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Lawyers should stay away from 'daily deals'

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A question from a northern Indiana attorney about using online group coupons for advertising spurred a legal ethics opinion from the Indiana State Bar Association in March warning lawyers against using such offers as they are “fraught with peril.” Doing so could put a lawyer in violation of Indiana’s Rules of Professsocial-media-other-bars.gifional Conduct.

South Bend attorney Jonathan Watson, who practices at Wandling & Associates, turned to an ISBA listserv for solo and small firms to pose the question: Does anyone know if using Groupon or LivingSocial for an estate package special would run afoul of any ethics rules?

When he posted the question in January 2011, Watson had his own firm offering estate planning, small business legal services, and general litigation. He’s always been up on the latest technology, so when Groupon and other ‘daily deal’ companies started to take off a couple years ago, he considered whether it would be a good way to offer his estate planning services that are flat-fee based.

Online group coupon deals offer customers the chance to purchase goods or services at a discounted rate as long as a certain number of people purchase the same deal. Once that tipping point has been reached, the deal can move forward and people can purchase and redeem their coupons. The business offering the goods or services works with the online coupon company to make the deal happen; both share in the money generated from the sale.
 

ted waggoner Waggoner

Watson said he heard back from several people who were interested in what he found out regarding usage, but no one mentioned considering the issue from an ethics standpoint.

The post caught the eye of members of the ISBA’s Legal Ethics Committee, which decided to write an opinion on the matter. That decision came on the heels of changes to advertising rules, Indiana Rules of Professional Conduct 7.1 to 7.5, that took effect in January 2011. This issue can be considered an advertising one, noted Ted Waggoner, a committee member and attorney with Peterson Waggoner & Perkins in Rochester.


patrick olmstead Olmstead

Patrick Olmstead Jr., an Indianapolis attorney with Hoover Hull and member of the committee, added that after the advertising rules were amended, the Legal Ethics hotline started fielding more calls that were Internet related with questions about creating referral websites and what one can write in a blog.

The committee investigated how one enters into a group coupon arrangement, what kind of promises the attorney makes as the one offering the service, and what kind of promises the companies arranging the online deals make. Once the committee understood the inner workings of the deals, it compared them to the Professional Rules of Conduct and found problems in four different areas, Waggoner said.

Those four areas are the issues of lawyer-client engagement; safekeeping of property; duties to a prospective client; and fee sharing and channeling clients. The committesocial-media-other-bars.gife concluded that a lawyer using a group coupon-style arrangement may violate Professional Conduct Rules 1.15, 1.16, 5.4 and 7.2.

Why be concerned?

At first blush, Olmstead and Waggoner thought that an attorney could use these kinds of deals with no issues, but a little digging changed their minds. The turning point for Olmstead was reading a copy of a Groupon contract.

“It really does concern me that Groupon takes 50 percent no matter what it is,” he said.

It took about nine months for the committee to release its opinion, but Watson came to the conclusion that it was something attorneys couldn’t use about a week after posting his question. He zeroed in on the issue of fee splitting with nonlawyers.

“(A prohibition against) fee sharing with a nonlawyer is intended to prevent law practices from being influenced improperly from outside considerations,” Watson said. “When we advertise on Groupon, sending a percentage of fees to an outside entity could look like its influencing us in some way that’s not proper.”

Rule 5.4 prohibits fee sharing with nonlawyers except in specific circumstances.

“By the process of the advertising companies creating buying groups, the online providers such as the Company are being paid to channel buyers of legal work to the specific lawyer, in violation of the advertising and fee sharing rules,” the ethics opinion states. “We believe this is comparable to the situation analyzed in Opinion 3 of 2008, in which we concluded that there is a prohibition on the fee sharing between a brokerage firm and an attorney.”

The idea of using group coupons for legal services isn’t unique to Indiana’s legal community. Several bar associations across the country have issued their own opinions as to whether one can use online coupon deals. Indiana’s seems the most decisive in its conclusion that the deals just shouldn’t be done based on our Rules of Professional Conduct. In fact, the opinion released by ISBA’s Legal Ethics Committee, warns that “such social media marketing is fraught with peril …”

Waggoner said the opinions from the state bars of South Carolina and New York had some influence, but every state’s Rules of Professional Conduct can differ. The South Carolina bar’s opinion found the use of these coupons doesn’t violate its Rule 5.4(a) prohibition on sharing of legal fees.

Another issue that arises out of these deals is being able to control the content of the coupon advertising. The social media site has its own advertising writers, and the attorney may not have input on what the deal specifies or if it includes the term “advertising material,” Olmstead said.

“Something that simple could get someone disciplined,” he said.

Watson said he thought it was unfortunate that he couldn’t use the online group coupon deal as he thought it would be an interesting way to advertise. Watson, Olmstead and Waggoner are unaware of any Indiana attorneys who have used the service. Last year, a Missouri attorney offered to provide a will and durable power of attorney for $99 through a group coupon deal. Missouri has no formal ethics opinion on the matter, but did give the attorney the go-ahead for the agreement.

Indiana attorneys can utilize coupons or other deals to stand out when marketing their services; they just cannot involve an intermediary like these social media companies. An attorney in California last year offered $99 misdemeanor DUI defense on Cyber Monday to the first three people who contacted him.

While the Indiana opinion warns against using group coupon deals, Olmstead and Waggoner encourage anyone who is considering it to reach out to the ethics committee or other counsel before entering into such an agreement.

“If you really want to do this, let us know and we’ll help guide you through this,” Olmstead said. “I believe in that on a gut level. If you’re trying to make money, make your business more profitable through advertising, part of the cost of doing that is making sure that you’re doing it right.”•
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  • Lawyers should stay away from ' daily deals
    Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.
  • Lawyers should stay away from 'daily deals'
    I agree, I mean after all it simply does not make sense to charge a fixed fee for legal services. Daily deals are here to stay though, no doubt about that, however I have to agree with the poster in saying that daily deals are not suitable for lawyers.

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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