Instead, a referral occurs when an entity directs or sends a potential client to an attorney. In the case of LegalMatch, the act of sending the user’s information to the selected lawyers “constitutes and completes the referral.”

The court further noted that the statutory framework surrounding section 6155 supported its conclusion. The legislature enacted section 6155 within a broader framework regulating unlawful solicitation in which the legislature wished to reduce “ambulance chasing” activities. Third-party ambulance chasers who solicited cases and referred them to attorneys were believed to send matters not to the most competent attorneys, but to the attorneys who would pay the chasers the most. The legislature thus enacted broad statutes to bar a person from acting as a “runner” or “capper” for an attorney. The court recognized that the statutory regulation of such solicitation served important interests by protecting consumers and upholding attorney professionalism.

Section 6155 was intended to serve as an exception to this statutory framework. While the potential for abuse by third-party cappers and runners did exist, the legislature also was aware that citizens could find it difficult to locate attorneys who were willing to consult with them. Lawyer referral services could solve this problem. The legislature thus created an exception to the general prohibition on client solicitation through runners and cappers by allowing lawyer referral services to operate, so long as they met minimum requirements that the legislature had clearly outlined, that is, that they are registered with the State Bar and operate within standards set by the State Bar or the California Supreme Court. The court concluded that “[b]roadly interpreting referral activity to focus on the act of directing a potential client to an attorney is consistent with the overarching statutory scheme that generally prohibits client solicitation for consideration on or behalf of an attorney, except when done in a manner that is regulated and compliant with state standards.”

LegalMatch pointed to the ABA’s Standing Committee on Lawyer Referral and Information Service’s Model Supreme Court Rules Regarding Lawyer Referral and Information Services (ABA Model Rules). These rules state that lawyer referral programs screen inquiries and provide clients with unbiased referrals to attorneys. LegalMatch claimed that the ABA Model Rules suggested that a lawyer referral service under section 6155 must screen inquiries, which LegalMatch does not do. The court rejected LegalMatch’s argument, holding that the ABA’s characterization of such programs could not supersede the plain meaning of the statutory text and the legislature’s intent in enacting section 6155. Moreover, the court noted that section 6155 predated the ABA Model Rules.

LegalMatch also made a cursory, one-sentence argument in its brief that defining referral activity broadly would raise free speech concerns. The court treated the argument as forfeited because LegalMatch did not cite any authority in support of its argument. It went on to observe, however, that LegalMatch’s argument seemed to be flawed because LegalMatch engages in “commercial speech,” which has only limited First Amendment protection. Such speech can be regulated if the regulation is narrow and supports a substantial state purpose, which would include “protecting consumers from unscrupulous lawyer solicitation.”

The court ultimately remanded the case to the trial court for a determination regarding unclean hands. LegalMatch contended that Jackson was barred from maintaining the action and the appeal because he had unclean hands. Jackson apparently was continuing to use LegalMatch’s services utilizing an account maintained under his wife’s name, and had renewed his subscription for three years beginning in 2016. Section 6155(a) provides that an attorney cannot accept a referral of potential clients from a business that is not operating as a registered legal referral services company. LegalMatch contended that Jackson could not have it both ways, by contending that LegalMatch was an unlicensed referral service but also choosing to violate the law by using that service. Because unclean hands is a heavily fact-dependent issue, the court held that it should be resolved on remand.

On January 6, 2020, LegalMatch filed a petition for review with the California Supreme Court, which remains pending as of early February 2020.

Consequences of the Court’s Decision

The court’s decision in LegalMatch is important for several reasons. First, as the court noted, there was a paucity of case law interpreting Business & Professions Code section 6155 prior to its decision. This scarcity of case law may have contributed to the trial court’s decision that LegalMatch did not engage in referral activity. The court of appeal’s detailed yet straightforward analysis of section 6155, and what constitutes “referral” activity, may serve as a helpful guide to other courts or decisionmakers who may later be asked to interpret section 6155 or analogous laws. There are numerous lead generators that offer similar services to LegalMatch. Even if their websites operate differently than LegalMatch, it is likely that other tribunals may look to the same broad, commonsense definition of “referral service” in determining whether those lead generation services are acting in accordance with the statute.

Additionally, attorneys who use, or are solicited to use, similar lead generation services should be aware of the court’s broad construction of section 6155 and take note that these businesses may be running afoul of that section. Moreover, the attorneys themselves, as LegalMatch has argued with respect to Dorian Jackson, may be acting improperly by accepting referrals of potential clients from unlicensed referral services.

Cathy Tran Moses is a litigation partner at Cox, Castle & Nicholson LLP in Irvine, where she specializes in complex commercial litigation. She is a member of the OCBA Professionalism and Ethics Committee. She can be reached at cmoses@coxcastle.com.