State Bar of Arizona Ethics Opinions

96-09: Advertising; Firm Brochures
10/1996

A law firm may provide firm promotional materials to businesses, along with offering a discounted fee to employees of those businesses, without running afoul of ER 7.1, as long as both the employees are not paid anything to recommend the lawyer's services and the employers are not active intermediaries between the employees and the lawyer.  Such promotional materials are presumed to otherwise comply with the general advertising requirements set forth in ER 7.1. [ER 7.1, 7.2, 7.3]

FACTS:[1]

 

The inquiring law firm wants to present printed materials describing its services and a discounted fee schedule to area employers with a request that the written materials be made available to the employees.  The employer would not endorse the law firm or its work, provide or receive a fee relating to distribution of the materials, or otherwise obtain any pecuniary recompense directly relating to the materials.  There would be no suggestion that the employees were obligated or encouraged to use the law firm's services. 

 

The law firm anticipates that an employer would be willing to distribute the materials to procure a "soft benefit" for its employees, which would allow them to obtain legal services at a discounted rate from the law firm as a result of their employment.  The employers might tell their employees that "If you are a consumer of these legal services, you can obtain them from this law firm at a discounted rate because you are an employee of ABC, Inc." This marketing plan would benefit the law firm by creating an advertisement with lower distribution costs that would be directly provided to employed persons in the area.

 

QUESTION PRESENTED

  

1.   May a law firm ethically provide printed materials describing its legal services and a schedule of discounted rates to businesses with the intent that they be distributed to the employees?

 

RELEVANT ETHICAL RULES

 

ER 7.1  Communications Concerning a Lawyer's Services

  

ER 7.1(j)    A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may pay the reasonable cost of advertising or written or recorded communications permitted by these rules and may pay the usual charges of a lawyer referral service or other legal services or other legal service organization.

 

 

* * * * *

 

ER 7.1(r)    A lawyer or his partner or associate or any other lawyer affiliated with him or his firm may be recommended, employed or paid by, or may cooperate with, one of the following offices or organizations that promote the use of his services or those of his partner or associate or any other lawyer affiliated with him or his firm if there is no interference with the exercise of independent professional judgment in behalf of his client:

 

* * * * *

 

(4)  any bona fide organization that recommends, furnishes or pays for legal services to its members or beneficiaries, provided the following conditions are satisfied:

 

                        (A)      such organization, including any affiliate, is so organized and operated that no profit is derived by it from the rendition of legal services by lawyers, and that, if the organization is organized for profit, the legal services are not rendered by lawyers employed, directed, supervised or selected by it, except in connection with matters where such organization bears ultimate liability of its members or beneficiary;

 

                        (B)      neither the lawyer, nor his partner or associate, nor any other lawyer affiliated with him or his firm, nor any non-lawyer, shall have initiated or promoted such organization for the primary purpose of providing financial or other benefit to such lawyer, partner, associate or affiliated lawyer;

 

                        (C)      such organization is not operated for the purpose of procuring legal work or financial benefit for any lawyer as a private practitioner outside of the legal services program of the organization;

 

                        (D)       the member or beneficiary to whom the legal services are furnished, and not such organization, is recognized as the client of the lawyer in the matter;

 

                        (E)       any member or beneficiary who is entitled to have legal services furnished or paid for by the organization may, if such member or beneficiary so desires, select counsel other than that furnished, selected or approved by the organization for the particular matter involved; and the legal service plan of such organization provides appropriate relief for any member or beneficiary who asserts a claim that representation by counsel furnished, selected or approved would be unethical, improper or inadequate under the circumstances of the matter involved and the plan provides an appropriate procedure for seeking such relief;

 

                        (F)       the lawyer does not know or have cause to know that such organization is in violation of applicable laws, rules of court and other legal requirements that govern its legal service operations; and

 

                        (G)      such organization has filed with the appropriate disciplinary authority at least annually a report with respect to its legal service plan, if any, showing its terms, schedule of benefits, subscription charges, agreements with counsel, and financial results of its legal service activities, or if it has failed to do so, the lawyer does not know or have cause to know of such failure.

 

ER 7.2  Legal Service Information

 

                  (a)      Each lawyer or law firm that advertises (including by written solicitation) his, her or its availability to provide legal services shall have a factual statement detailing the background, training and experience of each lawyer or law firm available for delivery upon request to any potential client in a form to be prescribed by the state bar and approved by the court.

 

                  (b)      If the lawyer or law firm claims expertise beyond that possessed by competent and experienced lawyers in general practice in the representation of clients in particular matters or publicly designated or limits the lawyer's or law firm's practice to particular types of cases or clients, the written information shall comply with ER 7.4.

 

                  (c)      Whenever a potential client requests information regarding a lawyer or law firm for the purpose of making a decision regarding employment of the lawyer or law firm:

 

                        (1)        the lawyer or law firm shall promptly furnish (by mail if requested) the written information described in paragraph (a) and (b).

 

                        (2)        the lawyer or law firm may furnish such additional factual information regarding the lawyer or law firm deemed valuable to assist the client.

 

                  (d)      A copy of all information furnished to clients by reason of this rule shall be retained by the lawyer or law firm for a period of three (3) years after last regular use of the information.

 

                  (e)      Upon reasonable request by the State Bar, a lawyer shall promptly provide proof that any statement or claim made in any advertisement or written communication, as well as the information furnished to a prospective client as authorized by these rules, is in compliance with paragraphs (a) and (b) above. 

 

ER 7.3  Direct Contact with Prospective Clients

 

                  (f)      Subject to all of the requirements of these rules concerning communications and advertising and the specific additional requirements of this section, a lawyer may initiate written communication, not involving personal or telephone contact, with persons known to need legal services of the kind provided by the lawyer in a particular matter, for the purpose of obtaining professional employment. . . ..

