Plus, lawyer membership in business referral clubs
By Chris Mullmann
With the anticipated adoption by the House of Delegates and the Oregon Supreme Court of a new version of the Model Rules of Professional Conduct in lieu of the current Code of Professional Responsibility, the question has come up whether the rules pertaining to advertising and solicitation will be changing. The simple answer is no, but our court will continue to define how the rules are interpreted in Oregon and the legal ethics committee will continue to be faced with new advertising and solicitation questions by lawyers.
The U.S. Supreme Court first addressed legal advertising in Bates v State Bar of Arizona, 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977), holding that the 1st Amendment protects truthful advertising of available fees for routine legal services, subject to reasonable restrictions on time, place and manner. However, the Court made it clear that states can prohibit false and misleading adverting.
One year later, the Supreme Court had the opportunity to address the issue of in-person solicitation. In Ohralik v Ohio State Bar Association, 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed. 2d 444 (1978), the Court held that a state may discipline a lawyer who solicits clients in person under circumstances likely to create undue pressure on the prospective client.
Rounding out the principal Supreme Court advertising cases is Shapero v Kentucky Bar Association, 486 U.S. 466, 108 S.Ct. 1916, 100 L.Ed. 2d 475 (1988), where the court concluded that First Amendment free speech guarantees prevent a state from imposing a blanket ban on direct mail advertising.
These rules are currently codified in Disciplinary Rule 2-101 to 2-104 and will be retained in Rules 7.1 to 7.4 of the proposed Oregon Rules of Professional Conduct.
Business referral clubs
An example of the legal ethics committee’s interpretation of these rules is the recent OSB Formal Ethics Op. No. 2004-175 concerning "Lawyer Membership in Business Referral Clubs". The opinion addresses the propriety of a lawyer joining a local chapter of a business and professional "networking association." According to its published policies, the purpose of the association is to facilitate the referral of business between members. Attendance at monthly meeting is emphasized and making referrals is a condition of maintaining membership. Members are also required to follow up on referrals although the association’s rules acknowledge that the formal standards of ethics of any profession would supersede the association rules.
The question posed to the legal ethics committee was whether Lawyer A may participate in the activities of the association, and the committee concluded that the lawyer could not do so. The ethics committee found that participation in the association would violate DR 2-103(A) which prohibits a lawyer from compensating or giving anything of value to a person or organization to promote, recommend or secure employment by a client or as a reward for having made a recommendation resulting in employment by a client. The committee also concluded that participation in the association would violate DR 2-105 which prevents a lawyer from referring a client to a nonlawyer with the understanding that the lawyer will receive a fee, commission or anything of value in exchange for the referral.
The opinion holds that a business referral is a thing of value and when Lawyer A commits to refer Lawyer A’s clients to association members, then in making such referrals the lawyer is giving something of value in exchange for the other members to promote, recommend or secure the lawyer’s employment. The quid pro quo nature of the agreement violates the rules. The committee noted:
Business development is a fact of life for modern professionals and the disciplinary rules do not prohibit participation in groups at which lawyers can network and learn about business opportunities. Many civic groups limit membership to one person in an occupation or profession and facilitate networking. The disciplinary rules do not prohibit participation in those groups unless making the referral is a condition of membership and continued participation. Moreover, substance must rule over form and a lawyer cannot join a group such as the Association on the premise that the rules are suspended for lawyers if, in fact, the referral requirements are a condition of membership.
The committee also cautions lawyers to be mindful that even in a group that does not require reciprocal referrals, DR 2-104 prohibits a lawyer from initiating personal contact with a prospective client except in very limited circumstances, and in the case of the association none of the limited circumstances was present. However, if the person making the referral represents that he or she has been expressly authorized by the prospective client to have the lawyer make the contact, the lawyer may contact the prospective client.
Practioners must keep in mind that the advertising and solicitation rules apply to more than yellow pages, newspapers and electronic media. For instance, DR 2-102 specifically addresses firm names and letterheads. DR 2-102(A) allows a lawyer to use professional announcement cards, office signs, letterheads, telephone and electronic directory listings, legal directory listings or other professional notices so long as the information contained therein complies with the rules governing all advertising. DR 2-101.
As to letterheads, a commonly asked question concerns who can be designated "Of Counsel" on a firm’s letterhead. The answer to that question is found in DR 2-102(B), which says a lawyer may be listed as "Of Counsel" if the lawyer has "a continuing professional relationship with a lawyer or law firm, other than as a partner or associate."
One potential problem for lawyers regarding letterheads is the indication that the Oregon lawyer is also licensed to practice in another jurisdiction. For instance, if the lawyer is an active member of the Oregon bar but an inactive member of the California bar, it would be improper to identify on the firm letterhead that the lawyer is also admitted to practice in California. In identifying himself or herself as being admitted in California, lawyer will lead the public to believe that the lawyer can handle a California client’s matter today. While reinstatement to active practice in California may not be difficult, unless the lawyer is an active member of the California bar, the lawyer cannot handle the California matter. Thus, the letterhead is misleading and does not comply with DR 2-101(A) as it omits a statement of fact necessary to make the communication considered as a whole not materially misleading.
A lawyer is also prohibited from permitting his or her name to remain in the name of a law firm or be used by the firm during the time the lawyer is not actively and regularly practicing law as a member of the firm. DR 2-102(C). This rule does not apply to periods of one year or less during which the lawyer is not actively and regularly practicing law as a member of the firm, if it was contemplated that the lawyer would return to active and regular practice with the firm within one year. It also does not apply to lawyers who are retiring, retired or deceased. For further discussion, see OSB Formal Op. No. 2002-169.
Although the rules on advertising and solicitation (both current and proposed) may seem complex and arcane, they are all based on two principles: advertising cannot be false or misleading, and in-person solicitation of persons with whom the lawyer has no prior relationship is prohibited. Remembering those basic standards will generally keep practitioners from violating the rules.
© 2004 Chris Mullmann
ABOUT THE AUTHOR
Chris Mullmann is assistant general counsel and manager of the Client Assistance Office for the Oregon State Bar. He can be reached at (503) 620-0222 or toll-free in Oregon at (800) 452-8260, ext. 392, or by e-mail at firstname.lastname@example.org.