Hello everyone and welcome to this JACPA Ethics Alert which discusses the recent South Carolina Ethics Advisory Opinion which states that lawyers can use “daily deal” websites (i.e. Groupon) which offer services at discounted rates to market legal services. The SC Ethics Opinion number is 11-05 and is available on the South Carolina Bar’s website at www.scbar.org.
The facts set forth in the advisory opinion are as follows: a South Carolina lawyer wanted to use “daily deal” websites that offer products and services at discounted rates to market legal services. The customers/website users purchase a voucher through the website to be redeemed for a discounted product or service, in this case legal services. The purchase price would be split between the website offering the voucher and the lawyer. The lawyer wanted to offer legal services such as the preparation of wills.
The issue as framed by the advisory opinion was whether a lawyer violates the SC 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.
The opinion concluded that the use of “daily deal” websites to sell vouchers to be redeemed for discounted legal services does not violate prohibition of SC Rule 5.4(a) prohibiting the sharing of legal fees; however, the attorney was cautioned that the use of such websites must be in compliance with Rules 7.1 and 7.2 and could lead to violations of several other rules if logistical issues were not appropriately addressed.
The following rationale was used to support the above conclusion: “(t)he fee charged by a company for use of its service (a percentage of the money paid by the customer for the discounted coupon) constitutes the payment of “the reasonable cost of advertisements or communications” permitted under Rule 7.2(c)(1) and not the sharing of a legal fee with a non-lawyer prohibited by Rule 5.4(a). The fact that the charge for this form of advertising service is deducted up front by the company rather than invoiced and then paid from the lawyer’s operating account does not transform the transaction from the payment of advertising costs into an improper fee split. To the extent the payment to the companies of a percentage of the coupon value as a cost of participating in the service does constitute a splitting of a fee with a non-lawyer, the members of this group (committee) believe it would violate the prohibition as written in Rule 5.4(a).”
The opinion also provided a secondary rationale for the conclusion: “the transaction does constitute the splitting of an attorneys’ fee with a non-lawyer, but that the prohibition of fee-splitting in Rule 5.4(a) only applies in situations where such fee-splitting interferes with “the lawyer’s professional independence of judgment” on behalf of the client as stated in comment one to the rule.” If the website does not have the ability to exercise any control over the services which are to be subsequently rendered by the attorney, there would be no violation of Rule 5.4(a) (the functional equivalent to Florida Bar Rule 4-5.4).
The opinion cautioned: “(w)hile the use of “daily deal” websites may not be prohibited by Rule 5.4(a), the Committee is concerned with the effect the use of such websites may have on the reputation of the legal profession if the attorney does not ensure compliance with the Rules of Professional Conduct concerning advertisements. For this reason, the lawyer is cautioned that the use of “daily deal” websites must be in compliance with Rules 7.1 and 7.2. The lawyer is responsible for the communication to potential clients which she asked to be placed on the “daily deal” website. The opinion also stated that the committee did not believe the use of “daily deal” websites would violate the requirements of Rule 7.3 concerning contact with prospective clients, because the lawyer will not be communicating directly with the users of the website and because the lawyer does not know whether the prospective clients who may use the website will be in need of legal services in a particular matter.
Finally, the opinion stated: “(t)he lawyer is further cautioned that various other logistical issues should be addressed by an attorney using “daily deal” websites to prevent a violation of the Rules of Professional Conduct. For example, the lawyer must ensure that she complies with Rule 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. Further, the lawyer must ensure that she is in compliance with Rule 1.15(c) which requires unearned fees to be deposited into a client trust account until the fees are actually earned. If a consumer purchases a voucher from a “daily deal” website and the lawyer is paid a percentage of the purchase price prior to rendering any services, then the compensation paid to the lawyer may be considered an unearned fee. Lastly, the lawyer must address the logistical issue of how she will handle conflict of interest situations that may arise under Rules 1.7 and 1.9.”
Bottom line: This is an opinion of the South Carolina Ethics Committee and does not specifically address Florida Bar Rules. In addition, the opinion sets forth many caveats (i.e. “red flags”) related to this type of activity. It is also not at all clear whether this activity would be permitted under the Florida Bar Rules or whether it would even be worth the effort considering all of the caveats.
…be careful out there and have a great weekend!