Yes, I’d Like to Think Utah is Taking My Advice

Back in January, 2018 I wrote a post titled  “What SHOULD Attorney Advertising Regulation Look Like?”

In that post — one of many in my long string of railings against the inanity of the attorney ad rules — I made my pitch plain:

So let’s gut the Rules. We can start by just flat-out eliminating – entirely – Rules 7.2, 7.4, & 7.5. I’ve never heard a remotely compelling argument for the continued existence of these Rules; they are all just sub-variations on the theme of Rule 7.1.

I would be lying if I said that at the time I wrote those words I had any optimism that a state would take this suggestion seriously — at least within my lifetime. But shockingly, this is almost exactly what the Utah Supreme Court has proposed doing: the complete elimination of Rules 7.2 – 7.5.[ref]In fact, Utah is going even further than what I had proposed, eliminating Rule 7.3 (attorney solicitation) and incorporating its central tenants into a new section of Rule 7.1 prohibiting coercion, duress, or harassment when interacting with prospective clients.[/ref]

In that post I also proposed that Bars adopt controlled regulatory tests:

I know that we as lawyers are trained to “spot issues,” but this training drives way too much tentativeness. Instead of applying the precautionary principle – REGULATE NOW, IN CASE THE BAD THINGS HAPPEN – Bars could try controlled tests.

Say a Bar has gotten a question about an innovative product like Avvo Legal Services. Instead of agonizing for 6-12 months over the potential RPC implications, the Bar could – gasp – have a quick talk with the provider and make a deal: the Bar would explicitly let attorneys know it’s OK to participate, if the provider agrees to feed the Bar data on engagement, complaints, etc.

There would also be the understanding that it would be a time-limited test (enough time to get data sufficient to understand consumer impact) and that the Bar could pull the plug early if results looked super-ugly. A process like this would actually IMPROVE the Bar’s ability to address real consumer harm, while smoothing the road to innovation.

Utah? They’ve created a “regulatory sandbox” — where innovations in legal services delivery, including partnerships with non-lawyers — can be tested empirically rather than being squelched out of the gate. That’s exactly what I had in mind.

Just three years ago, Utah was part of the chorus of head-in-the-sand Bars reflexively telling its members that the modest, consumer-friendly innovation that was Avvo Legal Services couldn’t possibly comply with their Rules.[ref]Utah State Bar Ethics Advisory Opinion No. 17-05.[/ref]

Now they’re leading the charge on making real change to the regulations that are holding back consumer access to justice.

While I’d like to think that Utah was persuaded by my advocacy in this area, what’s really important is that a state is actually doing something about the very real problem of regulatory cruft. 

Comments on these proposed changes are open until July 23, 2020. The usual reactionary voices will surely weigh in with their “sky is falling” rhetoric — it would be great if those who support this kind of meaningful regulatory change let the Utah Supreme Court know they are absolutely on the right track.

ABA Tweaks the Ad Rules

The ABA House of Delegates has now approved a significant number of changes to the attorney advertising rules.

If I sound less than excited about that, it’s because the changes don’t amount to much. As I wrote at the beginning of the year, the amendments fail to address the litany of constitutional, antitrust, and plain bad-for-the-public problems inherent within the Rules.

The rules as adopted DID tweak the definition of “recommendation,” removing an earlier change that would have defined “recommendation” even more broadly than in the current rules. But alas, it keeps the existing definition and adds a caveat that is surely going to cause even more trouble:

A communication contains a recommendation if it endorses or vouches for a lawyer’s credentials, abilities, competence, character, or other professional qualities. Directory listings and group advertisements that list lawyers by practice area, without more, do not constitute impermissible “recommendations.”

Having been through the meat grinder of multiple Bar ethics committees trying to evaluate the “ethics” of innovative new advertising and legal services delivery models, I can guarantee you this: a whole bunch of overbroad and unconstitutional interpretations of the ad rules are going to turn on the “without more” in the comment above.

