It is undebated that marketing has changed significantly in the past decade. Recently, businesses have employed online coupon services-most notably Groupon. Groupon is a website that charges businesses a fee in exchange for the business to post a coupon.
The Groupon marketing model has been a great success recently for many businesses. So, it is no surprise that Groupons have intrigued law firms and some have begun using them. However, the legal profession is different because of the self-imposed ethical duties that attorneys owe to their clients. Consequently, before utilizing a coupon service, attorneys should take heed to prevent any ethical breaches.
Lawyers Must Excercise Care When Using Coupons
The American Bar Association’s Standing Committee on Ethics and Professional Responsibility has articulated that these coupon deals are permissible. However, the Opinion also expressly states that “a lawyer must exercise great care to ensure that both the offer and any resulting representation comply with all obligations under the Model Rules, including avoiding false or misleading statements and conflicts of interest, providing competent and diligent representation, and appropriately handling all money received”. The Opinion includes permissible ways law firms may structure these deals.
The first is akin to coupon deals, where a law firm may sell a coupon, which a purchaser may use to obtain a discount on future purchased services from the firm. To illustrate, a law firm may post a coupon for $100 that will entitle a purchaser to a sharp discount on the first twenty hours billed. The second is analogous to prepaid services. For example, a law firm may advertise a deal for $1000 where the law firm bills the purchaser at a discount to the next twenty hours. If a law firm chooses to utilize one of these permissible structured deals, they should take care to comply with related duties, more of which are set forth below.
1.1– Competency Requirement:
Under Model Rule 1.1, lawyers must provide clients competent services. One pitfall to generally advertising your services in these deals is that a client may purchase a coupon or prepay for services a law firm is not competent in. For example, a purchaser may buy a coupon for a law firm limiting their practice in commercial litigation; however, the purchaser may approach this firm later on with the desire of having complex estates & trust work done. Absent competence, this work should not be undertaken, and the coupon should exclude work that the attorney cannot competently do.
1.3– Diligent and Prompt Services Requirement:
A lawyer has a duty to provide diligent and prompt services to their clients. One problem ironically is that these services may be too effective. An avalanche of work will cause a struggle with the burden of providing all of their clients with services in a diligent manner.
1.4–Charging Reasonable Fees Requirement:
Law firms should abide by the coupons they provide their clients. It is always unacceptable to pad hours.
1.5 – Safekeeping Property:
Both permissible structured deals are similar in terms of function. However, the semantics of their definitions makes them distinct in terms of ethically imposed obligations. Due to the prepaid definition, funds in this structured deal must remain in a trust account. Otherwise, the attorney will be in breach of Rule 1.5, as these funds are still the clients’. An attorney collecting funds under a coupon deal, which provides a reduction on future payments, is not under this duty. Consequently, coupon deals are a better option for firms, as they will minimize a firm’s risk of breaching this duty.
5.4 – Fee-splitting Prohibition:
Another interesting issue that utilizing these services raises is the prohibition on fee-splitting. Generally, the marketing services collect these deal’s fees upfront from the purchasers. While the ABA has stated that this practice is acceptable, law firms should consult their local state bar ethics committee before utilizing these services because each state may consider this practice a violation of the fee-splitting prohibition.
7.1 –False and/or Misleading Advertising Prohibition:
Attorneys must not have advertisements that include misleading or false statements. This includes statements about: the services the attorney can provide; qualifications; misleading offers; and potential expenses, amongst many other things. The Committee’s recent Opinion expressly identifies this potential ethical pitfall, and states, “[l]awyers who choose to use deal-of-the-day marketing programs must supervise the statements made to ensure their accuracy and ensure that the substantive content does not include misleading or incomplete offers that run afoul of the restrictions contained in the Model Rules.” Consequently, law firms should be prudent in only including statements in their advertisements that are one hundred percent truthful.