ETHICS COMMITTEE FORMAL OPINION 465:Daily Deals Can Be Structured to Comply With Ethics Rules
- The ABA Standing Committee on Ethics and Professional Responsibility issued a formal opinion that coupon deals can be structured to comply with the Model Rules of Professional Conduct (the “Model Rules”).
- Critical to this decision is the Committee’s conclusion that the payments that go to group marketing programs do not amount to fee sharing in violation of Model Rule 5.4.
- The Committee identified examples of two ways in which these deals may be structured: 1) In coupon deals, a lawyer could sell a $25 coupon for a 50 percent discount on up to five hours of legal services; and 2) In prepaid deals, a lawyer could charge $500 for up to five hours of legal service, a value of $1,000.
- According to the Committee’s Opinion, the funds collected from coupon deals are not considered legal fees under Rule 1.15 (c).
- Therefore, the amount collected from coupon sales may be deposited into the lawyer’s general account.
- The purchase of the coupon simply established the discount to be applied to the cost of future legal services.
- Prepaid deals are more concerning to the Ethics Committee.
- The ABA Opinion states that the money collected in prepaid deals amounts to advance legal fees – and must be identified by applicable purchaser name and deposited into a trust account.
- The lawyer will have to obtain sufficient information about deal buyers in order to comply with the Model Rules.
COUPON DEAL THAT IS PURCHASED AND NEVER USED:
- The Opinion states that a lawyer can retain the proceeds of a coupon deal, as long as the offer explains that there will be no refunds.
- However, money collected in a prepaid deal will likely need to be refunded to avoid the ban on unreasonable fees.
CONFLICT OF INTEREST:
- According to the Committee’s Opinion, if a lawyer cannot perform legal services because of a conflict of interest or other ethical obstacle, a full refund is required, even if the deal is structured as a coupon.
- Under these circumstances, the lawyer is required to refund the full amount paid, including any fee retained by the marketing organization.
- Groupon-type marketing initiatives are commonly used in many product and service industries.
- Now, lawyers may take advantage of the effective promotional platform.
- But as the Opinion cited here evinces, lawyers must proceed with caution to ensure that their marketing activities are in compliance with the Model Rules and applicable state bar association rules.