Money makes the world go ’round, as Joel Grey reminded us in Cabaret. But there is also much worldly value in wisdom, as the philosophers hold. So if you can acquire wisdom about money, it seems you have double-dipped.
Wisdom about money can be found in unexpected places. One place is the Arbitration Advisories published by the State Bar of California. These authoritative memoranda were originally written by the California Bar’s Mandatory Fee Arbitration (MFA) Committee to guide the deliberations of California’s volunteer fee arbitrators in the mandatory fee arbitration program established by Business and Professions Code sections 6200et seq. In 2019, the MFA was integrated into the California Bar’s Committee on Professional Responsibility and Conduct (COPRAC), the body that writes California formal legal ethics opinions.
That integration has been fruitful. The Arbitration Advisories were always meticulous, well-reasoned and well-researched but they are even better now in my view with more legal ethics analysis.
Recently approved Arbitration Advisory 2025-1, effective May 22, shows you what I mean. Entitled “Determination of A Reasonable Fee,” it replaces the valuable prior advisory 1998-03 with the same name with expanded analysis, examples, and ends with a list of 28 relevant questions to be asked in reasonable fee analysis. The Arbitration Advisory is a hidden treasure not only for fee arbitrators, but for practicing lawyers, and lawyers who advise practicing lawyers, about the ethics of fees.
The Arbitration Advisories are not well known but they deserve to be,
Two bills are pending before the California Legislature that would dramatically change the legal landscape regarding lawyer advertising and litigation financing.
SB 37 would add new Business and Professions Code section 6153 that would create a private right of action for violations of current section 6152, which prohibits capping. This bill would allow for statutory damages up to $100,000 per violation, attorney’s fees, injunctive relief, and “any other relief the court deems proper.”
This bill would also add new Business and Professions Code section 6156.5, which would create a private right of action for violations of current section 6155, the statute requiring lawyer referral services to be certified. Remedies would be the same as those in the proposed new section 6153.
The remedies under both new statutes are specifically independent of “any enforcement action or inaction by any governmental agency or official,” i.e., the State Bar of California.
SB 37 would also strengthen the largely ignored statutes in Article 9.5 of the Business and Professions Code, entitled “Legal Advertising,” otherwise known as the “Larry Parker Law.”
Section 6157 would have more precise definitions of “advertise” and “advertisement”, the later to be defined as “any communication, through any written, recorded, or electronic means, whether available to, or directed generally to, members of the public or to a limited group of individuals, that provides information concerning a lawyer or the lawyer’s services for the purpose of encouraging individuals to secure the services of the lawyer or their law firm.“
Section 6157.2 would be amended to prohibit misleading, deceptive, or false statements, words, or phrases regarding a lawyer’s or law firm’s skills, experience, reputation, or record. It would also be amended to require the location or the address of record listed with the State Bar for the lawyer or law firm.
Finally, the section would be amended to provide that the current provision allowing for a civil action enforcement action may be maintained by A consumer who wasmisled by anadvertisement in violation of this section, not just a “person.”
AB 931 takes a different approach. Current Business and Professions Code section 6156 would be renumbered as 6155.1, and the current civil right of action for violating section 6155 would be maintained through Business and Professions Code sections 17206 (unfair competition) or 17536 (false advertising).
However, the proposed new section 6156 would prohibit fee division between a California lawyer and an out-of-state alternative business structure, defined as any entity that provides legal services while allowing non-attorney ownership, management, or decision-making authority. Remedies include statutory damages, attorney’s fees, injunctive relief, and State Bar discipline.
AB 931 would also add an entire article (new number 17) to Chapter 4 of the Business and Professions Code regulating consumer legal funding. Among many other provisions, litigation financing companies would be prohibited from paying or accepting any consideration to any attorney, law firm, or any of their employees for referring a consumer to the company. They would also be prohibited from referring “in furtherance of legal funding” a customer or potential customer to a specific attorney, law firm, or any of their employees, except that they are not prohibited from “referring a consumer to a publically available attorney referral service operated by a local bar association of the State Bar of California.”
