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Opinion Number: 2001-01

Attorney may barter legal services in exchange for services from other professionals and may refer clients to other professionals subject to certain conditions

QUESTION:

The Office of General Counsel has received several inquiries concerning the ethical propriety of attorneys participating in bartering clubs. There are at least two such clubs presently operating in this state. One operates under the name Business Network International (BNI) and the other is called Trade Bank International (TBI).

The Disciplinary Commission has reviewed the membership agreement and other information pertaining to the services offered by these clubs. Based upon this information, it is the understanding of the Disciplinary Commission that BNI and TBI provide administrative services for a number of chapters or clubs which operate throughout the nation and in other countries. Each club or chapter is comprised of one or more individuals from each of the various professions who are associated for the purpose of bartering their services among themselves and also for the purpose of referring clients, customers or patients, etc., to each other. For example, if a medical doctor who is a member of one of these clubs needs the services of a lawyer to draft a will, he may contact a lawyer who is a fellow member of the club and the lawyer will prepare the will without cost to the doctor. In exchange, the doctor will provide the lawyer medical services of a comparable value at no cost to the lawyer. Additionally, if the doctor has a patient who needs legal services, he would refer that patient to a lawyer who is a member of the club, and in return, if the lawyer has a client who needs medical services, he would refer that client to the medical doctor.

Professionals, other than lawyers, would be given the name of the individual referred and would then contact the individual to make an appointment or otherwise discuss their needs. In the case of lawyers, face-to-face or telephone solicitation of clients is prohibited and, therefore, the referring professional would give the lawyer's name to the potential client and it would then be up to the potential client to make contact with, or set up an appointment with, the lawyer.

Each professional pays an annual fee of $250 to the club which, according to the information reviewed, is used to pay administrative costs. No fees are paid by any professional to another professional nor is there is any compensation received for any referral.

ANSWER:

It is the opinion of the Disciplinary Commission that participation by a lawyer in bartering clubs such as BNI and TBI is not inconsistent with the lawyer's ethical obligations under the Rules of Professional Conduct of the Alabama State Bar, provided that referrals ancillary to the lawyer’s representation of a client are made to another club member only after the lawyer has reached a good faith determination that referral to a member, as opposed to a nonmember, is in the best interest of the client and best suited to meet the client's needs.

DISCUSSION:

The first of the Rules of Professional Conduct which would appear to be pertinent to the issues presented is Rule 7.2(c), which prohibits a lawyer from giving anything of value to a person for recommending the lawyer's services. However, it would not appear that the proposed arrangement constitutes a violation of this section in that the only fees paid are to the organization itself, which does not make the referrals, and nothing of value is given to the professionals who actually make the referrals. Additionally, the prohibition in Rule 7.3 against face-to-face or telephonic solicitation would not appear to be a problem in that the lawyer would not make the initial contact with the client; rather, the client must take the affirmative step of first contacting the lawyer. However, there is an additional ethical consideration which is of some concern and which, in the opinion of the Commission, could constitute a potential conflict of interest for participating lawyers. In representing clients, lawyers are ethically obligated to act at all times in the client's best interest. Furthermore, Rule 1.7(b) provides that a lawyer shall not represent a client if that representation is materially limited by the lawyer's own interests.

Participation in an organization in which clients, customers or patients are referred back and forth between professionals could place a lawyer in a situation where the lawyer’s own interest is in conflict with the best interest of the lawyer’s client. If, for example, a lawyer has a client who needs the services of a financial planner, it would be in the lawyer's own best interest to refer the client to a financial planner who is a member out of the bartering club. In so doing, the lawyer not only obtains access to free financial planning services for himself, but also obligates the financial planner to make a reciprocal referral. However, in actual fact, the best interest of the lawyer's client may well be served by a financial planner who, although not a member of the club, may be better qualified to meet the client's needs.

The information reviewed by the Commission indicates that club members are not necessarily obligated to make referrals only to other club members. Each club member has the latitude to make referrals to nonmembers if, in the member's professional judgment, referral to a nonmember would best suit the interest or needs of the client, patient, or customer.

It is the opinion of the Disciplinary Commission that any lawyer participating in a bartering and referral club or organization must always remain free to exercise independent professional judgment in representing a client, including decisions relating to further professional services for a client. Therefore, before a lawyer may refer a client to a fellow member of a bartering club, the lawyer must make a good faith determination in the case of each referral as to whether or not the client's interests and needs would be best served by a club member, or by some other professional. Only if the lawyer can make such a good faith determination in every case would the lawyer's participation in such a bartering and referral organization be ethically permissible.

Finally, lawyers participating in a bartering club should be aware of the tax ramifications of obtaining goods and services by barter. Since such concerns present legal issues involving construction and application of the tax code, the Commission obviously expresses no opinion with regard thereto. However, participating lawyers are encouraged to carefully research these issues or to consult an accountant or other tax professional.