IS GROUPON FOR LAWYERS FRAUGHT
WITH ETHICAL DANGER?
WHY THE LEGAL COMMUNITY SHOULD
EMBRACE INNOVATIVE INTERNETMARKETING FOR LAWYERS
Aaron J. Russ
I.
II.
III.
IV.
TABLE OF CONTENTS
Introduction ..........................................................................................394
Background ..........................................................................................397
A. How It Works ...............................................................................398
B. Groupons and Lawyers ................................................................399
C. The Ethical Framework ...............................................................400
Analysis................................................................................................400
A. State Advisory Opinions Concluding that Deal-of-the-Day
Websites Are Unethical for Lawyers ...........................................402
1. Indiana ................................................................................... 402
2. Alabama ................................................................................. 405
B. State Advisory Opinions Permitting Attorney Marketing on
Deal-of-the-Day Websites ............................................................407
1. North Carolina ....................................................................... 407
2. South Carolina ....................................................................... 409
3. New York .............................................................................. 410
4. Nebraska ................................................................................ 412
5. Summarizing the Concerns of These States .......................... 413
Recommendation .................................................................................415
A. Technology and the Regulation of Legal Advertising ..................415
B. Accepting Economic Realities and Supporting the Movement
into Solo Practice and Smaller Firms ...........................................417
 J.D., University of Illinois College of Law, May 2013. Dual B.A., Economics and Political Science,
University of Michigan, May 2010. I would like to thank Chris Tinsley for his guidance through the notewriting process as well as the entire JLTP editorial staff for its continued dedication and hard work. I would
like to thank Theresa Reiss for her willingness to listen to my ideas and provide constructive feedback.
Finally, I wish to thank my family for its love, support, and understanding throughout my entire law school
career.
393
394
V.
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1. Lowering Start-Up Costs ....................................................... 418
2. Providing Lower Fees to Clients ........................................... 418
3. Accessing a New Supply of Clients....................................... 419
C. Dispelling the Concerns of the Indiana and Alabama
Opinions: How to Ethically Advertise on Deal-of-the-Day
Websites .......................................................................................420
Conclusion ...........................................................................................421
I.
INTRODUCTION
The marketplace for legal services in America is undergoing a change
commensurate with the shift in information technology. Rapid advances in
Internet capabilities have widened the boundaries of our economy and
increased the speed with which information is downloaded, processed, and
retransmitted.1
Legal work product can now be compartmentalized,
segmented, and shipped overseas in order to take advantage of cheaper labor
costs.2 While big-law has been pressured by corporate clients to lower costs,3
smaller-scale innovation has also developed in order to bring cost-savings to
the average legal consumer.4
Internet technology has been used to improve marketing, expand services,
streamline document review, and even reduce rent costs. Websites, such as
legalzoom.com, legalmatch.com, lawyers.com, and lawzam.com, have recently
been launched to leverage the advances of Internet technology into savings for
the individual legal consumer.5 Mirroring the shift away from the classic
brick-and-mortar retail stores, some law firms have even experimented with
abandoning their workspace entirely for a fully online firm.6 Thus, innovative
1. See WORLD INTELLECTUAL PROPERTY ORG., INTELLECTUAL PROPERTY ON THE INTERNET: A
SURVEY OF ISSUES ¶ 42 (2002), available at http://www.wipo.int/export/sites/www/copyright/en/ecommerce/
pdf/survey.pdf (noting that the process of digitization “allows the conversion of . . . materials into binary form,
which can be transmitted across the Internet, and then re-distributed, copied and stored in perfect digital
form”).
2. Id.
3. See Patrick G.
Lee, Pricing Tactics Spook Lawyers, WALL ST. J. (Aug. 2, 2011),
http://online.wsj.com/article/SB10001424053111904292504576482243557793536.html (detailing how large
corporations have been using a reverse auction method to drive down the price of large-scale legal services).
4. CITIGROUP & HILDEBRANDT CONSULTING LLC, 2013 CLIENT ADVISORY 8 (2013) [hereinafter
HILDEBRANDT],
available
at
http://online.wsj.com/public/resources/documents/CitiHildebrandt
2013ClientAdvisory.pdf (suggesting ways that firms can make small-scale structural changes to cut costs and
increase demand).
