Lawyers tempted to use Groupon or similar coupon services as lures for clients got reassurance on Oct. 21 that they won’t be violating ethics rules, provided the deals are carefully structured.
An American Bar Association ethics panel gave guidance on what lawyers should do to avoid charges of fee-splitting, conflicts of interest, false advertising and other rule breaches.
Formal Opinion 465, by the ABA Standing Committee on Ethics and Professional Responsibility, does not specifically mention Groupon by name and would apply equally to other coupon services, such as Living Social, Amazon Local and Google Offers.
The panel distinguished what it called coupon deals, in which purchase of a coupon entitles the buyer to a discounted price, from prepaid deals, where the discounted charge is paid up front.
Coupon deals pass muster because the amount paid for them can be seen as an advertising fee, so long as it is a reasonable sum. For example, a coupon that cost $25 might entitle the buyer to a certain number of hours at a 50 percent discount. The marketing company winds up with $25 for its services while the discounted fees are paid directly to the lawyer, who keeps all of the money.
Prepaid services deals, on the other hand, look like fee splitting with non-lawyers. For instance, $1,000 worth of legal services might be bought for $500, with the coupon company sending some of the money to the lawyer and keeping the rest.
Of the states weighing in on the subject, several, including New York, Maryland and North and South Carolina, allow coupons for legal services, while others, such as Alabama, Indiana and Pennsylvania, say they are unethical.
The committee cautioned that money received for prepaid coupons must be deposited into the lawyer’s trust account under the buyer’s name and handled like other advance fees.
And, if the coupon is never redeemed, the money will likely need to be refunded to avoid violating prohibitions on excessive or unreasonable fees, said the committee.
It noted, however, that some states, like Maryland and North Carolina, let lawyers keep the money if the coupon offer explains it is nonrefundable.
On the other hand, New York says that if the buyer decides prior to the coupon’s expiration that she or he does not want to be represented by that lawyer, the buyer can discharge the lawyer for a full refund.
The committee took a different view, saying only the unearned portion need be returned unless there is a conflict of interest or other disqualifying factor.
The committee explained that buying a coupon does not create an attorney-client relationship or turn the buyer into a current or prospective client for purposes of the ethics rules. Before that happens, the lawyer should make sure there is no conflict of interest and that the lawyer is capable of handling the buyer’s matter.
“Therefore, the lawyer’s advertisement and communications should explain that until a consultation takes place with the lawyer, no client-lawyer relationship exists and that such a relationship might never arise if the lawyer determines there is a conflict of interest, the lawyer is unable to provide the required representation, or the lawyer declines representation for some other reason,” wrote the committee.
It also recommended utilizing retainer agreements in jurisdictions that require them and disclosing that in the ad, too.
Lawyers must also be sure that the advertising is not false or misleading regarding such things as what services are covered and the possibility of added fees for more complex matters, as well as expenses such as court costs.
One lawyer known to have tried the coupon model is Craig Redler of St. Louis, who offered through Groupon to draft a will and power of attorney for $99, versus his usual $750 fee. More than 40 deals were sold and all but a handful of the clients upgraded to estate planning services, receiving a $750 credit toward the cost, says Redler. Almost all said they had been meaning to do a will and the Groupon offer spurred them to action, he adds.
Redler, who cleared the idea first with Missouri’s Office of Chief Disciplinary Counsel, sums up the experience as positive. He says that despite the deep discount, he made money and is still obtaining referrals and that the clients benefited. “Everybody came out on top,” he remarks. But he would not do it again, he says, mainly because of the attention it drew, with a flood of calls from curious lawyers.
Groupon spokesman Bill Roberts says, “We’ve offered a handful of these deals in the past,” while declining to disclose specifics, and adding “we expect that number to grow following the ABA opinion.”
Living Social has not yet offered legal services, says spokeswoman Elizabeth Hebda.
Legal ethics professor John Leubsdorf, of Rutgers Law School-Newark, does not see the harm in selling the right to a discount, which he calls not really different from cutting your price. Coupon deals seem “to lie toward the tacky end of the spectrum” but that doesn’t meant they should be forbidden, he says.
Leubsdorf wonders, however, “who would do this and what customers or clients you would get.”
Lake Hopatcong solo William Mack calls the opinion a “step in the right direction but a step that should be taken cautiously.” Coupon deals further the online presence that all law firms now need to have, he says.
Mack does not plan to promote his business law and land use planning practice through coupons but acknowledges it might be a better fit for a practice like real estate or trusts and estates.