I know that many of those who pushed these changes through agree that far more change is needed (including the wholesale elimination of Rule 7.2), but believed that the path forward was through this kind of incremental change. They may well be right that this is the best path to getting the Rules where they ultimately need to be. But forgive me if I lack any enthusiasm about these amendments.

Although if anyone wants suggestions about the NEXT set of changes, I’ve already prepared a helpful list.

An Opening for Ad Rule Changes?

At last weekend’s clutch of lawyer meetings in Vancouver – the ABA midyear, NOBC, APRL, etc – I had numerous discussions about the attorney advertising rules, how they represent an obstacle for consumers and lawyers alike, and the potential for change to the rules.

A few consistent themes:

  • We’re past the point of incremental change.
  • Nobody can provide a defense for the continued existence of ABA Model Rule 7.2.
  • An increasing number of states are no longer looking to the ABA for guidance, and are setting their own course in revising their rules.

This may explain why the only voices in opposition to the ABA’s proposed changes to the advertising rules were those calling for more sweeping change:

In closing Gillers asked the about 50 attendees how many support even less restrictive rules than the working draft proposes. Overwhelmingly, a show of hands suggested more changes would be preferred.

I’ve long suggested that there is far more the ABA could do here to protect the public while radically freeing up the advertising rules. Perhaps the weight of informed opinion has finally swung over to this view.

What’s “Reasonable?”

Let’s talk about the worst part of the most unnecessary (and harmful) rule in the ABA’s Model Rules of Professional Conduct: subsection (b)(1) of Rule 7.2.

What, you may ask is subsection (b)(1) of Rule 7.2?

It’s the begrudging caveat, added after Bates v. Arizona found that consumers and attorneys have a First Amendment right in attorney advertising, that attorneys can, in fact, advertise:

“(b) A lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may

(1) pay the reasonable costs of advertisements or communications permitted by this Rule;”

Why the powers-that-be didn’t just get rid of this rule entirely, I will never know – except that attorneys DO love their rules. And let’s face it: both expeditiousness and caution are going to cause us lawyers to gravitate toward incremental carveouts rather than bold rule changes.

But 40+ years post-Bates, these weasel words continue to do their damage, as attorneys and bar regulators agonize over whether a given payment for advertising is “reasonable.”

This, despite the fact that there is no class of professionals less qualified than attorneys to opine intelligently about the reasonableness of business marketing expenses. And despite the fact that it’s a vacant and empty exercise to begin with, as any “unreasonable” charges for marketing will be quickly squashed out by market forces.

But it gets worse.

For in their examination of this issue, virtually all attorneys and ethics committees make the same error out of the gate, assuming that all advertising should cost the same because all costs are the same. They know this because they’ve bought yellow pages or magazine ads, and hey, all paper and ink costs the same, right?

Not only does this logic not apply in the online world – where the cost inputs to providing advertising across different services or practice areas CAN actually vary widely – more importantly, it makes a fundamental error in assuming that the cost of advertising can only be reasonable in relation to the cost it takes to produce and serve such advertising. It’s understandable that attorneys would hold such a narrow view – we are, after all, accustomed to selling our services simply on a markup to our cost – but it is surely NOT the only, or even the best, way to determine whether the cost of advertising is “reasonable.”

Why? Because an attorney who is buying advertising doesn’t care what the costs of providing that advertising are. They don’t care what size of margin is being gleaned. That information is completely irrelevant to them. What they DO care about is the return on investment they get from that advertising. They care about the business they get, and the price they are charged to generate that business. That’s all.

This comes back to a deceptively simple concept that most businesses (except, apparently, lawyers and law firms) have to grapple with: how to price their services. The two primary means are cost-based and value-based pricing. But while it’s important that pricing ultimately cover costs, the more sophisticated and client-focused approach is to look at the value you are driving and price based on that (this hackneyed old anecdote is a useful illustration of the primacy of value over cost-based pricing).