5. See, e.g., LAWYERS.COM, http://www.lawyers.com/ (last visited Sept. 16, 2013) (allowing clients to
search for attorneys online); LAWZAM, https://www.lawzam.com/ (last visited Sept. 16, 2013) (providing a
virtual portal for clients and attorneys to consult and communicate via computer webcams); LEGALMATCH,
http://www.legalmatch.com/ (last visited Sept. 16, 2013) (helping clients match with attorneys based on
location and service area); LEGALZOOM, http://www.legalzoom.com/ (last visited Sept. 16, 2013) (providing
simple legal tasks such as will drafting, business incorporation, and trademarks via an online transaction).
6. Carolyn Elefant, Virtual Law Firms Going Viral, LAW.COM LEGAL BLOG WATCH (June 26, 2009,
3:41 PM), http://legalblogwatch.typepad.com/legal_blog_watch/2009/06/virtual-firms-are-virtually-everwhere
.html (outlining recent advances in online virtual law firms); see also VIRTUAL L. PRAC.,
virtuallawpractice.org (last visited Sept. 16, 2013) (detailing one lawyer’s experience with promoting her own
virtual firm).
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lawyers have been applying technology in creative ways to lower costs and
improve productivity.
The 2008 recession has hit all sectors of the economy—the legal
profession is no exception. Since 2008, the availability of legal jobs for young
attorneys has plummeted.7 The current employment outlook for new law
school graduates is the worst it has been since 1994.8 The financial crash in
2008 slashed the heavy transactional work for financial institutions that had
once driven the growth of larger law firms.9
A 2013 report of the legal market demonstrates that the rapid growth of
the “leveraged law firm model” in the 2000s was most likely an “aberration.”10
The absence of this model creates a void in the demand for the legal labor
market, resulting in an oversupply of young attorneys.11 The price pressure
attacking this leveraged model is coming from all angles. Clients are more
closely scrutinizing bills; contract attorneys, technology, and alternative legal
providers are competing with firms by delivering lower prices.12 The
compound aggregate growth rate of the legal market from 2008 to 2012 was a
meager 0.4%.13 The current excess capacity of law firms and the soft demand
for legal services supports the prediction that 2013 will be another
disappointing slow-growth year for the legal field as a whole.14
Although statistics indicate that legal hiring slowed in all major areas—
private, government, judicial, and public interest15—there was an increase
from 2008 to 2009 in the number of new law graduates entering private
practice as solo practitioners.16 Opening one’s own law firm carries with it a
number of financial and reputational risks.17 Taking this leap requires start-up
capital, ingenuity, confidence, and clients.18 However, the data indicate that
when the traditional opportunities are scarce, new attorneys, to a larger degree,
7. See Press Release, NALP, Law School Grads Face Worst Job Market Yet—Less than Half Find
Jobs in Private Practice (June 7, 2012), available at http://www.nalp.org/uploads/PressReleases/
Classof2011ERSSSelectedFindingsPressRelease.pdf (indicating that for the class of 2009, only 65.4% of new
graduates with employment had full-time jobs that required bar passage).
8. See id. (“[T]he overall employment rate for new law graduates is, at 85.6%, the lowest it has been
since 1994 . . . .”).
9. James G. Leipold, The Changing Legal Employment Market for New Law School Graduates, B.
EXAMINER, Nov. 2010, at 6, 6.
10. HILDEBRANDT, supra note 4, at 1.
11. Id. at 3 (“To exacerbate the problem, associate ranks have shrunk in recent years, while the
percentage of income partners has climbed.”).
12. Id. at 2–3.
13. Id. at 1. Compare this to the 2004–2008 period, when the compound aggregate growth rate for the
legal field was a healthy 3.7%. Id.
14. Id. at 6.
15. Leipold, supra note 9, at 7–9.
16. Id. at 8. For the class of 2009, the number of solo practitioners reported was well over 1,000 and
represented more than 5% of law firm jobs reported, compared with 3.3% for the class of 2008. Id. A similar
data trend was discovered during the recession in the 1990s. Id.
