Please ensure Javascript is enabled for purposes of website accessibility

‘Deal of the day’ ads may have serious implications

“Deal of the Day” web advertisers offer providers of goods and services access to potential markets. Typically, such services send emails to potential customers who have subscribed or otherwise agreed to receive such ads.

If the potential customer wishes to take advantage of the offer, he purchases a coupon or voucher permitting him to buy the item at a discounted rate. The advertiser shares the cost of the coupon with the service provider.

Generally, if a certain critical mass of sales is not reached, the deal is void. Presumably, providers or advertisers will enjoy a windfall if a purchaser fails to utilize his voucher within the time period specified in the offer.

This marketing model has proven an effective tool for attracting new customers and increasing overall business, and it has caught on quickly across a wide range of industries.

Some lawyers have begun to utilize “deal of the day” advertising. For example, an attorney may agree to draft a simple will for a discount against his normal rate provided the potential client arranges a consultation through the ad.

Applicable rules

Ethics authorities across several states disagree on whether “deal of the day” or similar coupon marketing tools violate the Rules of Professional Conduct.

The arrangement between the advertiser and the attorney implicates several rules.

American Bar Association Rules 1.7-1.10 generally prohibit attorneys from representing clients when doing so would adversely affect the lawyer’s relationship with a present or former client.

Rule 1.15 requires attorneys to hold trust funds in a trust account subject to specific operational and recordkeeping requirements and, ultimately, the oversight of the Board of Bar Overseers.

Rule 5.4 prohibits the sharing of legal fees with a nonlawyer. Attorneys may not pay for referrals, but may “pay the reasonable costs of advertisements” under Rule 7.2(c).

Advertisements must contain no false or misleading communications regarding the lawyer or his services (Rule 7.1), and attorneys may not initiate direct real-time contact with potential clients except under specified circumstances (Rule 7.3).

The New York State Bar Association on Professional Ethics, Opinion 897, and the South Carolina Ethics Advisory Committee, Ethics Advisory Opinion 11-05, have each concluded that this form of advertising does not per se violate their respective Rules of Professional Conduct.

Each authority determined that the arrangement between the advertiser and the attorney was an appropriate means of paying the reasonable cost of the advertisement. The advertiser has no communication with the potential client other than the collection of the fee for the coupon, and merely carries the lawyer’s advertising in much the same manner as a newspaper.

The attorney retains full responsibility for declining any representation that might constitute a conflict of interest, as well as for the content of the advertisement.

If an attorney determines that he is unable to provide the requested representation, or the potential client chooses not to proceed with the representation, then the coupon fee must be returned to the client.

The advertisement must make clear that the offer of representation is subject to terms and conditions, including a conflict check and an initial determination that the services sought by the client are within the attorney’s competence, subject to a full refund.

More recently, the Indiana State Bar Association Legal Ethics Committee, Op. 1 of 2012 concluded that group coupon services are fraught with risk and “probably unethical.”

The Indiana opinion appears to start with the premise that the purchase of the coupon constitutes in itself the formation or attempted formation of an attorney-client relationship.

The committee concluded that the arrangement violated Rule 2.1, which requires the attorney to exercise independent professional judgment and render candid advice. The committee further opined that the arrangement violated Rule 1.15 in that the advertiser, and not the attorney, held the client’s initial retainer.

The committee also found that if the representation did not proceed, the attorney would be required to ensure that the entire fee, including the fee charged by the advertiser, be returned to the prospective client.

Finally, it concluded that the fee charged by the advertiser – potentially 50 percent of the fee charged for the coupon – was not tied to the “reasonable cost” of the advertisement and may violate Rule 7.2(c).

Analytical framework

Although it’s impossible to predict precisely how disciplinary authorities throughout the country will analyze the issue, the varying approaches taken by ethics authorities so far suggest that the specific arrangement between the group-coupon advertiser and the lawyer must be carefully scrutinized.

At minimum, it appears that the attorney must ensure that the advertisement contains no false or misleading statements and includes appropriate disclaimers that merely clicking on the advertisement creates no attorney-client relationship.

The advertisement should make clear that the creation of the attorney-client relationship is subject to a conflict check, and that the fees will be returned if no such relationship arises.

The compensation arrangement with the advertiser must be carefully tied to the reasonable value of the services provided, and, of course, any fee the attorney receives must be accounted for in accord with Rule 1.15.

“Deal of the day” marketing is a creative response to the rapid evolution of information technology. When used appropriately, it can be an effective method of propagating information about available legal services. By offering services at a discounted rate, it promotes the laudable goal of making legal services more widely accessible.

However, that opinion is based on assumptions about the nature of the relationship between attorneys, advertisers and clients. Certain facts may change the analysis. If, for example, the advertising is targeted at particular individuals, or if the advertiser retains the purchase fee until the voucher is redeemed, the marketing scheme may warrant more exacting scrutiny.

Lawyers who engage in marketing through group-coupon sites should carefully analyze their agreements with the advertisers and the applicable rules of professional conduct.

Michael H. Darling is a second-year law student at Northeastern University School of Law and an editor of the Law Journal. Christopher D. Hawkins is a member of the professional liability and construction practice groups at Nelson, Kinder & Mosseau in Manchester, N.H.