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Dicta From Desa: Super Bowl, super problem — Lawyers using Groupon

By DESA BALLARD, Special to Lawyers Weekly

desab@desaballard.com

 

Among the Monday-morning quarterbacking from the Super Bowl was the inevitable critique of commercials aired during the event. This time, however, an issue of lawyer advertising was raised by one of the ads. 

In legal ethics circles, a quiet, under-the-radar debate has been simmering about the use of Groupon.com by lawyers for advertising their legal services.

Thanks in large part to a tasteless television ad about Tibet featuring Timothy Hutton, the world at large is now aware of the existence of Groupon. Why do lawyers care?

Groupon is a website though which vendors can offer and sell their services at a discount. The purchaser pays the discounted price to Groupon for the offered service, using a credit card. Groupon forwards a coupon for the discounted service to the purchaser and sends a part of the purchase price to the vendor, keeping the balance as its fee.

The purchaser shows up at the vendor’s location and the vendor is obligated to provide the service. The purchaser has already paid the fee, and the vendor has already received (its share of) the fee.

The concept works great for manicures and dining out. It’s a little troublesome, at least initially, for advertising by lawyers.

Groupon works like a dating service, putting purchaser and vendor together, takes its cut and delivers the fee to the vendor – in this case, a lawyer. Under a scenario that has already been advertised on Groupon outside South Carolina, the purchaser pays $99 for a will and durable power of attorney. So, if the funds used to pay for Groupon’s service was from a legal fee, then it’s improper fee-splitting, right?

Not so fast.

From a regulator’s perspective, any bill a lawyer pays related to the operation of her office could be considered fee-splitting. A lawyer charges a fee to perform a service; she then uses a part of the funds she charges to pay her office rent, her telephone bill, her cleaning service.

No one would seriously argue that she is fee-splitting with her landlord, telephone company or housekeeping service, although the only source of her funds would have to be from fees charged to clients. However, if the overhead expense that the lawyer pays is directly related to a particular fee that comes in from a particular case, the issue is more problematic.

Supposedly, regulators in at least one state (a Carolina which is, thankfully, not South) have voiced their knee-jerk “might be fee splitting” answer to all things related to advertising by lawyers and applied it to the concept of Groupon. Apparently, without knowing much, or even enough, that state’s bar regulators have sounded the alarm. “You can’t do it – of course not.”

If you step away from the regulator mindset, it doesn’t take long to see that the evils to be avoided from fee-splitting don’t apply here. Our Supreme Court has said that the rule against fee-splitting exists to discourage laymen from practicing law. EC-3-8 (repealed 1990). Could be.

It makes more sense that the rule exists to prevent runners from bringing clients in the door for a cut of a fee. This old practice is a cousin of common-law champerty, which is illegal and subject to criminal penalties. S.C. Code Ann. § 40-5-340.

Groupon, like other providers, furnishes a service. It advertises the lawyer’s service (like a web-hosting company), it serves as credit card processing company (like Bank of America or Wachovia), it provides the tools to the purchaser with which to redeem the purchase (like the Yellow Pages), it provides the administrative controls necessary to limit the use of the coupon (an accounting function) and it puts the purchaser and the vendor together.

None of that is the practice of law. Some of the services are transaction-specific, some are not. And, oh, by the way, the purchaser gets lower cost legal representation, which is a good thing.

It seems that the closest analogy, from a lawyer’s perspective, is the use of credit cards to pay legal fees, which has been approved by the American Bar Association (which all advertising lawyers agree is the most liberal of advocacy groups for its cause).

Client pays a fee to the lawyer, say $99 dollars for a will and durable power of attorney, and puts the charge on the client’s credit card. The lawyer gets only a portion of the $99 because the credit card company, or whoever processes the card, takes a percentage as a processing fee. That’s transaction-specific. One client, one fee. Permissible.

The only difference with Groupon is that the fee gets paid first, before the vendor-lawyer and client are put together. The timing cannot convert the substance of the transaction; if credit card fees are permissible, so are Groupon fees.

Odds are the first South Carolina lawyer to venture into the Groupon waters will get a personal and confidential letter from the Office of Disciplinary Counsel with an investigation about fee-splitting. Disciplinary Counsel is already going after lawyers who use website advertising by purchasing exclusive rights to a ZIP code, and more than 20 other states have already actively approved the process or refused to prosecute the lawyers involved.

Groupon advertising would be too bold not to trigger similar interest. I am confident that the first South Carolina lawyer who goes with Groupon will find out what the South Carolina Supreme Court thinks of it. 

 Whether regulators like it or not, I suspect the Internet is here to stay. Don’t count me among those who think we need special rules to regulate lawyer advertising on the Internet. Advertising and communication by lawyers is the same, regardless of the forum.

Bring on the Groupon ads. We can’t wait to see how they tackle this one. We need an answer by next year’s Super Bowl.

Editor’s note: Ballard, a West Columbia attorney who practices with Ballard Watson Weissenstein, focuses her practice on representing lawyers and other professionals in licensing and disciplinary matters. Her column appears monthly.

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