What’s “reasonable?” It’s what someone’s willing to pay, based on the perception of the value delivered. That customer-centric perspective should be the beginning – and end – of any evaluation of the “reasonableness” of charges for attorney advertising.

The Awful, No Good, Rule 7.2

My last couple posts have referred to Model Rule 7.2, and the ABA Ethics Committee’s inexplicable unwillingness to consign it to the dustbin of history. But while I have complained about this benighted Rule, perhaps I haven’t gone deep enough on why it needs to unceremoniously kicked to the curb.

Rule 7.2 is the “specific restrictions on lawyer advertising” rule. And it actually has its origins in the days before lawyers COULD advertise. The core of the Rule predates Bates v. Arizona, the seminal 1977 case that found that lawyers have a First Amendment right to advertise.[ref]Equally important to the decision in Bates was that consumers have a First Amendment right to receive information about legal services. Unduly restricting the free flow of information – including information provided via advertising – compromises these rights.[/ref] And pre-Bates, it stood for the proposition that lawyers could not advertise:

A lawyer shall not give anything of value to a person for recommending the lawyer’s services.

Instead of recognizing Bates for the sea change that it was and canning this Rule, the Bars simply added a begrudging caveat to it:

A lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may

(1) pay the reasonable costs of advertisements or communications permitted by this Rule;

(2) pay the usual charges of a legal service plan or a not-for-profit or qualified lawyer referral service.

The result is predictable: endless lawyerly hand-wringing over whether a statement is a “recommendation,” whether the cost paid for an ad is “reasonable,” or whether a form of advertising is “qualified” and/or a “lawyer referral service.” Avvo has dealt with ALL of these “concerns,” via state bar ethics opinions, with respect to Avvo Legal Services alone.

And it’s all a complete waste of time. The purpose of these rules is to protect the public, not to enable academic debate about whether a rating is a recommendation. The types of activities that the vague language of the Rule are really getting at are those that are already covered by Rule 7.1: false and misleading advertising. Any marketing transgressions that could constitutionally be prohibited by Rule 7.2 are also prohibited by Rule 7.1. So Rule 7.2 doesn’t add any weapons to the Bar’s enforcement arsenal; it just drives over-compliance and makes it harder for the public to get information about legal services.

A rule that serves no purpose other than to work cross-purposes to its stated intent? That’s a rule that should be eliminated – and with haste.

Incremental Changes Proposed to ABA Model Advertising Rules

There’s a lot of congratulatory talk going on about the “bold” changes proposed for the ABA model rules relating to attorney advertising.

And sure, there are things to like in the proposed changes. The new solicitation rule, in particular, focuses more on substance than form, and contains an exception for solicitations made to experienced buyers of business-related legal services. Those are both positive developments.

But bold change? Naw; more like incremental adjustments to a set of rules that should have been gutted 40 years ago when Bates v. Arizona was decided.

My single biggest disappointment is that the ABA ethics committee didn’t take this opportunity to get rid of Rule 7.2.  This is the Rule that contains the cruftiest, most problematic provisions: those relating to “the reasonable cost of advertising,” restrictions on paying for “recommendations,” and limits on use of “lawyer referral services.” These are the sort of vague terms that attorneys and regulators can’t help but over-interpret in ways that harm consumers and lawyers alike.

It’s not like the committee didn’t have reason to look into the utility of Rule 7.2.  The 2015 APRL Report – heavily leaned on by the committee  in making its proposed changes – makes the case persuasively that Rule 7.2 is unnecessary to protect the public, often unconstitutional in its application, and chilling in its effect on consumer access to information about legal services. Yours truly also submitted comments to this effect.

Yet Rule 7.2 remains. And in some ways, the proposed changes make the Rule even worse. For starters, the definition has been changed to try and make the rule applicable to non-advertising “communications” – despite the fact that these rules can only constitutionally limit commercial speech. And then there’s this little gem that’s been added to the Comments:

“A communication contains a recommendation if it expresses, implies or suggests value as to the lawyer’s services.”

Yeah, like THAT’S never gonna be interpreted too broadly.

