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Three R’s

Three Rs from old neon signs

As the world inches toward something like “reopening,” as current conditions continue to wreak a strange strain on us, maybe we eye a return to pre-pandemic client service and relationship management practices. Maybe we want to treat clients to dinner, or a ballgame, or a show. Maybe we want to focus on three Rs: reopening, relationships, and rejuvenation!

Maybe it’s also time to review what the ethical constraints on all that might be.

Thing of Value

In order to prove a violation of Rule 7.2(b), the ARDC would have to show, clearly and convincingly, that there was a quid pro quo – that the lawyer gave a “thing of value” to compensate someone for a specific referral. Historically, the ARDC has sought to prosecute violations of 7.2(b) in cases where the evidence shows a pattern or practice of paying non-lawyers to steer cases – often, but not always, accident cases – to the lawyer.

Those cases can be difficult to prove when the evidence is circumstantial, although it was in one such case that the Illinois Supreme Court held that “[c]ircumstantial evidence is legal evidence, and neither the commissioners nor this court are required to be naive or impractical in appraising an attorney’s conduct.” In re Krasner, 32 Ill.2d 121, 127 (1965).

Common-Sense Convincing

Krasner creates an evidentiary approach that, while not lowering the clear-and-convincing burden, broadens the concept of what is “convincing.” Under Krasner, a fact-finder – and, ultimately, the Court – can use context and life experience to determine whether a lawyer’s defense to a 7.2(b) charge makes common sense. Krasner’s did not: he simply suggested that the roughly $24,000 in payments he admittedly made to one non-lawyer over 3 years were “gratuities,” not compensation for referrals. That’s $24,000 in late 1950s dollars, which would have the buying power of more than $200,000 today!

Hence the concern with pattern and practice – at least back then. These days, enforcement priorities may have shifted: there has not been a complaint filed alleging a violation of Rule 7.2(b) since 2013.

No De Minimis, But…

Even with the shifts in the disciplinary landscape, and even though the act of taking a client or vendor out for dinner doesn’t approach the lavishly compensated referral churn of Krasner, lawyers must be mindful of the general principles behind Rule 7.2(b): not paying a referrer for referrals (other than compensating a lawyer via an appropriate fee agreement).

Philadelphia Ethics Op. 93-26 (1994) emphasizes that principle, but it comes to perhaps a surprising conclusion. It addresses a law firm that represents union workers taking union representatives to dinner or giving gifts valued less than $100. The opinion notes that although there’s no de minimis exception, the nominal value of gifts supports firm’s position that the gifts are not being given for referrals. It also cautions that the gifts not be given in any way that is or seems connected to the referrals – e.g., by amount or by timing. Where there is no connection between the gifts and the referrals, the opinion concludes that the gifts don’t violate Rule 7.2.

Ethics opinions don’t bind regulators in their own states, or anywhere else, but they do give insight about how we can interpret basic principles and rules based on the Model Rules. The Philadelphia opinion’s analysis – that a nominal expenditure is less likely to be compensation for a referral – is sound, and it makes as much common sense as Krasner’s defense didn’t. So as reopening happens, so too can our efforts to entertain clients and others, without running afoul of the Rules.

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