17. See Steven T. Taylor, Going Solo: Rising to the Challenge, L. PRAC., Jan.–Feb. 2007, at 36,
available
at
http://www.americanbar.org/publications/law_practice_home/law_practice_archive/lpm_
magazine_articles_v33_is1_an1.html (profiling one attorney who spent $100,000 and left a lucrative position
as a partner in a large firm to start his own practice).
18. Id.
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are willing to accept these risks and take the plunge into solo practice.19
If recent legal graduates and young attorneys are willing to seek out new
opportunities to serve new markets, they will need to be creative in seeking
such markets. One of the major challenges facing solo practitioners is finding
and retaining new clients.20 Due to the financial constraints, the limited
marketing that young solo practitioners can afford must be cost-effective. A
Pew Internet and American Life Survey estimated that by 2007 it was expected
that seven million Americans would be searching for legal services online.21
Lawyers can tap into this expanding market at relatively low costs.22 Internet
technology has the potential to help new start-up firms to break through this
marketing barrier and reach these consumers with the cost-effective tools that
are now available online. 23
Recently, the website Groupon.com (Groupon) has offered advertising
arrangements for attorneys. Some attorneys have tried to use the website in
order to attract new clients.24 Others remain skeptical of its costs and its
potential ethical violations.25 As of the writing of this Note, six states’ bar
associations have issued opinions on whether or not legal advertising on
Groupon or other similar “deal-of-the-day” websites is a violation of the ABA
Model Rules.26 While some of these opinions concluded that this form of legal
marketing can be Model Rule compliant, their conclusions are conditional and
do not provide clear guidance for attorneys.27 The other two opinions
condemn this practice, offering no safe-harbor for lawyers wishing to use these
websites.28
Ultimately, if lawyers are careful to implement a certain structure while
advertising on deal-of-the-day websites, they can avoid violating the principles
underlying the ABA Model Rules. Furthermore, the benefits to legal
consumers far outweigh the potential for Model Rule implications, which exist
in the shadows of every attorney-client relationship, online or face-to-face.
19. Leipold, supra note 9, at 8.
20. See, e.g., GISELA B. BRADLEY, MARKETING YOUR PRACTICE 4 (2001) (advising new solo
practitioners to have a plan to target an identified market that will demand the services offered by their new
firm).
21. Geri I. Dreiling, Choosing Up Sides, A.B.A. J., May 2007, at 28.
22. Id. (describing services that allow attorneys to be matched with clients through the Internet in
exchange for a nominal application fee and recurring subscription fees).
23. Id.
24. See, e.g., Debra Bruce, Did a Groupon Really Work for a Solo Lawyer?, SOLO PRAC. U. (Jan. 19,
2012), http://solopracticeuniversity.com/2012/01/19/did-a-groupon-really-work-for-a-solo-lawyer/ (explaining
one attorney’s experience with using a groupon to stimulate business).
25. Id. (commenting that many fellow attorneys had a negative reaction to this lawyer’s Groupon deal).
26. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01; Ind. State Bar Ass’n Legal Ethics
Comm., Op. 1 (2012); State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 1203 (2012); N.C. State Bar, Formal Op. 10 (2011); N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op.
897 (2011); S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011).
27. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012); N.Y.
State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011); N.C. State Bar, Formal Op. 10 (2011); S.C. Bar
Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011).
28. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012–01 (describing this practice as “fraught
with ethical landmines”); Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012) (holding that advertising on
these websites is “fraught with peril”).
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Jobs for new attorneys are scarce and young lawyers are driven, for better or
worse, into solo practice. Current markets exist that are underserved by the
legal industry.29 Low-cost Internet marketing could be the tool that removes
the friction between this abundant supply of young attorneys and the changing
demands of the industry’s clients.30 The ABA Model Rules should not
function as an impediment to the changing methods of legal advertising.
While several other online marketing tools have been the subject of
formal ethics scrutiny,31 this Note will focus its analysis on deal-of-the-day
style offers, popularized by Groupon. Part II of this Note will provide a
background of how deal-of-the-day websites work, the ethical framework
governing this advertising, and how lawyers can advertise with them. Part III
will survey the state bar association opinions that have directly commented on
this topic. Part IV will recommend how lawyers can avoid Model Rule
violations while using deal-of-the-day sites and why states barring this practice
should reconsider their positions.