 

RELEVANT PRIOR ETHICAL OPINIONS

 

Opinion No. 90-07 (August 2, 1990)

Opinion No. 90-09 (August 2, 1990)

Opinion No. 92-05 (March 26, 1992)

Advertising Opinion No. 01-94 (February 22, 1994)

 

OPINION

  

Advertising and communications with organizations that recommend, promote, or facilitate legal services are governed by ER 7.1-7.3.  Various restrictions apply to relationships between organizations and lawyers that promote legal services, particularly where the organization is a for-profit entity which is not independently qualified to provide legal services.  See e.g., Opinion No. 90-09 (participation in "Bankruptcy Attorneys' Trust" referral service unethical). 

 

The first issue presented by this marketing proposal is whether an employer who distributes printed materials implicitly recommends or promotes the law firm's services.  We note that the inquiring law firm has structured the proposal very narrowly to limit the possibility that the employees might believe that their employer is recommending the law firm's services.  The law firm makes clear that the employer will not endorse the law firm or its work, nor will there be any suggestion that the employees are obligated or encouraged to use the law firm's services.  The marketing proposal in some ways resembles a  recommendation  or promotion that may be impermissible or at least be subject to more severe restrictions, but it is also similar to advertisements for other services or products that consumers routinely encounter every day.  A potential client (i.e. the employee) would likely regard the written materials with the same objective scrutiny that is given to other advertisements, including the ubiquitous written and oral communications advertising lawyer services.  On balance, this proposal is not of the sort that demands restrictions beyond the minimum required of any lawyer advertising.  Moreover, the particular subparts of ER 7.1 that impose additional restrictions on lawyer advertising militate against a finding that this proposal is an impermissible recommendation.

 

ER. 7.1(j) provides that a "lawyer shall not give anything of value to a person for recommending the lawyer's services."  On its face, this prohibition is aimed at paid testimonials and referral fees.  The proposal raises the question, however, whether the "soft benefit" provided to an employer under the proposal is a 'thing of value' under ER 7.1(j).  The employer incurs a cost, albeit intangible and likely inconsequential, in distributing the firm's materials, for which it could expect some benefit as quid pro quo.  This benefit might constitute a 'thing of value'.  There are several reasons why this benefit does not confer 'value' as contemplated under ER 7.1(j).

 

First, although one may presume that a soft benefit inures to the employer, in fact the only certain benefit is for the employees.  They alone receive the discounted fee schedule.  The employer may or may not receive the employees' appreciation as a result of distributing the law firm's brochures and discount schedule.

 

Second, even if the employees' appreciation is assumed, such good-will must be considered intangible at best.  It is not an item of value that can be traded for a testimonial in favor of the lawyer.  The absence of any endorsement by the employer further supports this conclusion.  Therefore,  the Committee finds that ER 7.1(j) does not apply.

 

ER 7.1(r) governs organizations that recommend, employ, or work with lawyers to promote their services.  Although most of the organizations governed by ER 7.1(r) are unlike the employers targeted by this proposal (e.g., military legal assistance office or bar association lawyer referral service), subpart (4) describes a "bona fide organization that recommends. . .legal services to its members or beneficiaries."  Subpart (4) of ER 7.1(r) is intended to regulate prepaid legal plans.  Subpart (4) includes seven conditions that must be met before a lawyer can affiliate with this type of organization.  They include annual reports to the State Bar  concerning "the legal service plan."  See also Opinion No. 92-5 (labor union that recommends a limited number of attorneys must file reports).  These requirements govern programmatic legal service delivery plans much more complex and encompassing than simply making written materials available to employees.  More important, they are designed to regulate an organization that proposes to function as an active intermediary between its members/beneficiaries and the lawyer.  This marketing proposal does not impose on or even permit such a role by the employer.[2]  Accordingly, we conclude that ER 7.1(r)(4) does not apply.

 

The direct contact between the law firm and prospective clients, even though the intermediary of the employer, potentially invokes the requirements of ER 7.3, which prohibits telephone and in-person solicitation.  The requirements of ER 7.3 for written solicitation  include specific language, formatting of text, and filing.  See e.g., Advertising Opinion No. 01-94.  ER 7.3 is only applicable to written communications sent to someone with a known "need for legal services of the kind provided by the lawyer in a particular matter" (emphasis added).  We do not believe that ER 7.3 governs this proposal.  As the Arizona Supreme Court noted in its Comment to the 1989 Amendment, this rule principally concerns "direct-mail, targeted solicitation at times of personal tragedy, economic emergency, or other hardships."  The proposal by the inquiring law firm does not involve prospective clients in difficult situations who are known to need legal services.  Of course, if the law firm has knowledge about employees who need specific legal services, then ER 7.3 will apply.

 

Finally, the written materials provided by the law firm must comply with the remaining subparts of ER 7.1.  See Opinion No. 90-07 (discussing brochures distributed by Welcome Wagon, Inc.).  Although the inquiring law firm did not provide a sample of the proposed written materials, we presume that it will comply with the types of information that may be disclosed.  See e.g., ER 7.1(e) (fees) and ER 7.1(g) and (m) (identification of particular lawyers).  We also assume that the law firm will comply with the filing and recordkeeping provisions of ER 7.1 and 7.2.



[1]Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.  ã State Bar of Arizona 1996

 

[2]We do not have facts that would permit an analysis under ER 7.1(r)(4).  While the law firm and employer might comply with several requirements, compliance with the provision that the organization file an annual report with the State Bar offices about its legal services plan would not be likely under the proposed marketing plan.