Ethics Advisory Opinion
21-01
UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER'S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY.
S.C.R. Prof. Conduct: Rule 7.2
Client A applied for a loan refinance with Bank. Bank issued a loan estimate package that provided the name of a specific licensed SC attorney that 鈥淲e [the Bank] identified鈥� as one who could provide legal services related to the loan closing. The package expressly stated that Client A could 鈥渟hop for your own providers鈥� for legal and other services related to the transaction. The package and disclosures are assumed to be compliant with federal and state requirements for loan applications and attorney-preference notices.
Client A then informed Bank that she intended to use a different lawyer, Lawyer A, to serve as her lawyer for the loan closing. Subsequently, bank-created loan estimate documents provided to borrower prior to closing again identified as a potential service provider a SC licensed lawyer other than Lawyer A, while again noting Client A could choose 鈥測our own provider.鈥�
Client A inquired of Bank why another lawyer鈥檚 name, instead of Lawyer A who had previously been specifically elected, had appeared on the estimate form. Bank responded by offering information regarding how Lawyer A could sign up with a third-party company that Bank had contracted with to produce such loan forms, and Lawyer A learned that an annual fee of $249 was required to be included as an 鈥渋dentified鈥� service provider on such forms.
Lawyer A, Client A鈥檚 chosen provider, did not enroll in the offered program to become listed as a potential service provider on bank forms, but did close Client A鈥檚 loan transaction as desired by Client A.
May Lawyer A participate in Company鈥檚 service provider network for an annual fee of $249.00 and be listed as an 鈥渋dentified鈥� service provider that a Bank customer may choose without violating S.C. Rule of Professional Conduct 7.2(c)?
Yes. Lawyer A may pay the fee and participate in Company鈥檚 network of legal service providers and be 鈥渋dentified鈥� as a possible service provider to customers of the Banks serviced by Company.
Rule 7.2(c) generally provides that a 鈥渓awyer shall not give anything of value to a person for recommending the lawyer's services 鈥�.鈥� It contains three exceptions, one of which is relevant here: 鈥渁 lawyer may (1) pay the reasonable costs of advertisements or communications permitted by this Rule鈥�.鈥� S.C. Rule of Prof. Responsibility 7.2(c)(1).
Comment 7 to Rule 7.2 states that 鈥淸a] communication contains a recommendation if it endorses or vouches for a lawyer鈥檚 credentials, abilities, competence, character, or other professional qualities.鈥� The Bank鈥檚 and Company鈥檚 form only provides contact information for the participating lawyers and only makes three statements regarding the lawyers: (1) 鈥渢his list identifies some providers for services you can shop for;鈥� (2) 鈥淵ou can select these providers or shop for your owner providers;鈥� and (3) 鈥淧rovider We Identified.鈥� These limited statements hardly match up to the verbs and nouns used to describe a 鈥渞ecommendation鈥� in the comment. The language of the forms says nothing substantive about the listed lawyer鈥檚 credentials, abilities, competence, character, or professional quality beyond the fact that the lawyer might provide services should the customer 鈥渟hop for鈥� the lawyer and choose to use the listed lawyer. In this regard, the service is more like a directory listing of lawyers holding themselves out as able to provide services (like a phone book) as described in Comment 7 to Rule 7.2 rather than a third-party statement directing a potential client to a particular lawyer based on some credential or quality of the lawyer. If these statements are recommendations at all, they are of the faintest quality. In the absence of a recommendation, Rule 7.2 does not apply. Rather, the payment fits neatly within the stated exception for paid advertising in the form of listings.
Assuming the form generated for Bank by the Company and listing lawyers enrolled in the program is 鈥渞ecommending the lawyers services,鈥� based on the information provided, participation in the network appears to be open to any attorney practicing in the area of real estate law willing to provide services. The fee charged appears to be reasonable in light of the enrollment, onboarding, and maintenance charges of Company in including attorneys in its network. See S.C. Bar Ethics Adv. Op. # 01-03 (Lawyer may participate in internet service that charges based on a reasonable schedule of monthly or yearly advertising fees or on a 鈥減er hit鈥� basis); S.C. Bar Ethics Adv. Op. # 07-08 (Lawyer may participate in advertisement in conjunction with real estate company 鈥渁s long as Lawyer pays the reasonable costs of the advertisement 鈥�.鈥�) Thus, paying the Company鈥檚 fee for participation in its network of services providers does not violate Rule 7.2.
