Online legal service marketplaces could take another hit this month from state bar associations' ethics bodies, igniting debate yet again over their business models and the role of state bar associations in curtailing them.

The Virginia State Bar Council is slated to vote on Oct. 27 on a draft ethics opinion outlining the use of online attorney-client matching services. The opinion, which was approved by the state bar's Standing Committee on Legal Ethics on Sept. 13, finds that attorney participation in some matching services violates Virginia's Rules of Professional Conduct.

Although the ethics opinion did not explicitly name any particular services that would violate its rules, the description of the program addressed by the opinion closely matches the business structure of Avvo Legal Services, an Avvo offering allowing consumers to purchase individual services for a flat fee.

With the ethics opinion, Virginia joins five other states—New York, New Jersey, Ohio, South Carolina, and Pennsylvania—in taking issue with structural components of Avvo Legal Services' business model. Many of these states, including the New York and New Jersey opinions issued this year, found that the “marketing fee” withdrawn from attorney accounts constitutes improper fee splitting.

The North Carolina State Bar, conversely, found attorney participation in Avvo Legal Services' program permissible under certain conditions.

Jim McCauley, liaison to the Virginia State Bar's Standing Committee on Legal Ethics, explained that the bar association received a number of calls to its ethics hotline from Virginia attorneys and a formal request for an advisory opinion, prompting the state bar to formally address ethics concerns around Avvo Legal Services and similar programs.

Josh King, chief legal counsel for Avvo, said that the draft ethics opinion relies on a technical interpretation of the law that undercuts the core need to protect attorneys' independent judgment.

“It's a bit frustrating, because it's really focusing on form over substance. I'd go one step further and say it's like trying to make up form where no form exists, and taking it over substance,” King said.

To King's mind, the two ethical questions raised by Avvo Legal Services are whether the company is splitting fees with attorneys improperly, and whether the business relationship between Avvo and Avvo Legal Services' participating attorneys impairs attorney professional judgment.

“Our program doesn't do either of those things,” King said.

McCauley disagreed that Avvo's fee split is appropriate. Although he recognized that Avvo's marketing fee is collected after the transaction between clients and attorneys is complete, he said that the strategy still constitutes an improper fee split.

“They seem to think that it makes a difference whether that marketing fee is lopped off on the front end or on the back end,” McCauley said. “Our opinion and the other five states' is that it doesn't really make a difference.”

“If it walks like a duck and sounds like a duck, it probably is a duck. It's fee sharing with a nonlawyer,” McCauley added.

Under Avvo Legal Services' current operating model, clients retain attorneys through Avvo Legal Services for a particular legal service. Avvo collects payment from the client and transfers the full client payment to attorney operating accounts, after which it extracts a “marketing fee” from that amount.

The Virginia ethics opinion also took issue with the way Avvo holds fees between when clients solicit services and when attorneys complete them. “The ACMS collects advanced legal fees from a prospective client before the prospective client has had any contact with the lawyer whom she might engage,” the opinion notes, finding the practice to be a violation of a rule mandating that advance fees be held in an attorney trust account until services are completed.

King had a different account of Avvo Legal Services' transaction handling, noting “we don't charge them until the legal services have been provided.” Avvo Legal Services' website does, however, require that users enter their credit card information prior to communicating with or even choosing an attorney they'd like to retain.

McCauley acknowledged that technologists and legal innovators may read the Virginia State Bar's opinion as a reactionary clampdown on technology in legal services, but he said the bar association's ethics committee is simply doing its job to protect consumers. “We're not trying to stifle technology or innovation. Our goal is to make sure that online legal services are provided ethically and in compliance with the rules of professional conduct,” he said.

King likewise held his ground, noting that while Avvo Legal Services is certainly open to feedback, it does not intend to kowtow to bar associations simply for the sake of compliance. “We're open to tweaks if they make sense for consumers and lawyers. What we're not really interested in doing is tweaks that make the business model of the rules just because they comply with what we interpret as the unlawful application of the rules of professional conduct,” King noted.