Groupon and Living Social are two companies which represent one of the most popular business models of the internet age. These companies offer discount certificates through online daily deal (“daily deal”) emails usable for products or services at local or national companies. These deals have restrictions on when you can use them, what locations will honor them, and what exactly the deal entitles the owner to. The deal company gives approximately 50% of the proceeds to the participating business and retains the other half. For example, a common deal is to pay $10 for $25 worth of food at a local restaurant or $10 for two movie tickets. The restaurant or movie theatre would get half of the amount paid and the company advertising the daily deal would receive the other half.
While restaurants have played a lead role in taking advantage of daily deal advertising, other industries have quickly followed suit, including personal care, home services, health services, and most recently the legal industry. However, while some legal practitioners are pushing for this consumer savings innovation, some bar associations are reluctant to allow it.
Currently New York, North Carolina, and South Carolina have passed ethics rules allowing lawyers to offer online daily deals to potential clients. However, Alabama and Indiana have rejected such forms of advertising at the expense of legal consumers.
Lawyers’ rules of ethics are the central issues involved in these states’ decisions to allow or disallow daily deals. These issues include excessive advertising costs, sharing legal fees with a non-lawyer, client trust accounts for unearned fees, an inability to perform conflict checks, and an inability of a lawyer to competently and diligently represent a client in their specific legal matter. However, while legal ethics rules about these subjects generally help protect consumers of legal services, the strict application of these rules to online daily deals harms consumers rather than protects them.
The legal ethics concerns of states such as Indiana and Alabama are not valid in this situation. While it is important to lawyers to observe the highest standards of ethics, prohibitive regulations should not be put in place at the expense of consumers when far less restrictive measures are just as effective, and can allow greater access to affordable legal services.
The question of whether or not the cost of daily deals equal excessive advertising has become a contentious point. As stated previously, daily deal companies usually retain approximately 50% of the profits, and some critics consider that a violation of the cost allowed to advertise for legal services. However, lawyers should be free to choose this form of advertisement if they think it will be advantageous, and excessive advertising does not hurt a consumer.
States’ opinions are also split on whether daily deals violate the prohibition on sharing legal fees with a non-lawyer. These limitations are intended to protect the lawyer’s professional independence of judgment. Courts and bar associations are concerned that if someone other than the lawyer receives the lawyer’s fee or salary, the lawyer might place the interests of that third party over the client’s. In the case of daily deals, the third party merely disseminates the advertisement information the lawyer asked to be disseminated. The lawyers making use of these types of advertising owes no more allegiance to them than other lawyers who advertise in phone books or billboard owe to those companies.
Responsive Law believes that since daily deal companies do not have the ability to exercise any control over the services that will eventually be rendered to the consumer, their use should not be considered prohibited fee sharing. South Carolina’s Ethics Advisory Committee agreed with this stance in a recent Advisory Opinion.
Another object that bar associations have to daily deals concerns the obligation of lawyers to have client trust accounts for unearned fees. Client trust accounts are set up by lawyers to keep clients’ funds segregated from the lawyer’s general funds. The purpose behind requiring client trust accounts for unearned fees is to protect the funds from the lawyers’ own finances. ABA Model Rule 1.15 (c) provides that “a lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred.” This assures the client that they will receive any remaining amount that the lawyer does not use or earn. According to ABA Model Rule 1.16(d), when the representation terminates, unearned fees and costs must be refunded to the client.
If a lawyer chooses to engage in daily deal advertising, they should take on the responsibility that if there is an issue with representation, the lawyer will refund the consumer the entire amount the consumer paid to the daily deal company, including any amount that the company kept for profit. Therefore, if the lawyer chooses to offer $400 of legal services on a daily deal website for $200 will only receive $120 due to advertising costs, the lawyer should be required to not only put that $120 in a client trust account but also match it with $80 in order to protect the consumer if no services are provided.
A lawyer’s inability to perform conflict checks prior to the consumer purchasing the deal raises additional ethical concerns. Lawyers perform conflict checks regarding a client’s legal matter prior to creating an attorney-client relationship with the potential client to make sure that they do not currently have cases whose legal interests are adverse to the new client’s interest. While this rule does protect consumers’ interests, online daily deals can still operate within this framework. Disclaimers and restrictions are common in these deals. Lawyers who wish to offer these deals to potential new clients can add disclaimers to the offered deal which explains what conflict checks are, and explain that if a conflict of interest is discovered, the consumer will be refunded any amount paid for the services. As mentioned earlier, this will have to be a cost that the lawyer takes on if they choose to advertise in this way.
