Oregon State Bar Bulletin — MAY 2011

Bar Counsel
What Hath the Web Wrought?
Advertising in the Internet Age
By Amber Hollister

The Internet age is upon us. Firm websites are becoming stylized works of art. Lawyers are listed on LinkedIn, and big firms share space on Facebook. Lawyers are seeking creative opportunities to harness the power of the Web to market and sell legal services.

A Missouri lawyer recently made headlines in the ABA Journal when he offered his firm’s estate planning services on Groupon in a bid to attract new clients. Groupon is one of many “deal-of-the-day” Internet sites, similar to LivingSocial, ideeli and Woot, which offer customers daily discounts on everything from restaurants to spa services. Typically, deal-of-the-day websites ask customers to register and then give them a limited time to purchase a deal-of-the-day online. After the purchase is made, customers may present a voucher to the participating business as payment. Deal-of-the-day services often keep a portion of the proceeds from each deal sold rather than charge the participating business a fee up front.

Although deal-of-the-day sites can be a powerful marketing tool, lawyers should proceed with care.

Paying for Online Advertising
At the outset, lawyers should recognize that Internet-based advertising is governed by the same rules as more traditional print advertising. Lawyers are generally permitted to pay third parties to communicate information about their services on the Internet as long as the communication does not misrepresent a material fact and is not otherwise materially misleading. RPC 7.1(a)(1)-(2); RPC 7.2(b); see also ABA Formal Ethics Opinion No. 10-457 (Lawyer Websites).

In the context of deal-of-the-day offers, lawyers must accurately describe the proposed services in the online offer, and how they calculated the claimed discount. RPC 7.1(a)(1)-(2). They should be clear about the jurisdictional limits of their practice. See OSB Formal Op No 2005-103. They should also be careful to explain that their ability to provide the services promised depends on whether or not a conflict of interest exists under RPC 1.7 or 1.9.

Oregon RPC 7.1(d) permits a lawyer to pay others to disseminate information about the lawyer’s services, to the extent permitted by RPC 7.2. RPC 7.2(a) provides:

A lawyer may pay the cost of advertisements permitted by these rules and may hire employees or independent contractors to assist as consultants or advisors in marketing a lawyer’s or law firm’s services. A lawyer shall not otherwise compensate or give 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, except as permitted by paragraph (c) [regarding lawyer referral services] or Rule 1.17 [regarding sale of law practice].

RPC 7.2(a) allows lawyers to pay for the actual cost of online advertisements, but not for online recommendations or referrals. OSB Formal Opinion No. 2007-180 explains how advertising may be distinguished from recommendations or referrals: “When services are advertised, the nonlawyer does not physically assist in linking up lawyer and client once the advertising material has been disseminated. When a lawyer’s services are recommended, the nonlawyer intermediary is relied upon to forge the actual attorney and client link.”

Offering services on a deal-of-the-day website will violate Rule 7.2(a) if a lawyer is compensating the website as a reward for having made a recommendation resulting in employment by a client or securing the lawyer’s employment by a client.

Sharing Fees With Online Advertisers
Participating in a deal-of-the day website might also run afoul of the prohibitions against splitting fees with nonlawyers. Lawyers cannot pay advertisers a “share” of the legal fees that result from online advertising. RPC 5.4(a). This is because lawyers are prohibited “from giving a nonlawyer a share of a legal fee in exchange for services related to the obtaining or performance of legal work.” In re Griffith, 304 Or 575, 611, 748 P2d 86 (1978) (interpreting former DR 3-102, which is now RPC 5.4(a)).

Paying for online advertising based on the amount of web user interest does not automatically violate RPC 5.4(a). OSB Formal Opinion 2007-180 distinguishes between an attorney who pays a fixed fee for “hits” or “clicks” on the attorney’s advertising and an attorney who pays a fee based on work derived from an advertisement. The opinion concludes that if the attorney merely pays a fixed fee based on the number of “hits” or “clicks” on the attorney’s Internet ad, the attorney is not engaged in an improper fee-sharing arrangement with a nonattorney. The opinion, however, explains that the conclusion would be different if the fee is related to any particular work derived from the advertising or is based on actual referrals or retained clients. Such an arrangement would be a violation of RPC 7.2(a) and possibly RPC 5.4(a).

