Networking groups – Are they ethical?

Posted in Networking

legal networking ethicsReferral sources are the lifeblood of many successful attorneys.  Old standby places to meet new people and establish relationships with referral sources include bar and trade associations, as well as business community organizations (such as Chamber of Commerce or Rotary). Although the missions of these groups vary significantly, referrals are the inevitable reward for active participation

In addition, there are professional networking groups, whose primary missions are to provide members with referrals.  Professionals and business executives gather for breakfast or lunch on a regular basis to exchange information (including contacts) in the hope that these exchanges will lead to referrals.

Sometimes, attorneys suspect that participation in a professional networking group could raise ethical issues. Those suspicions are warranted. If you remember and follow a few guidelines, however, lawyers need not fear joining and participating.

Concerns about Solicitation

The first ethics rule to consider is Rule 7.3, Solicitation of Clients. Under the ABA Model Rule:

(a)  A lawyer shall not by in person, live telephone or real-time electronic contact solicit professional employment when a significant motive for the lawyer doing so is the lawyer’s pecuniary gain, unless the person contacted:

(1)  Is a lawyer; or
(2)  Has a family, close-personal, or prior professional relationship with the lawyer.

In essence, the Rule states that “thou shall not solicit” unless the potential client falls within one of the exceptions above.

A threshold question is whether the Rule even applies to the solicitation of referrals.  It does not. The Rule applies only when soliciting a potential client, not a potential referral source. Nothing in the Rule prohibits a lawyer from telling another person that referrals would be greatly appreciated.

Rule 7.3 only comes into play when a lawyer-member directly solicits other group members for their own specific legal business. While chatting over lunch, can an estate planning lawyer remark to a banker that he would welcome the opportunity to do some estate planning for the banker? Unless the banker falls within one of the exceptions above, the answer is no.

Is the estate planning lawyer somehow disadvantaged by having to play by the ethics Rule? I doubt it. After all, everyone in the professional networking group knows that everyone in attendance has joined with hopes of getting new business. If a lawyer-participant provides a good description of the types of legal services he or she provides – while meeting one-on-one or during a more formal introduction-type ceremony – other members will certainly know that the lawyer would appreciate the business of others in the group. There is hardly a compelling need for the lawyer to directly solicit that business.

Concerns about Advertising and Reciprocity

The trickier ethics rule is Rule 7.2(d), Advertising. The ABA Model Rule states:

A lawyer shall not give anything of value to a person for recommending the lawyer’s services.

Is the exchange of referrals something of value? Probably, if cross-referrals are exclusive and mandatory. In essence, reciprocal referrals would amount to a quid pro quo of payment for services. Furthermore, participation could possibly lead to a referral which would violate the lawyer’s obligation of competence under Rule 1.1 and independent judgment under Rule 1.7.

Finally, professional networking groups with mandatory referral obligations would violate Rule 7.2(b)(4), a provision that specifically addresses reciprocal referral arrangements. It provides that such agreements are allowed only if:

  1. The reciprocal referral agreement is not exclusive, and
  2. The client is informed of the existence and nature of the agreement.

Groups that mandate referrals to members are exclusive and would violate the rule.

Don’t let this post scare you away from joining a networking group. Depending upon your practice area, the quality level of the other members and the time-commitment, such groups can be very useful tools for building your book of business.
Just remember two things. First, remember the solicitation provisions of Rule 7.3. They apply not only to interactions with networking group members, but to all of your interactions. Second, stay away from groups that require referrals to other members.