States have also discussed the potential inability of a lawyer who receives clients through this method to competently and diligently represent those clients. Lawyers are ethically required to competently and diligently represent a client and to immediately inform the client if they are unable to do so. Normally, clients seek lawyers who claim to have knowledge in a specific legal area which concerns the client. After an initial discussion, the lawyer informs the client whether or not they possess the knowledge and the time to accept the offer to represent. However, with daily deals it is possible that a lawyer who advertises in this fashion may receive clients whom they are unable to represent due to lack of competence or time. However, there are ways in which to prevent any issues regarding competence and diligence with daily deals. Lawyers can specifically list the services which will be included as well as limit the amount of daily deals that they offer or state in the daily deal that it is only valid for certain types of work.
New York, North Carolina, and South Carolina are all heading in the right direction by allowing the legal profession to take advantage of new innovations that benefit consumers without harming the profession. While the issues raised by states that have rejected these innovations represent valid client protection principles when applied to traditional practice, the strict application of traditional rules to new innovations is not always appropriate. Appropriate regulations can be placed on online daily deals that achieve both the goals of increasing affordable legal services to consumers as well as protecting them from misuse of client funds and other lawyer misconduct.
Jen Roy, a law student at the University of the District of Columbia, is a Responsive Law intern.
The ABA House of Delegates approved a new consumer-friendly rule today which will allow lawyers who move to a new state the ability to practice in that jurisdiction for up to a year while seeking bar admission. Responsive Law supports this action and believes that this change will benefit consumers by allowing a greater amount of lawyer mobility, which will give consumers a larger choice in their legal service provider. Moreover, with the approval of this rule, the ABA is adapting, albeit slowly, to the expectations of both consumers and lawyers in today’s mobile society.
Jen Roy, a law student at the University of the District of Columbia, is a Responsive Law intern.
The American Bar Association (“ABA”) Commission on Ethics 20/20 recently requested comments regarding the rules governing lawyers practicing across state lines via internet. Responsive Law suggested to the ABA that opening up the internet for legal services is highly beneficial to consumers and will make the legal system more affordable without sacrificing the accountability that is already present.
Allowing lawyers to practice across state lines via internet is extremely beneficial to consumers. Although it is a relatively new practice, it is one that has great potential for increasing affordable access to the legal system. Online commerce has expanded the availability of goods and services in nearly every industry, particularly for those located far from major cities. People currently use companies such as eBay and Amazon to order products and the availability, convenience, price and safeguards of these companies continuously drive customers to use and reuse their services. Similarly, the legal profession, with its duty to protect access to justice, should support any effort to make the legal industry friendlier to online commerce in the way that successful internet companies already have.
Virtual law practices will improve communication between lawyers and clients. Many computer-savvy people may be more comfortable interacting with a lawyer online than through postal mail or in person. Since the internet does not require simultaneous communication, virtual practices can also expand the number of hours during which lawyers and clients can communicate thus increasing access.
Although there are many positive aspects of practicing via internet, some states are moving towards prohibiting licensed lawyers from practicing law in the state unless they hold a physical office in that state. This is extremely inconvenient for the person seeking legal assistance. For example, a New York resident who moves to Tennessee to take care of aging parents will not be able to hire an attorney licensed in New York unless that attorney has a physical office in New York. For this consumer, whether they are dealing with a lawyer physically located in New York or New Jersey, or even California is irrelevant. What is relevant is that the lawyer is competent to deal with the client’s issues relating to New York law. Unfortunately, on top of the burden of caring for aging parents, this person will now have to travel back and forth to New York rather than handle their legal matters online.
Even though we currently live in a mobile society, there are an increasing number of situations, like the New-York-to-Tennessee move, where restrictions on practice based on physical location of the lawyer hinder one’s ability to receive legal services. These anticompetitive restrictions reduce access to the law, yet provide no additional protection to consumers.
While some of the criticisms regarding lawyers practicing across state lines via internet involve a decrease in quality and accountability of legal service, most of those criticisms are largely unfounded. In the same way that eBay and Amazon are held accountable for dissatisfied customers, lawyers practicing across state lines via-internet can be held accountable for any bad legal practices. If one is dissatisfied with the services of their virtual lawyer, they can hold that lawyer accountable in the same ways in which they can hold an attorney accountable who lives down the street. Lawyers, regardless of whether they are engaging in physical or internet practice can be held accountable through civil lawsuits, or action by bar disciplinary committees in the state where they are licensed. Moreover, while consumers can hold lawyers equally accountable whether the lawyer is working in person or virtually, choosing virtual lawyering can result in lower cost and more options when choosing a lawyer.
Virtual law practice has great potential for increasing affordable access to the legal system. It enables consumers to have greater access to affordable and competent legal work while keeping it accountable and cost-effective. You can read our full comments to the ABA, urging them to allow this practice to grow.
