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Focus: Advertising and referral agreements front and centre

Focus on: Litigation
Issues around advertising and referral agreements for personal injury lawyers continue to be in the spotlight as the Law Society of Upper Canada has an ongoing study into the issue and a Florida-based law firm has entered the Ontario market in association with a medical and legal referral business.

As well, the Ontario Court of Appeal is going to hear arguments next month in a closely watched class action over the legality of certain types of contingency fee agreements.

The Florida company 1-800-ASK-GARY describes itself as a medical and legal referral service for automobile accident victims.

Its advertisements are now running on local television stations in southern Ontario.

Merricks Law Group, a firm based in Lutz, Fla., has the exclusive rights to ASK-GARY in Canada, says its founder Howard Merricks.  

“It is a business generation device,” says Merricks, in reference to the association with ASK-GARY.

The Merricks firm opened an office in Mississauga last year and has one lawyer so far, who is licensed to practice in Ontario, as well as three paralegals.  

“We are selective” about the cases it takes so far in Ontario, says Merricks.

It has plans to expand though and he stresses that the firm’s Ontario operations are not a referral service.

“We are a law firm. We do everything in-house,” he says.

Adam Wagman, president of the Ontario Trial Lawyers Association and senior partner at Howie Sacks & Henry LLP, says the association is aware of the Merricks firm and its association with 1-800-ASK-GARY.

He declined to comment specifically about its operations, but he says the rules are clear for lawyers in Ontario that paying or receiving fees from non­licensees such as medical clinics is not permitted.

“It is against the rules to pay a referral fee to a chiropractor,” Wagman explains.

That view is echoed by Merricks, who says there are no referral fees involved in its dealings with non-licensees in Ontario.

“There is no quid pro quo. That is unethical and illegal,” says Merricks.

In response to an inquiry from Law Times on 1-800-ASK-GARY, the Law Society says it does not speak to specific firms or the services that are provided.

A spokesperson for the regulator declined to say whether or not a United States-based firm with lawyers in Ontario is subject to the same referral fee restrictions for non-licensees.

The LSUC established a working group in February 2016 to look at advertising and referral fees issues.

It is expected to produce a report with its findings “in the coming months,” says the spokesperson.

The trial lawyers association has responded to requests from the LSUC for submissions related to advertising and referral fees, and Wagman says it wants the existing Rules of Professional Conduct in this area to be actively enforced.

“We are also suggesting to the law society that the rules need to be clarified and strengthened,” he says.

In the meantime, the structure of contingency fee agreements that also provide for lawyers to receive any of the costs awarded in the litigation will be front and centre next month at the Ontario Court of Appeal.

Neinstein & Associates LLP is appealing a majority Divisional Court decision that certified a class action against the firm as a result of the standard contingency fee agreements it entered into with clients.

The main ruling in Hodge v. Neinstein found that the standard agreement was in breach of the Solicitors Act.

The court heard that the retainer agreement for clients required them to pay 25 per cent of any damages recovered to the firm.

As well, the firm would receive partial indemnity costs, up to 40 per cent of the amount recovered, and be compensated for disbursements.

Section 28.1 (8) of the Solicitors Act states that a contingency fee agreement “shall not” include an award of costs or costs obtained in a settlement, in addition to the agreed fee.

The only exception in the Act is if both the client and lawyer apply to the Superior Court to include costs because of exceptional circumstances.

In the majority decision, certification as a class action will serve as a warning to all lawyers in Ontario, wrote Justice Anne Molloy.

“The fundamental requirements for contingency fee agreements must be followed and those who ignore them do so at their peril,” said Molloy.

The Ontario Trial Lawyers Association is an intervener in the Court of Appeal hearing, which will be heard over two days, beginning on March 8.

The Divisional Court decision issued by Molloy is based on an “unfair and inaccurate” portrayal of the plaintiff-side personal injury bar, states lawyer Paul Pape in written arguments filed with the court on behalf of the association.

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