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California Judge Denies Injunction Against LegalMatch

May 8, 2020, 7:13 PM

A California judge on Thursday denied the state bar’s motion for an injunction against legal referral group Legalmatch.com, the latest in a longstanding legal saga that could have broader implications for how such services that pair lawyers and clients are regulated.

The bar sued LegalMatch on May 4, saying it violated state law by operating as a lawyer referral group without a license. The hearing before Judge Ethan Schulman of the Superior Court of California, County of San Francisco was held by phone.

According to the bar’s May 4 complaint, LegalMatch failed to respond to a March 20 directive that it “cease and desist all operations until it is duly certified as a lawyer referral service.”

But LegalMatch’s Chief Operating Officer Anna Ostrovsky’s May 6 declaration to the court said that the group had filed to register as a referral service on March 31. Ostrovsky also said she replied to the directive by email the same day, confirming that LegalMatch would submit the application by March 31.

Vanessa Holton, general counsel for the state bar, said in an email to Bloomberg Law that the bar “takes seriously its responsibility to protect the public from harm caused by uncertified lawyer referral services.”

Holton said that the group is unlawfully operating as a lawyer referral service under the California Business and Professions Code and a recent California appellate court decision.

In Nov. 2019, a California appeals court ruled in Jackson v. LegalMatch.com that LegalMatch engages in referral activity, overturning a lower court ruling. The state’s highest court denied review of the decision in early March.

Holton said that the bar sought a temporary restraining order because LegalMatch refused to comply with the demand that it cease from unlawfully operating pending determination of its application for certification as a lawyer referral service.

Legal Buzz

Lawyers who work on legal ethics issues say the case is about licensing, but also touches on access to justice questions.

This case has created “a lot of buzz” through the legal community, particularly among those who practice in the area of legal ethics, said Kendra L. Basner, a partner with O’Rielly & Roche in San Francisco.

Basner said many are surprised that the California Bar chose to take such an action for the stated purpose of protecting consumers from harm, which is the overriding intent behind the California Business and Professions Code provision in the lawsuit, though no consumer harm has been alleged.

She added that some feel the suit could be interpreted as sending “mixed messages.”

“California has asserted itself as one of the states leading the profession’s efforts to provide better access to justice and to improve the delivery of legal services through technology and innovation,” she said.

For example, the bar created its Task Force on Access Through Innovation of Legal Services, which in March released a report that found “a clear trend to leverage technology and innovative delivery systems to improve access to legal service.”

It recommended that the bar look into amending state rules on referral services to avoid an “unintended chilling effect on a lawyer’s use of technology to provide information about the availability of legal services.”

California has also debated loosening standards around who can own law firms in order to increase access to justice.

Once the court determined in Jackson that LegalMatch was a lawyer referral service, the California Bar had little choice but to enforce its own rules, Ronald C. Minkoff said in an email. Minkoff is chair of Frankfurt Kurnit Klein & Selz’s professional responsibility group in New York.

“But it’s rare that states do,” he added. Many with registration regimes historically have ignored the fact that national lawyer referral services operate in their jurisdiction, Minkoff said.

There are two very different motivations for enforcement, he said. One is because of hostility toward the groups and a desire to regulate them out of business, while the other is simply to enforce state registration rules.

Minkoff said many Americans, even before the coronavirus pandemic, have struggled to make a living and can’t afford lawyers. He called referral services “an important vehicle for closing the so-called ‘justice gap.’”

Lawyer matching is a thriving business according to Lucian T. Pera an attorney at Adams & Reese in Memphis. And there’s a lot of discussion in the legal community on how to regulate the services, he said.

“Even though this case is only about the interpretation of a very specific California statute, the appellate decision and this enforcement action may well affect how regulators everywhere think about what new and existing regulations are really needed,” he said.

The case is State Bar of California v. LegalMatch.com, Cal. Super. Ct., No. CGC20584278, 5/4/20.

To contact the reporter on this story: Melissa Heelan Stanzione in Washington at mstanzione@bloomberglaw.com

To contact the editors responsible for this story: Rebekah Mintzer at rmintzer@bloomberglaw.com; Tom P. Taylor at ttaylor@bloomberglaw.com

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