SB 37 is the obvious impetus of the State Bar’s renewed interest in enforcing the legal referral service rules. But the question remains: why now?
Both SB 37 and AB 931 are sponsored by the Consumer Attorneys of California (CAOC). CAOC’s director of litigation cites the threat proposed by “tort reform advocates” inflamed by recent advertising touting a $4 billion settlement as evidence of unchecked and unethical attorney advertising, an initiative by the Los Angeles City Attorney’s Office to limit non economic damages (pain and suffering), a move by Uber to limit uninsured and under-insured motorist coverage somehow related to a nasty advertising campaigns seeking potential clients against Uber and advertising abuse occurring after the Pacific Palisades and Eaton fires.
The backdrop against all this is the relatively passive approach that the State Bar of California has taken to advertising and uncertified LRS complaints for the last few decades. The reasons for this approach make sense. The truism is that consumers don’t complain about lawyer advertising. The general public has come to accept it and largely tunes it out amid the noise of the hundreds, if not thousands, of advertising messages they are exposed to every day. Of course, that means that lawyers have to push the boundaries of ethical rules to get attention and boost the signal past the noise. Bigger billboards, louder ads, and the thing that gets everyone’s attention, the promise of big money. The money lure is so powerful that Business and Professions Code section 6158.1(c) makes a “message referring to or implying money received by or for a client in a particular case or cases, or to potential monetary recovery for a prospective client” presumptively misleading in an electronic ad. “A reference to money or monetary recovery includes, but is not limited to, a specific dollar amount, characterization of a sum of money, monetary symbols, or the implication of wealth.” Remember “Larry Parker Got Me $2.1 Million.”
There isn’t much evidence for it but maybe the general public is tired of lawyer advertising. However, there is a whiff of protectionism about these bills, especially the AB 391 provisions on fee division with out-of-state ABSs. The fervor for abolishing Model Rule 5.4 has faded away, leaving Arizona as the only state holding the fort (although some might say holding the bag). Fee division between non- Arizona lawyers and Arizona ABSs have been discussed as a way to extend their reach nationwide. California is still the Golden Goose of mass tort and big-damage personal injury lawyers. The California legislature’s hostility to ABS was well established when it pulled the plug on ATILS in 2022. The prospect of an Arizona ABS flush with non-lawyer investor cash and a big advertising budget can’t be comforting to the established injury lawyers in California.
The scuttlebutt is that both bills will probably be passed. However, their mere pendency is going to influence how the State Bar, a creature of the Legislature after all, approaches its disciplinary priorities. We have already seen that with the proposal of increased enforcement of the LRS rules. Part of that proposal is warning letters to lawyers who participate in an uncertified LRS. Perhaps even before these bills pass, but certainly after, the Office of Chief Trial Counsel may actively seek out potential advertising prosecutions, maybe even utilizing the Larry Parker Law for what might be the first time. It would probably be an uphill battle; the few available case law precedents suggest that only a massive scheme of deception, on par with In Re Morse (1995) 11 Cal. 4th 190 will result in substantial discipline.
This item caught my eye from the Wednesday, March 14 agenda for the State Bar of California Audit Committee meeting:
Here is the PowerPoint deck attached to the agenda item:
The burning question is: why now? Since the enactment of the Certified Legal Referral Service statute (California Business & Professions Code section 6155) in 1987, there has been little enforcement activity by the State Bar of California. There was a flurry of activity in the late 1990s connected with the 1996 plebiscite on the continued existence of the State Bar, when the State Bar felt it had to show lawyers that it was actually doing something for them, not just to them. There was another limited run of enforcement activity after the Jackson v. LegalMatch decision in 2019 (42 Cal.App.5th 760). The Office of Chief Trial Counsel sent letters to a number of attorneys who had accepted referrals from the old uncertified LegalMatch, but no discipline ensued. The State Bar’s civil suit against LegalMatch was “quietly” settled in October 2022.
The natural result of this lack of enforcement activity is that uncertified legal referral services have proliferated like weeds in a vacant lot. Fans of late-night television have probably seen their ads, staged with obvious fake “boiler rooms” staffed by obviously fake lawyers “standing by to take your call!” on obviously fake telephones.