Michael Frisch of Georgetown Law Center has just written an outstanding and frightening post about an attempt by the District of Columbia Bar to quietly takeover control of the budget for the District's bar discipline office from the D.C. Court of Appeals. Taking over the budget for discipline would mean that lawyers would exercise financial control over its own prosecution for disciplinary violations. Professor Frisch calls this "the most dangerous idea in the history of the D.C. Bar." From a consumer perspective, it's hard to disagree.
An inherent problem of self-regulation of any profession, including law, is that practitioners may act in the best interests of their guild, rather than in the best interests of the public. There are many areas where this takes place in the regulation of the legal profession. For example, restrictions on who may provide law-related services, such as document preparation, are justified by the bar as consumer protection measures, but act primarily to prevent consumers from having access to low-cost, non-lawyer service providers who, not surprisingly, might be in direct competition with lawyers.
In disciplinary matters, the bar generally argues that outside regulation is unnecessary because it can act on its own to protect consumers from lawyers who act against their clients' interests. The problem with this argument is that most lawyer disciplinary systems are already weak, administering meaningful discipline in less than two percent of all complaints they receive. Taking away budgetary independence of bar counsel's office will further handcuff the many dedicated lawyers who are trying to police the profession on an already limited budget. Furthermore, it completely undermines the argument that the bar is capable of regulating itself.
I've only been a D.C. bar member for about half as long as Professor Frisch, so I don't have the historical knowledge to confirm his claim that this is "the most dangerous idea in the history of the D.C. Bar," but it would take a remarkably bad idea to top it.
On June 15, 2012 the Washington Supreme Court adopted a groundbreaking rule which will allow consumers to use non-lawyers with certain training and education to provide technical help on simple legal matters. This Limited Practice Rule for Limited License Legal Technicians (“LLLT”) will be effective September 1, 2012 and is a monumental step toward increasing access to justice for Washingtonians. The purpose of the rule is to authorize certain persons to render limited legal assistance or advice in approved areas of law.
This rule was a product of the Washington Practice of Law Board, which was created to handle unauthorized practice of law (“UPL”) complaints. In other states, UPL committees are dedicated to defining and investigating complaints for UPL. Such investigations often cause more harm than good to consumers, as they sweep up useful service providers alongside fraudulent ones. However, rather than blindly cutting off non-lawyer services for consumers, this UPL committee focused on finding ways in which access to law-related services can be improved by allowing consumers to use well-regulated non-lawyer professionals.
While some of the specifics regarding Limited License Legal Technicians are still being worked out, there are some guidelines that the Washington Supreme Court has already outlined. LLLTs must:
After an individual meets all of those requirements for an LLLT they will then be authorized to engage in tasks previously allowed only by attorneys. This is a great development because prior to this rule, these tasks, most of which are basic, have been monopolized by the legal profession but can be competently done by well trained and educated individuals for a fraction of the cost of hiring an attorney.
Some of the tasks which LLLTs will be able to engage in under the new rule are:
This model also improves upon that of California, which along with Arizona is the only state to license and regulate legal technicians. California currently licenses legal document assistants (http://www.calda.org/ContinuingEducationCodes.asp) (LDAs) to help consumers with legal document preparation. However, California LDAs are forbidden from offering legal advice, discussing legal strategies, answering legal questions, or selecting forms for the consumer. Therefore, in California, LDAs can be prosecuted for UPL if they advise clients on something as essential as determining which legal forms need to be completed.
Under the Limited Practice Rule, Washingtonians will have access to a broader range of services from LLLTs than Californians can receive from LDAs. The ability for LLLTs to be able to advise clients on a broader range of tasks, such as which forms are appropriate, will make the program more dependable to consumers. For example, if a Californian goes to an LDA with a form that is inappropriate for the task at hand, the LDA may not correct them and suggest the correct form. In Washington, the LLLT can correct obvious consumer mistakes such as this.
Allowing access to LLLTs will also allow legal services organizations in Washington to save money and serve more people with complex legal needs, since LLLTs can alleviate many of the simpler legal issues before legal services agencies. Moreover, courts will benefit by facing more knowledgeable self-represented litigants who have filed the correct paperwork and who will be better prepared for the court hearing, resulting in less rescheduling of court dates and less need for judges to explain court processes to litigants.
With LLLTs being able to handle more basic legal services, consumers will have a greater ability to save money by unbundling legal services. For example, a person with an uncontested divorce could use an LLLT for the majority of the paperwork, such as division of property issues, but might consult a lawyer for more complicated parts of the divorce, such as child custody.
If Washington continues to execute the licensing and regulation of LLLTs smoothly, and other states follow Washington’s lead, this could be one of the greatest advances for consumers of legal services since the U.S. Supreme Court outlawed mandatory fee schedules in Goldfarb v. Virginia State Bar in 1975.