Dec. 3, 2014 – The State Bar of Wisconsin’s Ethics Hotline frequently receives calls regarding lawyer advertising. These calls increasingly concern Internet-based marketing issues such as lawyer websites, LinkedIn endorsements, AVVO listings, and lead generation services.
One source of considerable confusion is the distinction between permissible advertising and impermissible referral in the context of lead generation.
Prior to the Internet, the distinction between permissible advertising and impermissible referral was easy to understand. For example, payments to a television station to broadcast a commercial or payments to the telephone company to print an advertisement in the telephone directory were permissible. Sharing fees with a for-profit, nonqualified referral service was impermissible.1
Internet-based lead generation services such as LegalMatch, LegalZoom, Nolo, and TotalAttorneys, do not, however, fit neatly into the existing categories. Although the specifics of the services differ, lawyers often pay these services a fee for each client lead that is generated. The question in this context is whether the lead generating service is “recommending” the lawyer for whom the lead is generated.
If so, payments from the lawyer would violate Supreme Court Rule (SCR) 20:7.2(b). The language of SCR 20:7 does not clearly resolve the issue.
Moreover, a comment to the American Bar Association’s Model Rules of Professional Conduct, prior to its amendment in 2012, provided no clarity.2
The following hypothetical demonstrates why the distinction between permissible advertising and impermissible referral is not easy to understand and why lawyers who are considering participating in such a service should make a thorough evaluation of the adequacy of the particular service’s disclosures.
A Wisconsin lawyer has been asked to participate in a for-profit service that, through its website, provides information and documents on legal topics, and also advertises the services of lawyers who practice in a particular area of law.
Aviva Kaiser is assistant ethics counsel for the State Bar of Wisconsin. Reach her by email. Ethics question? Call the Ethics Hotline at (608) 229-2017 or (800) 254-9154.
Through the website, consumers are offered the opportunity to connect with lawyers practicing in that particular area of law by submitting an online form or by calling a toll-free number. The for-profit service offers an “attorney plan” for a monthly fee. The website has a disclaimer, labeled “Attorney Advertisement,” stating that the “attorney plan” portion of the website is an advertisement and not a lawyer referral service. The disclaimer also states that the for-profit service does not endorse or recommend any lawyer who advertises on the website, and does not make any representation or judgment as to the qualifications, expertise, or credentials of any of the participating lawyers. The disclaimer appears at the bottom of the webpage in smaller and denser typeface. However, the following statement appears in the main body of the page: “Plan attorneys are vetted, reviewed by customers like you, and in good standing with their respective bars.”
A lawyer who participates in this “attorney plan” pays $75 for each client referred to that lawyer, but this information does not appear on the website. The Wisconsin lawyer has asked whether his participation in this service is prohibited by the advertising rule.
The Rule and Other Guidance
SCR 20:7.2 prohibits a lawyer from giving anything of value for recommending the lawyer’s services. The exceptions to the rule permits a lawyer to pay for the “reasonable costs” of advertising and the “usual charges” of nonprofit or state-qualified lawyer referral services. SCR 20:7.2(b), which is identical to ABA Model Rule 7.2(b), states:
“A lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may: 1) pay the reasonable cost of advertisements or communications permitted by this rule; 2) pay the usual charges of a legal service plan or a not-for-profit or qualified lawyer referral service. A qualified lawyer referral service is a lawyer referral service that has been approved by an appropriate regulatory authority. …”
While Wisconsin has no ethics opinion or case law addressing SCR 20:7.2(b), some guidance is provided by Arizona Ethics Opinion 11-02 (2011). Arizona ER 7.2(b) is identical to both SCR 20:7.2(b) and ABA Model Rule 7.2(b). The Arizona ethics opinion concluded:
A lawyer may ethically participate in an Internet-based group advertising program that limits participation to a single lawyer for each ZIP code from which prospective clients may come, provided that the service fully and accurately discloses its advertising nature and, specifically, that each lawyer has paid to be the sole lawyer listed in a particular ZIP code. To remain a permissible group advertising program, such a service may do nothing more to match clients with lawyers than to provide inquiring clients with the name and contact information of participating lawyers, without communicating any substantive endorsement. The service will lose the protection afforded by the required disclosures and cross the line that distinguishes permissible advertising from an impermissible for-profit referral service if the required disclosures are difficult to find, read, or understand; are contradicted by other messages on the website; or are made so late in the process that the consumer of legal services is unlikely to read them before contacting participating lawyers.