So, again, why now, especially after we know the State Bar of California decided in 2021 that “the Board declined proactive uncertified LRS enforcement activity due to resource limits”? Some have speculated that the public at large is getting genuinely tired of the seeming wall-to-wall attorney advertising that is saturating all media. Color me skeptical. The public has been subjected to this for years now.
I know of no particular Legislative impetus for this new possible enforcement push. If someone out there knows something, please let me know.
For an institution that prides itself on transparency, the State Bar of California sometimes seems to go out of its way to make things more opaque. State Bar Court Review Department decisions are important information. Before March, all Review Department decisions were published on the State Bar Court’s website, easily accessible and nicely categorized into published, publication pending, and non-published decisions. These old decisions are still there, but now there is a link to a list of new Review Department decisions with case numbers that require an expedition into the State Bar Court docket to locate and retrieve the decision. Not a lot of additional work, but enough to cause wonder about what was so difficult or expensive about the old system. But enough of my trivial nitpicking.
The first Review Department decision subject to this treasure hunt is In the Matter of Trimarche, and it is worth the effort. It is a public decision, therefore citeable, pending final action by the California Supreme Court, filed on March 17, 2025.
The respondent lawyer was an experienced environmental lawyer and commercial business litigator for approximately 25 years before embarking on a new venture in April 2015, ominously entitled the “Debt Relief Operation” in the opinion. The Debt Relief Operation had a number of moving parts. At the core was GST Factoring Inc., where Respondent was one of three principals, along with two non-lawyers. The second component was a group of lawyers referred to as the Debt Attorneys, two licensed in California, one in Arizona, and one in Florida. Operational services for the Debt Relief Operation were provided by an entity called Champions Marketing Solutions LLC. Finally, there were a number of debt counselling and debt relief companies, referred to as Affiliates.
GST recruited and contracted with the Affiliates, which were using nationwide telemarketing to solicit potential customers seeking to reduce their student loans. When Affiliates encountered individuals with private student loans, as opposed to federally guaranteed loans, the Affiliates informed them that the Debt Attorneys offered debt relief legal services and referred them to the Debt Attorneys. Trimarche helped edit the telephone scripts the Affiliates used to communicate with potential customers. CMS provided support staff services and acted as the customer service arm of the Debt Relief Operation, including maintaining client communications on behalf of the Debt Attorneys. GST-specifically, Trimarche-also recruited the Debt Attorneys, who generated income for the Debt Relief Operation by providing debt relief services, which were marketed as legal services, to the Affiliate-referred clients.’ Trimarche testified that securing a large number of clients would allow the Debt Attorneys to have greater leverage in negotiating with the lenders. GST entered into an Attorney Factoring Agreement with each Debt Attorney. GST agreed to purchase all accounts arising from providing “legal services to clients in matters relating to student debt elimination.” In effect, the monthly fees paid by the Debt Attorneys’ clients were collected by GST for distribution to the various entities in the Debt Relief Operation.
Trimarche, slip opinion at 3-4. The Debt Relief Operation was successful; from April 2015 to May 2020, GST collected from clients receiving debt relief services approximately $11.8 million in fees, of which Trimarche received around $1.5 million.
But, as you know by now, trouble ensued. It’s shape principally in the form of the Telemarketing Sales Rule (TSR), title 16 Code of Federal Regulations (C.F.R.) part 310, promulgated by the Federal Trade Commission in 2010, at the height of the Loan Mod Wars. The TSR was amended in September and October of 2010 to prohibit the telemarketing of debt relief services requiring an advance fee. The Debt Attorneys fee agreement (written by Trimarche) provided for a contingent fee of 40% of the debt payable in installments up front before any work was done. Trimarch testified at trial that he was not familiar with debt relief services before initiating the Debt Relief Operation, but that he researched the internet to learn about the student debt crisis, and he read various materials to determine strategies that could be useful for the Debt Attorneys in rendering their debt relief services. “Yet, for several years, Trimarche did not inquire about any rules that GST or the Debt Attorneys were obliged to follow when rendering nationwide debt relief services, even when concerns about the legality of the operation were repeatedly brought to his attention.” Trimarche, slip opinion at 7.
