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Ethics Opinion

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R-18

July 22, 1994

SYLLABUS

    It is unethical for a lawyer to participate in a legal services marketing scheme where:

  1. The lawyer is contractually obligated to accept cases on a contingency fee basis without first advising the client that lawyers' services may be procured under other fee arrangements;
  2. An advertisement pursuant to the marketing scheme, when taken as a whole, misleads the viewer/listener into believing that there is one identifiable entity that is responsible for the legal services being advertised, when that is not the fact; or
  3. An advertisement pursuant to the marketing scheme, when taken as a whole, misleads the viewer/listener into believing that some appropriate entity has determined that participating lawyers have particular expertise in an area of law when no such evaluation of the lawyers' credentials has been made.

    References: MRPC 6.3(b), 7.1, 7.2(c), 7.3; R-6, R-8; RI-9, RI-17, RI-147; Shapero v. Kentucky Bar Ass'n, 486 US 466 (1988).

TEXT

A for-profit company has created a group television advertising program for law firms which, for the purposes of this opinion, we shall call "Accident Hot Line." A lawyer asks whether it is ethical to participate in the program.

This inquiry was accompanied by a multitude of documents, including, in part, specimen copies of the contract documents proposed between the sponsoring company and the lawyer and a specimen videotape advertisement.

The advertising contract documents state that the purchasers (lawyers and law firms) agree to participate in a group with other law firms only for the purpose of sharing in the cost of advertising legal services. The company is paid an annual advertising service fee and an advertising preparation fee. Seventy percent of the advertising service fee collected from the group purchasers is to be used to purchase advertising for the target area market. There is no statement in the agreement as to the use of the other 30 percent of the fees paid by the lawyers.

The contract states that the advertisements will be designed "to invite offers from injured persons desiring professional legal assistance and/or advice to purchase legal services." The contract states that the advertising would be directed to the public at large. The company agrees to provide exclusive notification to the participating lawyers of names and telephone numbers of persons in the lawyer's zip code area who respond to the advertisements. Calls to the "Accident Hot Line" reach an answering service operated by the advertising company or its agents, and the lawyers agree to accept the telephone responses referred to them by the company and to provide a first consultation at no charge. The company represents that it is acting solely as an advertising agency and answering service on behalf of the lawyers.

One of the contract documents is a form providing that the lawyer has viewed and pre-screened the commercials to be broadcast on television and has approved them and consented to their broadcast. The contract provides that any changes in the commercials will not be made without the lawyer's prior consent, if the consent is required by the lawyer's state rules governing lawyer advertising.

The videotape which was provided is 30 seconds in length. The viewer is encouraged to call the Accident Hot Line. During the presentation, the phrase "Accident Hot Line" is shown on the screen in large block letters and an 800 number, also in large block letters, is shown during all but a few seconds of the advertisement. In much smaller letters, and during the time that an actor is talking to the audience, a message states that, "advertising paid for by sponsoring attorneys" and "not a lawyer referral service" is shown for about three seconds. During the last six seconds of the videotape, the actor encourages the viewers to call the "Accident Hot Line" and a listing identifying the "participating independent law firms and lawyers," a statement regarding the 800 number and referral to a firm from the caller's geographical area, and a statement identifying the participating firms, and the areas they seek, and describing the "Accident Hot Line" with its 800 number are all shown.

The text of the spoken message during the advertisement is as follows:

    "If you have been seriously injured in an accident, the law limits the time you have to take legal action. If you delay you could lose your right to receive payment for your injuries.

    "Call the [Accident Hot Line]. Talk to an attorney near you for free. There are no attorney fees unless you receive payment for your injuries.

    "Time may be running out. Insurance companies have attorneys working hard for them and so should you. Now, before you sign something you don't understand, call the [Accident Hot Line]."

In determining whether the proposal violates ethics rules, we first look at the payment arrangement between the company and the participating lawyers. We are told that 70% of the fee paid by the lawyer to the company purchases advertising for the target area market. Although there is no explanation of the other 30% of the fee, some of its components appear clear: developing the generic ads, tailoring the ads to the particular jurisdiction, shooting and editing the ads, the 800 telephone line, staffing the answering service. MRPC 7.2(c) states:

    "(c) A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may:

      "(i) pay the reasonable cost of advertising or communication permitted by this rule;

      "(ii) participate in and pay the usual charges of, a not-for-profit lawyer referral service or other legal service organization that satisfies the requirements of Rule 6.3(b); and

      "(iii) pay for a law practice in accordance with Rule 1.17."

Thus, a lawyer may pay the reasonable costs of advertising and, beyond advertising costs, may pay the usual charges of a not-for-profit referral service. Otherwise a lawyer may "give nothing of value" for a recommendation of the lawyer's services. There is no doubt that the advertising in this inquiry "recommends the services" of the participating lawyers. Since the company in this inquiry is a for-profit company, we need only determine whether the lawyer's fee to the company includes any cost other than advertising.

It seems clear that a lawyer could establish an 800 telephone line and advertise the phone number directly without contravening MRPC 7.2(c). It also seems clear that a group of lawyers could agree to share an 800 number which is answered by a member of one lawyer's firm, and the cost of the phone line and the staff member apportioned among the group members, without contravening MRPC 7.2(c), although other ethics rules might be triggered by such an arrangement. May a group of lawyers pay for an outside agency to staff their phone line?

As long as the lawyer ensures that the conduct of the outside agency is compatible with the lawyer's ethical obligations, MRPC 5.3, it would appear that such an arrangement would not contravene MRPC 7.2(c).