The opinion cautioned that lawyers who were considering participating in such a service should make a thorough evaluation of the adequacy of the particular service’s disclosures. The opinion further cautioned that its analysis depended on the specific facts presented by the hypothetical website, and even small changes in those facts could result in the conclusion that the arrangement was a referral service rather than an advertisement.
Central to the analysis of the Arizona opinion is the plain language of the rule: the rule prohibits a lawyer from paying for recommendations, not merely referrals. The crucial or determinative question is whether the service’s “direction” of a consumer to some particular lawyer or lawyers is or connotes an endorsement of that lawyer or those lawyers as suitable for the consumer’s needs because an endorsement is a fundamental characteristic of a recommendation.3 Consequently, whether a service that directs lawyers to consumers is permissible advertising or a type of impermissible referral arrangement that violates SCR 20:7.2(b) depends on the characteristics, operation, and disclosures of that particular service.4
In the hypothetical, the for-profit service’s website contains the disclosures, but they are located at the end of the webpage. As a result, the consumer may not read them before contacting the participating attorney. In addition, the disclaimer is contradicted by the statement in the body of the webpage that the “plan attorneys are vetted.”
Moreover, the consumers are not told that the participating lawyers pay for each client lead. Under the current interpretation of SCR 20:7.2(b), as guided by the Arizona ethics opinion, the Wisconsin lawyer’s participation in this service would violate SCR 20:7.2(b). This analysis necessarily depends on the specific facts presented by the hypothetical website, and even small changes in the facts could result in a different conclusion.
In 2012, the ABA adopted changes to the language of the Comment to Model Rule 7.2. Those changes clarified that Rule 7.2(b) permits lawyers to pay for “lead generation” services, including Internet-based leads, as long as certain safeguards are followed.
Comment  defines the word “recommendation” as a communication that “endorses or vouches for a lawyer’s credentials, abilities, competence, character, or other professional qualities.” This definition permits lawyers to use lead generation services, such as those that are increasingly prevalent online, but would require lawyers to ensure that the lead generators do not engage in conduct that the Rule was intended to prohibit, such as in-person solicitations or false or misleading tactics.
The definition makes it clear that lawyers cannot pay lead generators who endorse or vouch for the lawyer’s credentials, abilities, competence, character, or other professional qualities. “This restriction is consistent with the idea that nonlawyers do not have the necessary expertise to know which lawyer has the necessary professional qualities to handle a particular matter.”5
The ABA identified other possible concerns associated with lead generation. First, Comment  explains that even when the lead generator does not “recommend” the lawyer, the lawyer’s use of the lead generator must be consistent with Rule 1.5(e)(division of fees) and Rule 5.4 (professional independence of the lawyer).
The reference to Rule 1.5(e) acknowledges that a lead generator may be another lawyer, in which case the restrictions on division of fees must be observed. The reference to Rule 5.4 reminds lawyers that although a lawyer may pay a fee to a nonlawyer for a client lead, the fee should not be contingent on a person’s use of the lawyer’s services because such fee would constitute an impermissible sharing of fees with nonlawyers. Moreover, the reference to Rule 5.4 also reminds lawyers that a nonlawyer lead generator should not direct or regulate how the lawyer’s work is performed.6
Second, the Comment reminds lawyers that the lead generator’s communications must be consistent with Rule 7.1, which prohibits false or misleading communications.
The ABA concluded, however, that lead generators do not need to state affirmatively that they are not recommending the lawyer and have not analyzed the person’s legal needs. The ABA recognized that lead generation takes many forms and some do not require any affirmative statements to prevent misunderstandings.