Trouble duly arrived in the form of a State Bar disciplinary prosecution of one of the debt attorneys and an action by the late Consumer Financial Protection Bureau, which began a notice of regulatory action and later a Federal Court action that was resolved with a stipulation in July 2020 that the Debt Relief Operation cease operating.
Some years later, the Office of Chief Trial Counsel (OCTC) filed charges against Trimarche in August 2023, alleging that he (1) violated Business and Professions Code section 6068(a) in violating the TSR; (2) violated section 6068(a) in assisting others in violating the TSR; (3) violating California Rule of Professional Conduct 8.4(a) by assisting the Debt Attorneys in violating California Rule 7.1 and 7.3, and violating California Rule 5.5(a) and 5.5(b)by assisting the Debt Attorneys in the the unauthorized practice of law; and, as you might expect, (4) moral turpitude in violation of section 6106, wrapping up all the previous charged misconduct with bright red bow.
Trimarche’s defense to count 1 and count 2 was that he was acting in good faith at most, and made a mistake of law in concluding the TSR was not applicable. “An attorney’s negligent, good faith mistake of law, even when it results in a violation of law, may be a defense to discipline under section 6068, subdivision (a). (See In the Matter of Respondent P (Review Dept. 1993) 2 Cal. State Bar Ct. Rptr. 622, 631-632.) In finding Trimarche culpable, the hearing judge rejected his defense that he held a reasonable, good-faith belief that GST’s Debt Relief Operation did not violate the TSR. Instead, she determined that he willfully blinded himself to the TSR’s potential application to GST’s activities, despite being generally aware that the rule existed.” Trimarche, slip opinion at page 12. The Review Dept. agreed. “These circumstances establish by clear and convincing evidence that from April 24, 2015, to at least September 24, 2019-over four years-Trimarche consciously avoided learning about the rule. (See In the Matter of Carver (Review Dept. 2016) 5 Cal. State Bar Ct. Rptr. 427, 433 [willful blindness is equivalent to actual knowledge].) Thus, his ignorance of the applicable law cannot constitute a reasonable, good faith belief. (In the Matter of McKiernan (Review Dept. 1995) 3 Cal. State Bar Ct. Rptr. 420, 427 [“it is [not] appropriate to reward respondent for his ignorance of his ethical responsibilities”].)
The unusual charging of Count 3 did lead to one small victory for Trimarche. The Review Dept., reversing the hearing judge, found that OCTC failed to provide adequate notice of its allegation that Rule 7.1 was violated by misleading marketing language. However, a second basis for a 7.1 violation was upheld – that the marketing materials failed to disclose how the fees would be divided among the different entities. The Review Dept. also reversed the hearing judge and found that Trimarch did assist the Debt Attorneys in providing services to clients where they were not licensed to practice. Trimarche’s defense that he relied on the Debt Attorneys to obtain their own counsel on the UPL issue was rejected as the same type of “wilful blindness” rejected as a defense to the violations of the TSR in Counts 1 and 2.
Ultimately, the Review Department upheld the hearing judge’s recommendation of one year actual suspension and two years probation with conditions, based on the finding that “Trimarche’s serious misconduct impacted 2,600 clients from across the nation and resulted in the collection of $11.8 million in illegal fees.”
While Trimarche will be ordered to pay a $2,500 sanction and the State Bar’s costs, restitution of some of the $1.5 million that Trimarche received was neither sought nor ordered.
So you could say that Trimarche paid a heavy price for his wilful blindness. On the other hand, his misconduct netted him $1.5 million that he did not have to give back. Cases like this often prompt us to ponder the question of “what was he thinking?” The prospect of a big payday can buy a lot of blindness, and once the cart is rolling downhill, it is hard to stop, especially when there are a few others in the cart with you. Lawyers can be clear-eyed about their client’s risks and astonishingly blind about their own. At the risk of tooting my own horn, and that of my fellow ethics lawyers, that is why we exist.
