State Bar of Arizona Ethics Opinions
92-09: Advertising and Solicitation; Recommendation of Employment
Attorney who owns a collection agency which solicits prospective customers asks whether he may establish an attorney/client relationship with those customers whose collection matters have not been successfully resolved through traditional non-legal collections procedures.
June 22, 1992
The inquiring attorney is the owner of a licensed collection agency. The collection agency obtains clients primarily through media advertising and solicitation. The solicitation done by the owner consists of personal contact with and letters to persons not previously known to the owner whom he believes need debt collection services.
During client solicitation, or after a client is retained, the owner or an employee may describe the owner's credentials and state that the owner is a lawyer. After a client is retained and a relationship is established between the client and the agency, the agency may not be able to collect the debt through traditional non-legal collection procedures.
May the owner, with ethical propriety, establish a separate lawyer-client relationship with the collection agency client and represent the client/plaintiff in a legal action to collect the debt?
ETHICAL RULES INVOLVED
ER 7.1. Communications Concerning a Lawver’s Services
A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services. A communication is false or misleading if it:
(a) contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading;
Comment: This rule governs all communications about a lawyer’s services, including advertising permitted by ER 7.2. Whatever means are used to make known a lawyer’s services, statements about them should be truthful....
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.
There is a potential for abuse inherent in direct solicitation by a lawyer of prospective clients known to need legal services. It subjects the lay person to the private importuning of a trained advocate, in a direct interpersonal encounter. A prospective client often feels overwhelmed by the situation giving rise to the need for legal services, and· may have an impaired capacity for reason, judgment and protective self-interest. Furthermore, the lawyer seeking the retainer is faced with a conflict stemming from the lawyer’s own interest, which may color the advice and representation offered the vulnerable prospect.
The situation is therefore fraught with the possibility of undue influence, intimidation, and over-reaching.
ER 8.4. Misconduct
It is professional misconduct for a lawyer to:
(a) violate or attempt to violate the rules of professional conduct, knowingly assist or induce another to do so, or do so through the acts of another;
As a general rule, lawyers may engage in dual or multiple careers or occupations so long as they are kept appropriately separate and independent. See our Opinion No. 85-5 (April 1, 1985) at 2 ("Simultaneous engagement in a business career and the practice of law is... .permissible under the... Rules of Professional Conduct...."); our Opinion No. 84-16 (November 13, 1984) (practicing lawyer also served as a securities broker and dealer, and principal in a securities sales company); and our Opinion No. 88-05 (October 27, 1988) (practicing lawyer also served as a licensed real estate broker).
A recurring ethical problem for such lawyers, however, arises when the dual careers are not kept separate and independent and, as a result, the non-law business or profession serves as a conduit of clients to the lawyer’s law practice. Under the facts presented, the lawyer is indirectly soliciting legal clients both through his collection agency employees and through his own personal contacts with prospective or retained customers of the collection business.
It is also misleading for the lawyer, through media advertising and solicitation, to hold out his business as a non-legal collection agency. In fact, the collection agency is not limited to non-legal procedures. The owner of the business is a lawyer who is available to do the customer’s legal work when the debt cannot be collected through the agency’s traditional non-legal procedures.
In our Opinion No. 81-24 (August 5, 1981), this committee addressed a similar problem. The inquiring attorney’s wife proposed to set up a collection agency in her name alone as a sole proprietorship financed by community property funds. The agency would operate out of the same building in which the lawyer’s office was located. The lawyer would be retained to file and handle any collection lawsuits for the agency’s customers. We found this arrangement ethically improper under the prior Code of Professional Responsibility because the lawyer had an ownership interest in the agency which would hire him to provide legal services for the agency’s customers, the agency’s solicitation of customers thus being the lawyer’s indirect solicitation of clients.
The result is the same under the present Rules of Professional Conduct. In our Opinion No. 85-5 (April 1, 1985), we held that a lawyer, acting as a salesperson for an insurance company, would violate ER 7.3 by selling prepaid legal insurance where the sales activity would also promote his own availability as a lawyer. We also concluded that the lawyer could not circumvent ER 7.3 by having his wife work as a salesperson for the same company while promoting the lawyer’s services. Other jurisdictions are in accord: Ohio State Bar Informal Opinion 86-5 (5-29-86) (ABA/BNA Lawyer’s Manual on Professional Conduct, p. 901: 6825) [lawyer-trust officer may not use his position with the bank to advertise a private law practice]; Alabama State Bar Opinion 86-101 (10-30-86) (ABA/BNA Lawyer’s Manual, supra, p. 901:1012) [lawyer may take a job as a private investigator but may not solicit legal business for himself or have the detective agency solicit for him]; Cleveland Bar Association Opinion 87-1 (7-31-87) (ABA/BNA Lawyer's Manual, supra, p. 901:6902) [lawyer may not enter into a professional relationship with a medical and marketing consulting firm, advise clients as to their legal requirements, and then accept employment in the matters].
This does not mean that the inquiring attorney may not solicit collection agency customers, as any other collection agency may do, so long as his collection business is operated separately and independently of his law office and practice. However, once the lawyer/owner and his collection agency employees mention the fact that he is a lawyer, or otherwise disclose that the owner is a lawyer and available for legal work, or there is some other nexus between the collection business and his being retained as a lawyer, the Rules of Professional Conduct apply to his conduct as collection agency owner just as if his business were run out of his law office and he were advertising as a law practice that handles collections. He cannot solicit clients either directly or through others, including employees of his non-law business, in violation of ER 7.3. The lawyer would be obligated to make clear that the lawyer-client relationship was completely separate and independent from the lawyer’s business activity in operating the collection agency.
In this regard, it would not make a difference that the collection agency’s customers only discovered that the owner was a lawyer and available for legal work after they became agency customers. The "prior professional relationship" exception to ER 7.3(a) refers to a prior attorney-client relationship, not to a customer-business owner relationship. See our Opinion No. 85-5, supra.
It may often be a question of proximity and degree as to when a lawyer’s dual career or business is, in effect, a feeder for his or her law clients. Under the facts presented, however, it is clear that the lawyer would not be in a position to be retained as a lawyer but for the improper and misleading solicitation by the lawyer and/or his agents. Accordingly, the owner would violate ER 7.1, ER 7.3, and ER 8.4 by establishing a separate lawyer-client relationship with the collection agency client to represent the client as plaintiff in an action to collect the debt.
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.
©State Bar of Arizona 1992
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