Category: Regulation

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.

 

The Floyd Abrams Institute for Freedom of Expression is a program at Yale law; yesterday it put on a symposium in New York City on “Commercial Speech and the First Amendment.” It was a surprisingly well-attended event, sold out with a waiting list; probably a couple hundred folks there.

And, of course, squarely in the sweet spot for this blog and my legal interests. I was speaking on a panel, but I found the whole program fascinating. Not only because it’s rare to be in a room with lawyers who have even heard about the commercial speech doctrine – let alone a bunch who know way more about it than I do – but also because the state of the art in understanding commercial speech law is so, so far removed from what attorney regulators do when dealing with commercial speech.

How’s that? Well, the panel before mine featured Floyd Abrams himself, along with a bunch of law professors debating the extent to which the commercial speech doctrine is getting subsumed into the strict scrutiny analysis applicable to most other forms of content-based speech regulation. No one on the panel doubted that the bar for regulating commercial speech was being raised, at least in some ways; the debate was over whether this development is a good thing.

Lawyer regulators? It’s a rare day that you even see an acknowledgement that their ability to regulate is constrained in any meaningful way by the First Amendment.

My co-panelists, Denise Esposito and Rebecca Tushnet, discussed the regulatory challenges facing the FDA and Trademark Office, respectively. In both cases, it’s a matter of generally thoughtful, restrained regulation running into a broader trend of freeing up speech in the margins.

Lawyer regulators? New York’s rules of lawyer advertising run longer than 4,000 words; they know little, if any, restraint (other than what gets forced on them by federal courts).

Judge Alex Kozinski was there, too, cracking wise and noting that the idea that free speech is just for the preservation of self-governance is “bull-pucky.” And Mary Engle from the FTC walked us through how a thoughtful, mature regulator deals with advertising regulation – something that closely approximated the polar opposite of the mechanical approach taken by state advertising regulation. In a statement that would surely shock many state regulators, she noted that many ads don’t need to be labeled “advertisement,” as it is obvious what they are. Gasp!

My only regret is that more folks from the Bars couldn’t be there. Because there is a place for attorney advertising regulation – it just needs to be approached in a manner that respects both the First Amendment rights of those speaking, and the reality that flexible approaches are often preferable to rigid rules.

Last week, I wrote about the decision of the New Jersey Committee on Attorney Advertising doubling down on compelled speech (around attorney “accolade” advertising), despite a recent Third Circuit decision noting that such regulation must be carefully and narrowly crafted in order to not offend the First Amendment.

This week brings news of a similar sort of decision out of Florida. Last year, a federal district court ruled that Florida’s prohibition on attorneys using terms such as “specialist” and “expert” to describe their practices – unless certified as such by the Florida Bar or an ABA-certified entity – violated the First Amendment. I’ve long railed on this issue; such restrictions are either lazy or overly-broad interpretations of the Supreme Court’s Peel decision (which simply noted that states can restrict attorneys from falsely stating that they’ve been certified as specialists).

So did the Florida Bar respond by getting rid of its unconstitutional restriction? Pshaw! Of course not.

Rather, the Bar’s Board of Governors has approved a slight change to its rules, adding a new section (D) to Florida’s Rule of Professional Conduct 4-7.14(a)(4):

(D) the lawyer’s experience and training demonstrate specialized competence in the advertised area of practice that is reasonably comparable to that demonstrated by the standards of the Florida Certification Plan set forth in chapter 6 of these rules and, if the area of claimed specialization or expertise is or falls within an area of practice under the Florida Certification Plan, the advertisement includes a reasonably prominent disclaimer that the lawyer is not board certified in that area of practice by The Florida Bar or another certification program if the lawyer is not board certified in that area of practice.

Translation: if you want to say that you “specialize” or have “expertise” in a particular area, be prepared to demonstrate that you’ve got the goods sufficient to be certified by the Bar  . . . assuming the Bar chose to have a certification in your area. How you’d demonstrate that is anyone’s guess.