II. BACKGROUND
Deal-of-the-day websites have enjoyed recent success and are expected to
continue their unprecedented growth.32 According to a BIA/Kelsey study,
revenues for these websites will continue to grow from $873 million in 2010 to
$3.9 billion in 2015.33 This dizzying rate of growth is attributed to reaching
new markets and increasing the number of users.34 The two major players in
this market are Groupon and LivingSocial; however, competition continues to
expand as over two hundred rival websites have launched.35 As of 2011, these
websites reached an estimated 102 million people in the United States.36
When shares of Groupon (GRPN) were offered to the public in November
of 2011, $700 million of new investment poured into the company.37 With this
influx of new capital, the untested three-year-old online website became the
largest IPO by a U.S. Internet company since Google.38 Although the stock’s
29. See Kendall Coffey, Underserved Middle Class Could Sustain Underemployed Law Graduates,
LAW.COM (Aug. 22, 2012) (noting that the middle class could provide a new market for young lawyers
offering a competitive price point).
30. Id. (explaining how advances in technology can facilitate new firms with lower hourly rates).
31. See Ethics FAQ, LEGALMATCH, http://www.legalmatch.com/attorneys/ethicsFAQs.html (last
visited Sept. 16, 2013) (listing the six states that have issued ethics opinions specifically regarding for-profit
legal matching websites).
32. Press Release, BIA/Kelsey, Consumer Spending on Deal-a-Day Offers Likely to Reach $3.9B in
U.S. by 2015, According to BIA/Kelsey (Mar. 3, 2011), available at http://www.biakelsey.com/Company/
Press-Releases/110303-Consumer-Spending-on-Deal-a-Day-Offers-Likely-to-Reach-$3.9B-in-U.S.-by2015.asp.
33. Id.
34. Id.
35. Id.
36. Id.
37. Alistair Barr & Clare Baldwin, Groupon’s IPO Biggest by U.S. Web Company Since Google,
REUTERS (Nov. 4, 2011, 12:55 PM), http://www.reuters.com/article/2011/11/04/us-grouponidUSTRE7A352020111104.
38. Id.
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performance at the one-year anniversary was a disappointment,39 the company
is currently predicting revenues between $625 million and $675 million in the
fourth quarter of 2012.40
A.
How It Works
Daily deal websites such as Groupon provide a way for customers to
enjoy the best businesses, products, and services in their city by leveraging the
framework of “collective buying.”41 Users sign up for free on Groupon.com
with their email address and zip code.42 They then receive daily deals, known
as “groupons,” which are essentially time-sensitive vouchers allowing the
purchaser to redeem anything from “pet grooming and pizzerias to puppeteers”
at a deep discount from the merchant.43 The merchant honors these discounts
similarly to a traditional coupon. According to its website, Groupon touts a
massive reach, currently over 38 million customers.44 Based on internal data,
Groupon has helped more than 250,000 businesses and generated over
$2 billion in sales for these companies.45
Groupon’s method of “collective buying,” means that a deal only
becomes valid once a certain number of consumers purchase the voucher. This
number is known as the “tipping point.”46 As long as enough of the groupons
are purchased for a given product or service within the allotted time, they may
be redeemed for the discounted goods or services.47 Once the groupon is
purchased, the fee is split between the merchant and Groupon.48 This deal is
mutually beneficial; Groupon provides its vast network of customers and
receives a fee for each groupon if they reach the tipping point, which also
generates enough new business for the merchant to make the arrangement
worthwhile.49 Merchants are also able to generate additional revenues from
Groupon users who purchase complementary goods at redemption, and the
39. Morgan Korn, Groupon Stock Plummets After Poor Q3 Earnings: Has It Hit a Wall?, YAHOO! FIN.
(Nov. 9, 2012, 11:03 AM), http://finance.yahoo.com/blogs/daily-ticker/groupon-stock-plummets-poor-q3earnings-hit-wall-160325425.html (“The stock has plunged 85% during its time on the market as investors
have grown increasingly worried about the vitality of the company’s business model.”).