Again: attorneys have a hard enough time telling when and where these rules apply. Bar regulators and ethics committees persistently over-apply the rules. And for what? There’s no evidence that the specific ad rules benefit the public. Yet instead of streamlining the Rules, instead of cutting back to the core concept – no false or misleading advertising – we’re getting more of the same old thing.

The ABA ethics committee is holding an open hearing at its Vancouver meeting on February 2, and accepting written comments until March 1. If you’d prefer to see some real change here, please make your voice heard.

SF “Soda Warning” Law Nixed

Sugar-water-purveyors and nanny-state-haters alike can cheer: San Francisco’s disclaimer requirement for soda advertisers has been killed off by the Ninth Circuit.

What kind of disclaimer? A prominent box containing this text:

WARNING: Drinking beverages with added
sugar(s) contributes to obesity, diabetes, and
tooth decay. This is a message from the City
and County of San Francisco.

Your tax dollars at work, San Francisco!

I’m not a big soda drinker, but my interest is the compelled speech angle – the attorney ad rules are replete with disclaimer requirements. In fact, the seminal Supreme Court case on compelled speech (Zauderer v. Office of Disciplinary Counsel) involved attorney advertising.

The opinion striking San Francisco’s law (American Beverage Assn. v. City and County of San Francisco) offers a terrific overview of the compelled speech doctrine. And as the opinion notes, the state has wide latitude to compel advertisers to “speak” uncontroversial facts – as long as that compulsion isn’t too burdensome.

In analyzing the San Francisco ordinance, the Ninth Circuit opinion does a neat little flip of Zauderer, where “technically truthful” advertising was found to still be deceptive because it omitted key information:

Applying this principle to disclosure requirements, a literally
true but misleading disclosure creates the possibility of
consumer deception.

Nice! The decision goes on to find that while the the San Francisco warning is technically true – there is a consensus, at the population level, that added sugar contributes to obesity, etc. – it also suggests that this is true at the individual level, “regardless of the quantity consumed or other lifestyle choices.” And as such, the disclaimer is at best a “disputed policy view.” As the court notes:

Zauderer does not allow the state to require corporations to provide one-sided or misleading messages, or to use their own property to convey an antagonistic ideological message.

The court also found that the disclosure requirement was unduly burdensome, as the disclaimer would have comprised 20% of subject advertisements. And, interestingly, it didn’t even bother with a second level of analysis to see if the more exacting intermediate scrutiny test would save San Francisco’s law – it simply gave the law the kibosh.

In any event, the opinion is nice exposition of the constitutional test in this often-confusing area. And what’s more, it offers something for state bar regulators to keep in mind when thinking about the viability of their own disclaimer requirements.

Compelled Speech & Viewpoint Discrimination

First Amendment

So “compelled speech.” The government telling you what you’ve got to say. It’s surprisingly common, and also often uncontroversial. Think nutrition labeling and warning signs.

Other times, not so much.

So what’s the test? Under what circumstances can the government tell us what we’ve got to say?

I’ll tell you what the test SHOULD be: it should be the same “intermediate scrutiny” test that applies to commercial speech restrictions. Meaning that if the state wants to make a business say something, that requirement must be both necessary and narrowly-tailored. Oh, and there’s gotta be some evidence of necessity.

But this area of commercial speech law is a mess.

It all starts with Zauderer v. Office of Disciplinary Counsel, a 1985 Supreme Court case dealing with attorney advertising. One of the key issues in the case – and the one it is best known for – was the legality of a disclaimer requirement for “no recovery, no legal fees” advertising.

The Zauderer court found that the disclaimer rule must only be “reasonably related” to the state’s interest in preventing consumer deception. That’s a much lower bar to clear than the intermediate scrutiny standard. Pretty much any argument the state can make without breaking into uncontrollable laughter will do.

