Another State Bar Proposes to Allow Online “Daily Deals”

I wrote a couple weeks ago about South Carolina’s new Formal Ethics Opinion 11-05 regarding an attorney’s use of services, such as Groupon, to offer discounts and deals on their legal services.  North Carolina also has a proposed ethics opinion, 2011 Formal Ethics Opinion 10 entitled “Lawyer Advertising on Deal of the Day or Group Coupon Website.”

The proposed NC ethics opinion states:

[A] lawyer may advertise on a website that offers daily discounts to consumers where the website company’s compensation is a percentage of the amount paid to the lawyer if certain disclosures are made and certain conditions are satisfied.

The primary concern with this opinion and the one that was published in South Carolina is that it does not violate Rule 5.4(a) which prohibits sharing of legal fees with nonlawyers. In the case of the website providing the daily deals service to the lawyer for his or her practice, the fees are directly paid by the lawyer for the cost of advertising and does not include any fees paid by the lawyer’s clients obtained through the daily deals service.

Ensuring that this method does not equate to fee-splitting and that the method falls under the normal costs of advertising, the opinion goes on to caution that a few other rules and regulations related to lawyer advertising may arise depending on the website service used and how the attorney uses it to market their services.

To simplify the basic rules laid out in this opinion:

1) Don’t mislead your prospective clients (it has to actually be a discount from your regular fees offered);

2) Disclose the method and remind prospective clients not to act hastily in making decisions about their legal representation (um, isn’t that actually the marketing benefit of a coupon – to create immediacy and prompt the consumer to spend? anyway….) ;

3) Remind them that there may be some reason why you can’t go through with the discount because of conflict of interest, jurisdiction conflict, etc.;

4) Still follow trust accounting rules even if the funds go to the website service first as prepaid fees;

5) If you put a time limit on the discount and the client lets it expire, you can’t go back and charge your regular fee for the same service. You have to return any advance payment on the service or if the client agrees to the higher price, add that advance payment to the revised cost;

6) The legal work provided must still be competent. So if the services exceed what the discount included, you still have the obligation to provide full, competent services to complete the matter for them.

Both this proposed opinion and the one in South Carolina will be interesting to watch to see how attorneys implement them into their marketing strategies for their firms. It would seem like unbundled legal services at fixed fees would work best with these types of daily deal offers. Following best practices for delivering unbundled services, in terms of educating the client about the scope of services and signing a limited scope engagement agreement would protect both the attorney and the client in this situation.

UPDATE: It looks like the New York State Bar Association published an ethics opinion on daily deal sites in December 2011: NYSBA Committee on Professional Ethics Opinion 897 (12/13/11). (HT to NY Attorney Paul Jeff Perez.)