Groupon and similar deal-of-the-day websites: is their use ethical for a lawyer? It seems so, according to a recent opinion of the Ethics Advisory Committee, but are the risks worth its while?
Groupon is an online company that offers daily deals at local businesses. You can get discounts on manicure service, drinks, local restaurants . . . and maybe on lawyers’ services. Groupon is not unique. There are many websites like Groupon and there are also – even if someone could find it inelegant – lawyers who find it desirable to sell their services in this way. Is that ethical? The issues are obviously fee-splitting and advertising.
In South Carolina the relevant rules are Rule 5.4(a) “A lawyer or law firm shall not share legal fees with a nonlawyer” (save limited exceptions expressly listed) and Rule 7.2(c):
A lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may
(1) pay the reasonable costs of advertisements or communications permitted by this Rule;
(2) pay the usual charges of a legal service plan or a not-for-profit lawyer referral service; and
(3) pay for a law practice in accordance with Rule 1.17.
Proper consideration should also be given to Comment 6 to Rule 7.2.[1]
In the case submitted to the Committee, a lawyer would like to use “daily deal” websites that offer products and services at discounted rates to market her legal services. In particular, lawyer would like to use sites in which users purchase a voucher through the website to be subsequently redeemed for a discounted product or service. The proceeds of the purchase are split between the website offering the voucher and the business at which it is to be redeemed. Lawyer envisions using such websites to offer legal services such as preparation of wills.
Answering the question whether a lawyer violates the Rules of Professional Conduct by contracting with a website to offer vouchers that can be purchased from the website and then subsequently redeemed for discounted legal services such as the preparation of wills, the Committee opined that it does not. “The use of ‘daily deal’ websites to sell vouchers to be redeemed for discounted legal services does not violate the Rule 5.4(a) prohibition on sharing of legal fees.”
Why? According to the Committee, for two reasons: (1) The fee charged by the website for use of its service (i.e. a percentage of the money paid by for the coupon), can be qualified as a payment for the “the reasonable cost of advertisements or communications,” pursuant to Rule 7.2(c)(1). The Committee found that it was not significant whether the fee is deducted up front by the company rather than invoiced and then paid later by lawyer. (2) Even if the fee does constitute fee splitting with a non-lawyer, since the website does not have the ability to exercise any control over the lawyer’s services, the prohibition of fee-splitting in Rule 5.4(a) does not apply because it only applies where a fee-splitting agreement interferes with “the lawyer’s professional independence of judgment”.
The full text is available at http://www.scbar.org…
_________________
Professor Crystal’s Comments:
A great victory of the attorneys on sale? It is hardly so. The Committee cautioned that the use of such websites must be in compliance with Rules 7.1 and 7.2. Easy to do with the coupons website? We would not say that. Rule 7.1 expressly provides that an attorney must ensure that the communication does not contain any false, misleading, deceptive or unfair information about the lawyer or her services. Rule 7.2 provides that “[a] lawyer is responsible for the content of any advertisement or solicitation placed or disseminated by the lawyer and has a duty to review the advertisement or solicitation prior to its dissemination to reasonably ensure its compliance with the Rules of Professional Conduct.”
In addition, the Committee cautioned the lawyer on the possibility of breaching several other rules, i.e. 1.5(b) (requiring the lawyer to disclose the scope of representation and the basis of her fee within a reasonable time of the commencement of representation), Rule 1.15(c) (requiring the lawyer to deposit unearned fees into a client trust account until the fees are actually earned) and Rules 1.7 and 1.9 on conflicts of interest.
It seems to us that it may be quite difficult for a lawyer taking part in a deal-of-the-day website to assure compliance with these rules. And even if, investing attention and time, the compliance is possible, is the investment of energy worth its while to sell your services by coupons?
[1] Lawyers are not permitted to pay others for channeling professional work. Paragraph (c)(1), however, allows a lawyer to pay for advertising and communications permitted by this Rule, including the cost of print directory listings, on-line directory listings, newspaper ads, television and radio airtime, domain-name registrations, sponsorship fees, banner ads, and group advertising. A lawyer may compensate employees, agents and vendors who are engaged to provide marketing or client-development services, such as publicists, public relations personnel, business development staff and website designers. See Rule 5.3 for the duties of lawyers and law firms with respect to the conduct of nonlawyers who prepare marketing materials for them.