State Bar of Arizona Ethics Opinions
98-03: Advertising and Solicitation; Lawyer Referral Service
This opinion discusses a law firm and a marketing agency entering into a marketing services agreement. [ERs 7.1, 7.3] Would the proposed marketing services agreement violate any of the Rules of Professional Conduct?
2. Do the Rules permit a lawyer to purchase a list of customers from a towing company?
A law firm and a marketing agency wish to enter into a marketing services agreement (the "Agreement"). The marketing agency also provides services for individuals who have been involved in car accidents, including handling salvage claims, towing and storage of vehicles, arranging for rental cars, and referrals to doctors and chiropractors on request.
Under the Agreement, the law firm pays a fixed, monthly "marketing services fee" and participates with other law firms in the same "marketing area." In exchange, the marketing agency provides "marketing designed . . . to respond to inquiries from injured persons desiring professional legal assistance and/or advice to purchase legal services." Agreement at 3.
The communications by the marketing agency under the Agreement are limited to providing the law firm's name and brochure "to those individuals who specifically request the name of a licensed attorney experienced in personal injury litigation" in the designated marketing area. Id. The Agreement provides that the marketing agency will not screen or interview the individuals, make any judgments or recommendations as to whether an individual should seek counsel, give any legal advice, compare the law firm to other law firms, charge any fee to the individual for providing the law firm's name and brochure, or "[m]ake any false or misleading statements concerning the services provided" by the law firm. Agreement at 4.
The Agreement further provides that the marketing agency will disclose to each inquiring individual that the individual is free to call the referred law firm or any other lawyer, that none of the other services provided by the marketing agency will be affected by the individual's decision, that all communications between the individual and the law firm or lawyer are strictly confidential, including whether the individual actually contacts the law firm, and that the law firm pays a flat marketing fee in exchange for referrals from the marketing agency.
Alternatively, a lawyer wishes to purchase a customer list from a towing company.
1. Would the proposed marketing services agreement violate any of the Rules of Professional Conduct?
2. Do the Rules permit a lawyer to purchase a list of customers from a towing company?
Relevant Ethical Rules
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ER 7.1 Communications and Advertising concerning a Lawyer's Services
(a) A lawyer shall not make false or misleading communication about the lawyer or the lawyer's services.
(b) All communications and advertising concerning a lawyer's services shall be predominantly informational.
(c) [A] lawyer may advertise services through public media, such as a telephone directory, legal directory, newspaper, or other periodical, billboards and other signs, radio, television and recorded messages the public may access by dialing a telephone number, or through written communication.
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(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 service organization.
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(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 on behalf of his client:
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(3) a lawyer referral service operated, sponsored, or approved by a bar association. A lawyer shall not accept referrals from a lawyer referral service unless the service:
(A) engages in no communication with the public and in no direct contact with prospective clients in a manner that would violate the rules of professional conduct if the communication or contact were made by the lawyer;
(B) receives no fee or charge that constitutes a division or sharing of fees;
(C) refers clients only to lawyers lawfully permitted to practice law in Arizona when the services to be rendered constitute the practice of law in Arizona;
(D) furnishes the state bar on a quarterly basis with the names of all lawyers participating in the service; and
(E) neither represents nor implies to the public that this service is operated, endorsed, sponsored or approved by the state bar, unless the service is operated, endorsed, sponsored or expressly approved by the state bar.
ER 7.3 Direct Contact with Prospective Clients
(a) A lawyer may not solicit professional employment from a prospective client with whom the lawyer has no family or prior professional relationship in person or by telephone, when a motive for the lawyer's doing so is the lawyer's pecuniary gain.
(b) 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. Such written communication shall be clearly marked on the envelope and on the first page of the communication contained in the envelope, as follows:
THIS IS A COMMERCIAL SOLICITATION
Said notification shall be printed in red ink, in all capital letters, in type size at least double the largest type size used in the body of the communication. No other statement shall be placed on the envelope which makes reference to the contents of the solicitation. If the solicitation advertises representation on a contingent or "no recovery, no fee" basis, it shall also state that the client may be liable for costs and expenses.
(c) At the time of dissemination of such written communication, a copy shall be forwarded to the Clerk of the Arizona Supreme Court and the State Bar of Arizona at its Phoenix office. If a written communication identical in content is sent to two or more prospective clients, the lawyer may comply with this requirement by forwarding a single copy together with a list of the names and addresses of persons to whom the written communication was sent.
(d) A lawyer shall not send, or knowingly permit to be sent, on behalf of himself, his firm, his partner, an associate, or any other lawyer affiliated with him or his firm a written communication to a prospective client for the purpose of obtaining professional employment if:
(1) it has been made known to the lawyer that the person does not want to receive such communications from the lawyer;
(2) the communication involves coercion, duress, fraud, overreaching, harassment, intimidation, or undue influence;
(3) the communication contains a false, fraudulent, misleading, deceptive or unfair statement or claim or is otherwise improper under these rules;
(4) the lawyer knows or reasonably should know that the physical, emotional, or mental state of the person makes it unlikely that the person would exercise reasonable judgment in employing a lawyer;
(e) Written communications mailed to prospective clients shall be sent only by regular U.S. mail, not by registered mail or other forms of restricted delivery.
(f) No reference shall be made in the communication to the communication having received any kind of approval from the state bar.
(g) If a contract for representation is mailed with the written communication, the contract shall be marked "sample" in red ink and shall contain the words "do not sign" on the client signature line.