Unfortunately, some nuance has gotten lost since Zauderer was decided. What it seems the court meant – though it was only specifically called out by Justice Brennan in his concurrence – is that the “reasonably related” test is only appropriate when the compelled speech is necessary to avoid consumer deception. Sadly, what this has been taken to mean by many lower courts is that ANY compelled speech need only be justified under the “reasonably related” test.

So this brings me to the Supreme Court’s decision Monday in Matel v. Tam, a case involving the trademark application for the band “The Slants.” It was an important decision, and a unanimous one,[ref]8-0; Justice Gorsuch wasn’t on the bench when the case was heard.[/ref] finding that the government’s denying of “disparaging” trademarks was constitutionally impermissible content regulation. But in a four judge concurrence, Justice Kennedy went even further, delving into the importance of holding the government to a high standard when it dictates a viewpoint, even in the commercial speech context:

“Commercial speech is no exception,” the Court has
explained, to the principle that the First Amendment
“requires heightened scrutiny whenever the government
creates a regulation of speech because of disagreement
with the message it conveys.” Sorrell v. IMS Health Inc.,
564 U. S. 552, 566 (2011) (internal quotation marks omitted).
Unlike content based discrimination, discrimination
based on viewpoint, including a regulation that targets
speech for its offensiveness, remains of serious concern in
the commercial context. See Bolger v. Youngs Drug Products
Corp., 463 U. S. 60, 65, 71–72 (1983).

If the government picking and choosing which trademarks are appropriate is “viewpoint discrimination,” why is the same not true for compelled speech? Or, at least, speech that is compelled outside of those situations where disclosure is necessary to cure otherwise-deceptive marketing messages?

This isn’t an idle question. There are dozens of instances of speech compulsion contained within state lawyer advertising rules, and many – if not most- of them aren’t designed to cure otherwise-deceptive messages. In fact, many require that attorneys publish the state’s view on the efficacy or usefulness of lawyer advertising.[ref]For example, New Jersey requires that any comparative advertising by lawyers state that “No aspect of this advertisement has been approved by the Supreme Court of New Jersey.”[/ref]

Speech that’s compelled outside of health, safety, or a need to cure deceptive marketing is an even starker example of viewpoint discrimination than the picking and choosing of acceptable trademarks. I’d love to see the Supreme Court close this “Zauderer exception” to the commercial speech doctrine sooner rather than later.

Ethics Opinions: A Modest Proposal

A few months back, I ranted about the inanity of Bar ethics opinions – those things that purport to help conscientious attorneys ensure they are fully in compliance with the Rules of Professional Conduct. I’d like to add some nuance to that, and also propose a new approach for bars when it comes to ethics opinions.

Here’s the thing: the extra-careful, bend-over-backward approach of ethics opinions is actually a good thing when it comes to a lot of the ethics rules. As I tell attorneys, if you feel like you’re splitting hairs or facing a close call when it comes to client confidences or protecting your client’s assets, you’re already lost. You should ALWAYS err on the side of caution in those matters. And ethics opinions do a great job of helping attorneys err on the side of caution.

The problem comes when ethics opinions apply this same belt-and-suspenders approach to attorney marketing.

Here’s why: the rules dealing with attorney-as-fiduciary (whether money or confidences) only ratchet one way. There’s no detriment to clients if attorneys are overly-protective; what client WOULDN’T want their attorney to be super-cautious when it came to their money or secrets?  But that’s not the case for attorney marketing. Applying the same level of caution to marketing is actually BAD for consumers, as it deprives them of important information about legal services.

How’s that? Because a major way consumers find information about legal services is via communications from lawyers. And a lot of those are marketing communications. If the conscientious lawyers – the kind who ask for, read, and pay attention to ethics opinions – are pulling back their communications because a Bar ethics opinion took an uber-conservative interpretation of the attorney advertising rules, then consumers have access to less information and fewer innovative service offerings. That’s a bad thing for consumers and lawyers alike.