And if you want to use one of these words to describe your abilities with respect to an area the Bar DOES certify (which includes such broad areas as “civil trial,” “real estate,” “business litigation,” and “criminal trial”), you’re compelled to include a self-abnegating disclaimer.

Why the Bar didn’t take the Court’s strong direction and just get rid of its rule is anyone’s guess. Nothing would have prevented it from so doing while still aggressively going after any attorney who either a) falsely claimed expertise or b) falsely claimed to be certified as a specialist. Either is a form of misleading advertising, easily sanctioned under even the most basic of attorney advertising rules (ABA Model Rule 7.1, which is, honestly, all the attorney advertising regulation we really need).

Will this new rule survive First Amendment scrutiny? The answer is almost certainly no, for the same reasons the court showed the Bar the back of its hand on the last go-round. But until that happens, Florida lawyers will have to think about regulation even when making commonplace expressions of competence.

h/t Joseph Corsmeier

The New Jersey Supreme Court Committee on Attorney Advertising recently released a “Notice to the Bar” regarding attorney “accolade” advertising: the touting by attorneys of various awards they might have received (including, presumably, their Avvo Ratings).

The Notice goes on at some length regarding the appropriateness of publicizing such awards, and the disclaimer requirements the Committee imposes on any such advertising. What do these disclaimers look like? The Notice contains a helpful example:

For example, a reference to the Super Lawyers accolade should provide:

“Jane Doe was selected to the 2016 Super Lawyers list. The Super Lawyers list is issued by Thomson Reuters. A description of the selection methodology can be found at www.superlawyers.com/about/selection process detail.html. No
aspect of this advertisement has been approved by the Supreme Court of New Jersey.”

So if you’ve been named a “Super Lawyer,” and you want to let people know, the New Jersey bar regulators want you to include a lengthy disclaimer, including a little pursed-lips head-shake noting that Supreme Court does not approve, not one bit.

This is, to put it mildly, ludicrous. It’s also unconstitutional: there are limits to the state’s ability to compel speech in the form of mandatory disclaimers.  And although the way these limits apply is a little more complicated than a straightforward commercial speech analysis, as a general rule compelled disclosures must be necessary to:

• Cure otherwise-misleading advertising, or
• Protect consumers from unwitting harm, or
• Advance some other significant government interest.

Such mandatory disclosure requirements must be, like all commercial speech regulations, narrowly tailored.

Does the New Jersey Supreme Court’s requirement meet any of these requirements? Of course not. There’s nothing misleading about an attorney stating truthfully that a third party has bestowed an award. To the extent anyone wishes to dig into the methodology behind that award, such data is typically available online in a few mouse clicks.  And there’s no significant government interest here; rather, it’s just the Committee’s distaste for accolades, and its attempt to make it too cumbersome to advertise such things.

And here’s the kicker: the Committee really should know better, because a federal court smacked it back on a very similar issue less than two years ago. In finding that the Committee’s disclosure requirements around advertising laudatory quotes from judicial opinions was unconstitutional, the Third Circuit noted:

“Guideline 3 as applied to Dwyer’s accurate quotes from judicial opinions thus violates his First Amendment right to advertise his commercial services. Requiring Dwyer to reprint in full on his firm’s website the opinions noted above is not reasonably related to preventing consumer deception. To the extent the excerpts of these opinions could possibly mislead the public, that potential deception is not clarified by Guideline 3. In any event, what is required by the
Guideline overly burdens Dwyer’s right to advertise.”[ref]Dwyer v. Cappell, 762 F.3d 275, 284 (3rd Cir. 2014).[/ref]

And the rule here re disclaimers on accolade advertising? I’d say it ticks all three boxes: not reasonably related to preventing consumer deception, not directly advancing an important government interest, and overly burdening the right of lawyers to advertise.

It would be nice if the New Jersey Committee on Attorney Advertising learned from its past overreaching. And it would great if it could show some respect for the ability of the public to weigh and discern the meaning of legal accolades. But that kind of balanced thinking doesn’t seem to be in the cards.

h/t ABA Journal