Under RPC 5.4(a), whether advertising and selling services on a deal-of-the-day site is permissible will depend to some extent on how a lawyer pays the website for its service. Some deal-of-the-day sites may require the lawyer to allow them to retain a portion of the amount collected or the fee actually earned. According to its website, LivingSocial collects a “commission fee” out of the money collected from the customer. Other deal-of-the-day sites may have different payment procedures. Regardless, offering services on a deal-of-the-day website will violate Rule 5.4(a) if the specific terms of service require the lawyer to pay a fee based on the work derived from the advertising or the number of retained clients.

According to the ABA Journal, the Missouri lawyer who advertised on Groupon maintains that he vetted his participation in Groupon with the Missouri Bar Association. In a sign of the times, the Missouri bar issued a statement through Twitter, clarifying that Missouri ethics authorities have not approved Groupon wholesale. The tweet explained that “Legal Ethics Counsel does not provide advisory opinions on companies” because a “company could operate one way now and differently next week.” The tweet encouraged lawyers to contact the bar for case-by-case advice.

At least one other state bar seems poised to issue an ethics opinion concluding that participating in a deal-of-the-day website would result in illicit fee-sharing. The North Carolina Bar recently issued Draft Proposed Ethics Opinion No. 2010-4, which concludes that where a deal-of-the-day website’s fee is the percentage of each deal sold and the amount paid does not reflect the cost of advertising with the website, it constitutes impermissible fee-sharing with a nonlawyer.

Forming an Attorney-Client Relationship Online
Assuming a lawyer’s participation in a deal-of-the-day website does not amount to illicit fee-sharing or an impermissible referral fee, there are still potential pitfalls. When a customer purchases a deal-of-the-day offer, when and how might that customer become the lawyer’s client?

In Oregon, a lawyer-client relationship can be formed based on a prospective client’s subjective intention to form a lawyer-client relationship if there are objective facts upon which a reasonable person would rely as supporting the existence of a lawyer-client relationship. In re Weidner, 310 Or 757, 770, 801 P2d 828 (1990).

When a lawyer offers to provide legal services at a deal-of-the-day website, and a customer purchases a voucher to pay for those services, the lawyer has laid the foundation for the creation of a lawyer-client relationship. Lawyers should be mindful of the expectations they are creating in the minds of customers. Before undertaking representation, the lawyer will need to determine whether a conflict exists under RPC 1.7 or 1.9. If a conflict prevents a lawyer from providing the services promised, at a minimum, the lawyer will need to issue a refund to the customer. RPC 1.15-1(d).

Even if a lawyer-client relationship is not created, a deal-of-the-day customer “who discusses with a lawyer the possibility of forming a client-lawyer relationship” before or after purchasing a deal is a prospective client who is owed certain duties of confidentiality and loyalty under RPC 1.18.

Conclusion
While the Internet beckons, lawyers should proceed with care to avoid potential ethical traps. Generally, lawyers may advertise and market their services on the Internet in the same way they would utilize print advertising. When doing so, they should ensure all communications about their services are neither false nor misleading, and that they are not sharing their legal fees with nonlawyers. Lawyers should also be cognizant of whether and when they are forming a lawyer-client relationship.

Amber Hollister is deputy general counsel for the Oregon State Bar. She can be reached at (503) 431-6312, or toll-free in Oregon at (800) 452-8260, ext. 312, or by e-mail at ahollister@osbar.org.

Ethics opinions are published and updated on the bar’s website at www.osbar.org/ethics/toc.html.

 

ABOUT THE AUTHOR
Amber Hollister is deputy general counsel for the Oregon State Bar. She can be reached at (503) 431-6312, or toll-free in Oregon at (800) 452-8260, ext. 312, or by e-mail at ahollister@osbar.org.

Ethics opinions are published and updated on the bar’s website here.

An archive of Bar Counsel articles is available here.


© 2011 Amber Hollister

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