And it’s not just good policy that a fundamentally different level of caution should pertain to interpreting the RPCs as applied to marketing rules than to the other professional obligations of attorneys. You see, the First Amendment dictates that a wholly separate level of scrutiny apply to regulation in this area. While the state has wide latitude to regulate most matters related to attorney regulation, it has a much higher burden to meet when it comes to interpreting  rules that impact legal marketing (for more on this, see my in-depth discussion of the commercial speech doctrine).

Yet Bar ethics opinions almost never acknowledge this, and persist in taking the same cautious approach regardless of the rule in question. This is no good: it shows a lack of respect for important First Amendment principles, and it is actively harmful to both the profession and the public it serves.

So here’s my modest proposal: Bars should simply stop issuing ethics opinions on questions impacting legal marketing.  To preempt such requests, they could feature a statement like this on their “ethics opinions” pages:

The First Amendment protects the commercial speech of attorneys.  This is not just for the benefit of attorneys. As the US Supreme Court noted in Bates v. Arizona:

“[T}he consumer’s concern for the free flow of commercial speech often may be far keener than his concern for urgent political dialogue. Moreover, significant societal interests are served by such speech. Advertising, though entirely commercial, may often carry information of import to significant issues of the day.  And commercial speech serves to inform the public of the availability, nature, and prices of products and services, and thus performs an indispensable role in the allocation of resources in a free enterprise system.  In short, such speech serves individual and societal interests in assuring informed and reliable decisionmaking.” 433 U.S. 350, 364 (1977) (internal citations removed.)

There is an inevitable tension between the cautionary approach of ethics opinions and the public interest in access to a robust amount of information about legal services. Accordingly, the Bar does not offer advisory ethics opinions on the Rules of Professional Conduct relating to attorney advertising.

This should not be interpreted as a lack of concern for compliance with the Rules in this area. The Bar actively pursues disciplinary action against those attorneys who engage in false, misleading, or otherwise deceptive marketing practices.

Pay-per-Action, Legal Edition

Lawyers can advertise, and they can pay to do so. We’ve known that since Bates v. Arizona, in 1977; this principle is basically the driving force behind this blog. And this right exists notwithstanding the weaselly way it finds expression in the Rules of Professional Conduct:

Rule 7.2

(b): A lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may:

(1) pay the reasonable costs of advertisements or communications permitted by this Rule.

But here’s the thing: advertising has come a long way from the good old days of insertion orders, where advertisers paid based on the size of the anticipated audience, hoping that some small percentage of that audience would buy what they were selling.  Nowadays, you can buy advertising based on intent. Rather than buying the whole basket of impressions seeing your ad, you can pay only for the audience that has actually expressed some interest. Two obvious examples are pay-per-click (most notably used by Google) and pay-per-lead (think online web forms).

It should go without saying, but I’ll say it anyway (as many lawyers are bad at math): advertisers will pay more – orders of magnitude more – for each “click” or “lead” than they would have for each “impression” in the old-school model. Some pay-per-click searches can involve payments in excess of $100 per click. But the reason for the popularity of those techniques is simple: by moving the payment-triggering-event closer to an actual purchase, the advertising expense becomes much more efficient; there’s less risk of waste.

So what about moving the marketing payment all the way over to where someone actually buys? Not just an indication of interest in purchasing – via a click, or a phone call, or filling out a web form – but an honest-to-god, signing-on-the-line-that-is-dotted purchase?

Many businesses pay a healthy percentage of revenue annually, year over year, on marketing alone. Think they’d like to have that payout only triggered by actual purchases? Of course they would. While such certainly would obviate the possibility of improving on those margins via better advertising efficiency (or, more likely, luck) it would also foreclose marketing disasters. Marketing spend would suddenly become predictable, and fully paid for by the resulting transactions.

Traditionally, connecting marketing spend to actual purchases was hard. Usually impossible. And it still is for many types of marketing. However, the internet has made it possible to track this connection, and the online advertising world even has a term for it: “pay-per-action.” Simply put, the advertiser’s cost is based directly on the action of a customer buying the advertiser’s product or service.