For some forms of lead generations, such as when someone clicks on an advertisement and is taken to the lawyer’s website, it is obvious from the context that the lead generator has not analyzed the person’s legal needs and is not recommending the lawyer. Consequently, the ABA concluded that it was more appropriate to state generally that lead generators should not state, imply, or create a reasonable impression that they are recommending the lawyer or that they have analyzed a person’s legal problems when determining which lawyer should receive the referral.7
Wisconsin has not adopted the ABA’s 2012 amendment to the Comment to Model Rule 7.2. Wisconsin lawyers who are considering participating in an Internet-based lead-generating service must comply with both SCR 20:7.2 and SCR 20:7.1.
They should be guided by the Arizona ethics opinion and should make a thorough evaluation of the adequacy of the particular service’s disclosures. To be a permissible advertising, the service may do nothing more to match consumers of legal services with lawyers than to provide the consumer of legal services with the name and contact information of participating lawyers, without communicating any substantive endorsement. The service’s website should fully and accurately disclose its advertising nature and that each lawyer has paid to be a participating lawyer.
These required disclosures will be ineffective if they are difficult to find, read, or understand, if they are contradicted by other statements on the website, or if they are made so late in the process that the consumer of legal services is unlikely to read them before contacting the participating lawyer.
1 ABA Comm’n on Ethics 20/20, Resolution 105B and Report to the House of Delegates at 3-4 (2012), (Resolution and Report: Technology and Client Development).
2 Consequently, the ABA concluded that clarifying language was needed. The ABA Commission on Ethics 20/20 found that there is considerable confusion concerning the kinks of Internet-based client development tools that lawyers are permitted to use, especially because of an ambiguity regarding the prohibition against paying others for a “recommendation.”
ABA Comm’n on Ethics 20/20, Resolution 105B and Report to the House of Delegates at 4 (2012), (Resolution and Report: Technology and Client Development).
3 Arizona Ethics Opinion 11-02 (2011).
4 Ethics Committees have struggled with the complexity of this issue. North Carolina Ethics Op. 2013-10 concluded that a lawyer may participate in the online service Total Attorneys provided that each Total Attorneys website fully, accurately, and prominently discloses the following: it provides paid group advertising services to lawyers; it is not a law firm and cannot provide legal advice; it is not a referral service; it does not recommend or endorse a particular lawyer; it does not vouch for the qualifications of participating lawyers; and each participating lawyer is licensed to use the advertising site and has paid to be the sole lawyer listed for a particular zip code.
Michigan Informal Ethics Op RI-365 (2013) concluded that a lawyer's agreement to pay a referral fee to a nonlawyer-owned, for-profit website service for each potential consumer that accesses the website and expresses an interest in the lawyer's substantive law subject matter is unethical, since it requires the lawyer to give something of value to a person for recommending the lawyer's services. The opinion also concluded that the for-profit lawyer referral service is not advertising, because the individual lawyer is not initially identified, the lawyer has no opportunity to review and control the language disseminated, and the fee structure is tied specifically to referrals made.
New Jersey Advertising Op. 43 (2011) concluded that an Internet service that sends users to attorneys who pay per lead for the exclusive rights to contacts generated in a specific geographic area does not amount to an impermissible referral service. The opinion concluded, however, that the website must change its disclosures in order to avoid misleading users and emphasized that lawyers violate Rule 7.1(a) if they participate in a website that is misleading. The opinion sets out standards to prevent a lead-generating website from being misleading: the website must make clear the methodology for the selection of the attorney's name, especially if attorneys' participation is restricted by geographical area or practice area; if participation is limited, all requirements for attorneys to participate must be specified; the website may state that participating attorneys meet these requirements but may not vouch for the quality of the participating attorneys or compare them to other attorneys; a full list of participating attorneys must be available and easy to access; information that is needed to avoid misleading users must be provided in plain language, not convoluted legalese, and cannot be countermanded or undermined by contrary statements or suggestions; the language “attorney advertisement” and “not an attorney referral service” must be prominently displayed on the website.
5 Arizona Ethics Opinion 11-02 (2011).
6 Id. at 5.