40. Id.
41. GROUPON, www.groupon.com/about (last visited Sept. 17, 2013).
42. Id. (prompting new users to enter an email address in order to access local Groupon deals).
43. GROUPONWORKS, https://www.grouponworks.com (last visited Sept. 17, 2013).
44. Id.
45. Id.
46. Ish Bhanu, Group + Coupon = Groupon, Groupon.com: The Power of Collective Buying 3–4 (Dec.
2, 2010) (unpublished manuscript), available at http://www.econ.ucla.edu/sboard/teaching/tech/Groupon.pdf
(“Once [the tipping point] had been reached . . . the deal became active and those who had committed earlier
were charged . . . .”).
47. GROUPONWORKS, supra note 43.
48. Bhanu, supra note 46, at 4 (“Through heavy negotiating a Groupon representative would hammer
out a contract, which was typically just barely above marginal cost for the business in which the Groupon
company would take 30%-50% of money paid for the Groupon and the business would take the remainder.”).
The merchant’s portion of the Groupon fee is usually dispersed in three installments within sixty days of the
promotion. Id. at 4–5.
49. Id. at 2.
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arrangement can create repeat clientele.50 Consumers can enjoy substantial
discounts on these services, typically between fifty and ninety percent.51
B.
Groupons and Lawyers
Groupon discounts are offered in countless industries. The website caters
to a wide range of businesses: restaurants, beauty salons, ticket sales, services,
shopping, and travel, among several others.52 The website boasts that ninetyone percent of its users already returned or plan to return to the merchant again
for repeat business.53 If a lawyer wishes to expand his business as a Groupon
merchant, he or she will make an arrangement with a member of the Groupon
sales team, providing a discount for a specified legal service. The common
examples are completed on a flat-fee arrangement and do not involve billable
hours.54
Since lawyers commonly charge per hour, deal-of-the-day arrangements
are only feasible for less complicated legal services that can be provided for a
set price. A commonly cited example is drafting a will. If an attorney can
estimate the amount of hours of work involved in drafting a will, he or she can
price the groupon accordingly. In one example, an attorney advertised his
services on Groupon to prepare a will for ninety-nine dollars.55 The rest of the
transaction is identical to any other groupon issued to consumers.56 If enough
consumers purchase the groupon, it goes “live” and all purchasers may enjoy
the discount.57 Groupon takes a cut of the purchase price, distributes the other
share to the attorney, and the purchasers decide when to redeem the services
from the attorney.58
Potentially, the attorney or any other merchant runs the risk of mispricing
the groupon. If the costs of the groupon do not cover the true costs, then the
merchant takes a loss on the arrangement.59 This is analogous to the
alternative billing structure that many corporate clients are demanding from
big law firms.60 The corporate client attempts to minimize the inefficiencies
50. Id. at 4.
51. Id.
52. GROUPONWORKS, supra note 43.
53. Id.
54. See, e.g., Bruce, supra note 24 (in the context of a will); see also GROUPONWORKS, supra note 43
(showing examples of how Groupon for services work, generally charging for the job and not by the hour).
55. Bruce, supra note 24. Mr. Redler’s typical will package was $750. Id. He admits that this wasn’t
necessarily done to create a surge in profits, but rather he was a fan of Groupon.com and wanted to experiment
with one of his own. Id.
56. GROUPONWORKS, supra note 43.
57. Bhanu, supra note 46, at 3–4.
58. Id.
59. See Bruce, supra note 24 (noting that in some cases, Mr. Redler’s Groupon clients actually wanted
something more complicated than a simple will, in which case he gave the clients a $750 credit—his base price
for preparing a simple will).
60. See generally Rachel M. Zahorsky, Facing the Alternative: How Does a Flat Fee System Generally
Work?, A.B.A. J., March 2012, at 41 (noting one example of Tyco International opening up its entire litigation
defense work for alternative fee arrangement bidding in 2004). Corporate clients push for these arrangements
because they can pay one flat fee for a law firm to handle all of a certain type of legal work. Id. The law firm
has to balance two competing goals: it must price the work competitively in order to win the bid, but it almost
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inherent in paying for legal services by the hour, and this structure allows that
client to budget accordingly for its future legal work.61 However, firms want
to avoid pricing complex legal work on a flat-fee basis due to the uncertainty
of how many hours and attorneys it will require to complete the job.62
Although law firms have been able to amass large amounts of success based on
the billable hour, it is clear that these new alternative fee arrangements favor
the client, and the demand for them will continue to grow.63 It may be the case
that this billing model is spreading to smaller firms and solo practitioners.64
C.