Pay-per-action forms the basis for all sorts of online marketing, including online  affiliate marketing. Take, for example, Amazon: the world’s largest online retailer has a robust affiliate program. Online publishers can link to Amazon products, and if someone buys via one of those links, the publisher is paid a small percentage of the transaction. That’s Amazon paying to market its products, one transaction at a time.

What About Attorneys?

When it comes to advertising, attorneys suffer from the hangover of regulations that existed long before Bates v. Arizona and the recognition that attorneys have a first amendment right to advertise. The profession is also hampered by a rigid prohibition on splitting legal fees with non-lawyers.

So, within the rules of most state bars, you have something like the following:

Rule 7.2(b): A lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may (1) pay the reasonable costs of advertisements or communications permitted by this Rule;

along with:

Rule 5.4(a): A lawyer or law firm shall not share legal fees with a nonlawyer.

Graft these together and pay-per-action advertising looks like a rules violation. Having the advertising fee dependent on the earning of a fee feels like “fee sharing,” as well as the giving of something for recommending the lawyer’s services.

But is that right? I don’t think so.

Let’s take the “recommending” bit first. The concept of paying-for-recommending-a-lawyer has a sordid history. It goes back to the “runners” and “cappers” who would hang out in hospitals and courthouses, channeling unsuspecting clients to the grubby attorneys who would pay per sucker delivered. There’s a strong consumer protection element in regulating such person-to-person recommendations.

But general advertising online isn’t “recommending,” and it certainly isn’t person-to-person.  It’s just the giving of value for advertising. The fact that the value itself is determined based on a sale rather than an impression matters not.

Or, at least, it doesn’t matter to consumers. There’s no harm to consumers based on how the marketing fee is determined. And without evidence of consumer harm, competition law and the first amendment dictate that the state not regulate.

As for the “fee splitting” bit, that’s just elevating form over substance. No one would argue that attorneys can’t pay for advertising (or salaries, or rent, or letterhead, etc.) based on the fact that such payments are being “split” out of legal fees earned. So what difference does it make if the payment for marketing is closer – i.e., determined by the earning of a legal fee – or even deducted from the fee earned?

The answer is is that it doesn’t make any difference. From the perspective of consumer harm – again, the only lens through which the RPCs can be lawfully interpreted – having a marketing fee triggered by signing a client is no different than the fact that we allow lawyers to use earned legal fees to buy reams of stationary or new iPhones. It’s just that somehow it feels different because it is conditioned on the actual transaction.

A caveat: this feeling isn’t completely groundless. The reason for having a fee-splitting prohibition in the first place is that some such arrangements have the potential to cause interference with the lawyer’s independent professional judgment.

But we need to separate the mechanics of a fee split from the substance of fee splitting practices that might cause such interference. For example:

  • We permit fee splits with other lawyers, assuming (perhaps naively?) that our fellow lawyers would be above bring such pressures to bear.
  • We permit fee splits in circumstances such as credit card processing fees, where the split is incidental to the transaction, and we know that the credit card processor has no reason whatsoever to interfere with the lawyer’s handling of the case.
  • And, of course, we permit fee splits in the world writ large, where lawyers “split” their fees, in the aggregate, with every person and entity they buy goods and services from.

As mentioned above, it’s critically important, when dealing with these concepts, to always view these rules from the perspective of consumer protection. These rules aren’t supposed to be applied mechanically, but rather in a narrow and thoughtful way that maximizes public access to information.

Or as the Federal Trade Commission recently put it, when commenting on yet another overreaching attorney advertising proposal:

“FTC staff believes consumers receive the greatest benefit when reasonable restrictions on advertising are specifically and narrowly tailored to prevent unfair or deceptive claims while
preserving competition and ensuring consumer access to truthful and non-misleading information. Rules that unnecessarily restrict the dissemination of truthful and non-misleading information are likely to limit competition and harm consumers of legal services.”

Exactly. So enough with the reflexive and overbroad interpretations: let’s free legal services up for pay-per-client advertising.