It is not significant that in this inquiry the company is not hired to answer the lawyers' phone line, but rather to answer the company's phone line and to forward prospective client names to participating lawyers according to zip code. The phone operator exercises no discretion in determining how a call is handled. Therefore the payment relationship does not appear to violate MRPC 7.2(c).

The marketing scheme requires that a lawyer initiate personal contact with the potential client. The terms and conditions of the proposed agreement provide that the lawyer will be notified of the names and telephone numbers of persons who respond to the advertising, requesting legal consultation. MRPC 7.3 states:

    "(a) A lawyer shall not solicit professional employment from a prospective client with whom the lawyer has no family or prior professional relationship when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain. The term "solicit" includes contact in person, by telephone or telegraph, by letter or other writing, or by other communication directed to a specific recipient, but does not include letters addressed or advertising circulares distributed generally to persons not known to need legal services of the kind provided by the lawyer in a particular matter, but who are so situated that they might in general find such services useful, nor does the term "solicit" include "sending truthful and nondeceptive letters to potential clients known to face particular legal problems" as elucidated in Shapero v. Kentucky Bar Ass'n, 486 US 466; 108 S Ct 1916; 100 L Ed 2d 475 (1988).

    "(b) A lawyer shall not solicit professional employment from a prospective client by written or recorded communication or by in-person or telephone contact even when not otherwise prohibited by paragraph (a), if:

      "(1) the prospective client has made known to the lawyer a desire not to be solicited by the lawyer; or

      "(2) the solicitation involves coercion, duress, or harassment."

Under the proposed arrangement the prospective client initiates the contact with the lawyer by calling the 800 number. The ad itself tells the audience to "call to talk to a lawyer." The answering service forwards the names and phone numbers of the prospective clients to the participating lawyers by zip code. It does not violate MRPC 7.3 for a participating lawyer to return the phone call of the prospective client.

Pursuant to the contract between the participating lawyers and the company, the participating lawyers agree to accept the telephone responses referred to them by the company and to provide a first consultation at no charge. We also note that the advertising contemplates only work on a contingency fee basis, as evidenced by the ad audio "there are no attorney fees unless you receive payment for your injuries" and the ad text "contingency fee refers only to attorney fees." There is no provision in the contract which allows the participating lawyer to decline a telephone inquiry because of conflicts of interest, heavy workload, etc. In RI-17 we addressed the propriety of lawyers listing their names in a "collections lawyer network" directory in which each subscribing lawyer agreed to accept collection work on a contingency fee basis. The subscription agreement made no provision for a lawyer and client to negotiate for a fee to be paid on other than a contingency basis, contravening MCR 8.121(E). The Committee concluded that a marketing arrangement whereby participating lawyers are contractually obligated to accept cases on a contingency fee basis, in whole or in principal part, violates the proscription in MCR 8.121(E) against entering into a contingency fee arrangement without first advising the client that lawyers' services may be procured under other fee arrangements.

MRPC 7.1 requires that communications about a lawyer's services not be false, fraudulent, deceptive or misleading. The facts provided indicate that participating lawyers have the opportunity to review advertising before it is used. MRPC 7.1 states:

    "A lawyer may, on the lawyer's own behalf, on behalf of a partner or associate, or on behalf of any other lawyer affiliated with the lawyer or the lawyer's law firm, use or participate in the use of any form of public communication that is not false, fraudulent, misleading, or deceptive. A communication shall not:

      "(a) contain a material misrepresentation of fact or law, or omit a fact necessary to make the statement considered as a whole not materially misleading;

      "(b) be likely to create an unjustified expectation about results the lawyer can achieve, or state or imply that the lawyer can achieve results by means that violate the Rules of Professional Conduct or other law; or

      "(c) compare the lawyers' services with other lawyers' services, unless the comparison can be factually substantiated."

The television advertisement leads a viewer/listener to conclude that there is an existing, real entity called "Accident Hot Line" which has lawyers who handle insurance claims. Although the videotape uses the phrase "participating independent lawyers," the phrase is on the screen for six seconds, is small and is shown with a generous amount of other information. The audio portion clearly states "call the [Hotline] and talk to an attorney near you." In fact, when a viewer calls there is no opportunity to talk to a lawyer - the lawyer will always have to return the call. In fact, the participating lawyers are not associated together in practice in any way. The general presentation is that the "Accident Hot Line" is a single sponsoring entity which employs the listed lawyers or which in is the listed firms' control. That clearly is not the case under the circumstances of this plan and therefore the ad is materially misleading.

To comprehend the entire audio text of the 30-second ad, this Committee reran the tape four times. To read the entire visual text displayed during the 30-second ad, this Committee had to freeze frames of the videotape. A prospective client will not have this luxury. The information concerning participating lawyers appears in the last six seconds of the ad, and does not correct the misleading information presented earlier in the ad and in the audio.

Finally, the lawyer who gets the case is determined by who purchases the territory, not by any competency or experiential criteria. The advertising suggests that the participating lawyers are those with some expertise in "injury" matters capable of balancing the scales against the insurance companies. Yet the materials forwarded by the inquirer do not disclose that any attempt is made to investigate the qualifications of the lawyers who participate; they are simply lawyers willing to take these cases and pay for the advertising. See RI-147 and R-8. Advertising the availability of lawyers with an expertise, without verifying that participating lawyers have such concentration or expertise, violates MRPC 7.1.

A Michigan lawyer may not ethically participate in the "Accident Hot Line" for the various reasons discussed in this opinion.

 
     

 

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