(h) Written communications shall be on letter-sized paper rather than legal-sized paper and shall not be made to resemble legal pleadings or other legal documents. This provision does not preclude the mailing of brochures and pamphlets.
(i) If a lawyer other than the lawyer whose name or signature appears on the communication will actually handle the case or matter or if the case or matter will be referred to another lawyer or law firm, any written communication concerning a specific matter shall include a statement so advising the client.
(j) Any written communication prompted by a specific occurrence involving or affecting the intended recipient of the communication or a family member shall disclose how the lawyer obtained the information prompting the communication. If the information prompting the communication is a public document obtained from a commercial service or subscription, the disclosure shall identify the fact and role of the commercial service or subscription.
(k) A written communication seeking employment by a specific prospective client in a specific matter shall not reveal on the envelope, or on the outside of a self-mailing brochure or pamphlet, the nature of the client's legal problem.
(l) All statements required by this rule shall be displayed conspicuously in type size at least equal to the largest type used in the communication.
(m) The lawyer initiating the communication shall bear the burden of proof regarding the truthfulness of all facts contained in the communication, and shall, upon request of the State Bar or the recipient of the communication, disclose:
(1) how the identity and specific legal need of the potential recipient were discovered; and
(2) how the identity and knowledge of the specific need of the potential recipient were verified by the soliciting lawyer.
1. Participation in Marketing Agreement
ER 7.1(j) prohibits a lawyer from giving anything of value to a person for recommending the lawyer's services, except for the reasonable cost of advertising permitted by the Rules or the "usual charges" of a lawyer referral service. This provision must be read in conjunction with ER 7.1(r)(3), which prohibits a lawyer from being recommended by or cooperating with any lawyer referral service that is not sponsored or approved by a bar association. See, Formal Opinion No. 95-13 at 2 (Dec. 6, 1995).
Since nothing in the proposed Agreement suggests that the proposed service is operated, sponsored or approved by any bar association, the pertinent question is whether it constitutes a "lawyer referral service." If it does, the proposed Agreement would violate ER 7.1(j) and ER 7.3(r).
While for-profit, non-sponsored lawyer referral services are prohibited, "group advertising" is permitted by the Rules even if for-profit and not sponsored or approved by a bar association. Formal Opinion No. 95-13 at 3; Alabama State Bar Ass'n v. R.W. Lynch Co., Inc., 655 So.2d 982 (Ala. 1995). The Committee on the Rules of Professional Conduct has concluded that "[t]he process of ascertaining the caller's legal needs and then matching them to a Member having appropriate 'area of experience' is the distinguishing feature of a referral service." Formal Opinion No. 95-13 at 4. Similarly, a 1989 report of the ABA Standing Committee on Lawyer Referral and Information Service stated that the important function of a lawyer referral service "is to provide the client with an unbiased referral to an attorney who has experience in the area of the law appropriate to the client's need. . . ." R.W. Lynch Co., 655 So.2d at 984 (quoting report).
The proposed Agreement purports to restrict the service provided to dispensing a law firm's name and brochure to inquiring individuals, and states specifically that the marketing agency will not "[s]creen or interview Individuals, or in any way inquire as to the nature, or seriousness, of Individuals' accident." Agreement at 4. However, the Agreement also provides that the marketing agency will provide a firm name and brochure "to those Individuals who specifically request the name of a licensed attorney experienced in personal injury litigation" in the designated area. Agreement at 3 (emphasis added). Moreover, the agency, by virtue of its position as a provider of services to individuals who have been involved in motor vehicle accidents, already will have ascertained the nature of the legal need, and uses that information to refer individuals to a lawyer with experience in that area.
Whether or not the agency conducts any explicit "screening," the effect is the same. Unlike permissible "group advertising," participating lawyers under the proposed Agreement are not the only persons who speak with the consumers, and efforts are made to refer consumers to lawyers with experience in a particular area of the law. Id. at 984 (upholding arrangement where calls to toll-free number advertised on television were forwarded to lawyers based solely on geographic location.)
In addition, despite the statement that marketing under the Agreement "will be directed to the public at large," in fact that marketing is directed to specific individuals, known to have been involved in automobile accidents, who have received other services from the company and who request the name of a personal injury lawyer. Agreement at 3. That is distinct from a group of lawyers sharing the cost of advertising to the general public through newspapers or television.
2. Purchase of Customer List
The other inquiry posed is whether an attorney may purchase a customer list from a towing company. A lawyer's receipt of customer lists from a towing company does not render the towing company a "lawyer referral service" for the purposes of ER 7.1, and is therefore permissible. Formal Opinion No. 92-11 at 3 (Nov. 25 1992) (applying former ER 7.2(g)(3). Where the towing company does not advertise on the lawyer's behalf or personally recommend clients to the lawyer, it also is permissible for the lawyer to pay the towing company a reasonable compensation for the names and addresses of its customers, since the rule of ER 7.1(j) against giving anything of value to a person for recommending a lawyer's services would not apply. Id. at 4 (applying former ER 7.2(c)). The Committee reminds the inquiring attorney that in order to contact any of those customers, the lawyer must follow the requirements set forth in ER 7.3.
The proposed Marketing Services Agreement would create a for-profit lawyer referral service that is neither sponsored nor approved by a bar association. Such a service is prohibited by ER 7.1(j) and ER 7.1(r). It is permissible, however, for a lawyer to purchase a customer list from a towing company, provided that the towing company does not advertise for the lawyer or recommend the lawyer's services and the lawyer communicates with the customers in accordance with ER 7.3.