The Ethical Framework
Lawyers are governed by a set of ethical rules, which are adopted by the
highest court of each state after consultation with the state bar association.65
Almost every state has enacted one version of the ABA Model Rules.66 These
rules govern how lawyers can practice their trade within the state.67 The
highest court of each state is also in charge of the enforcement of these rules; it
will typically delegate the task to a separate disciplinary agency, run by
attorneys.68 Penalties for violating these rules can include public censure,
monetary fines, license suspension, and even disbarment.69 When the Model
Rules do not clearly resolve ethical issues facing lawyers, the state bar
associations will issue opinions which reflect their position on the issue.70
While these opinions are not legally binding, courts are increasingly relying on
these advisory opinions in their decisions.71
III. ANALYSIS
Advisory opinions attempt to apply the Model Rules to new situations,
but these rules are generally outdated, particularly in the realm of Internet
technology.72 The ABA recently realized that the Model Rules need to “keep
must charge enough money to cover its own costs and maintain profitability. Id. This can be challenging
considering that the amount of work involved in litigating any case is unpredictable. Id.
61. Id.
62. See id. (noting that traditional billing and tracking models are not good for predicting how a future
issue should be priced).
63. See HILDEBRANDT, supra note 4, at 7 (indicating that the trend toward alternative fee arrangements
is increasing).
64. See id. (discussing the successful small firm business models and strategies).
65. LISA G. LERMAN & PHILIP G. SCHRAG, ETHICAL PROBLEMS IN THE PRACTICE OF LAW 20 (2d ed.
2008).
66. See State Adoption of the ABA Model Rules of Professional Conduct, A.B.A.,
http://www.americanbar.org/groups/professional_responsibility/publications/ model_rules_of_professional_
conduct/alpha_list_state_adopting_model_rules.html (last visited Sept. 17, 2013) (indicating that every state
except for California has adopted the ABA Model Rules of Professional Conduct).
67. Preface to MODEL RULES OF PROF’L CONDUCT (2013).
68. LERMAN & SCHRAG, supra note 65, at 20.
69. Id. at 36.
70. Id. at 42.
71. Peter A. Joy, Making Ethics Opinions Meaningful: Toward More Effective Regulation of Lawyers’
Conduct, 15 GEO. J. LEG. ETHICS 313, 319 (2002).
72. AM. BAR ASS’N, COMMISSION ON ETHICS 20/20 INTRODUCTION AND OVERVIEW 1–2 (2012)
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pace with social change and the evolution of law practice.”73 Specifically, the
ABA noted that “[t]echnology is changing the way that clients find lawyers.”74
Thus, the ABA seeks to provide more guidance to lawyers on the issue of
online legal marketing but realizes the benefits of technology.75 While
proposing to amend the rules with respect to online marketing, the ABA
recommends that three principles must undergird these modifications:
“preventing false and misleading advertising, protecting the public from the
undue influence of solicitations, and safeguarding the confidences of
prospective clients.”76
Newer forms of Internet marketing cannot become a free-for-all; the
Model Rules must continue to protect prospective clients. However, these
rules must be flexible enough to take advantage of the benefits of technology.
Adhering to the principles outlined by the ABA will ensure that these two
concerns are properly balanced.77
Several states have attempted to provide guidance on whether or not
lawyers’ advertising on deal-of-the-day websites is ethically appropriate.78
Currently, six state opinions tackle head-on the issue of attorney advertising on
deal-of-the-day websites such as Groupon.79 While these opinions come to
different conclusions, the separate analyses concern the same ABA Model
Rules: Rule 1.5 “Fees,” Rule 1.15 “Safe-keeping Property,” Rule 1.16
“Declining or Terminating Relationship,” Rule 2.1 “Advisor,” Rule 5.4
“Professional Independence of a Lawyer,” and Rule 7.1 “Communication
Concerning a Lawyer’s Services.”80
Indiana and Alabama have declared that using deal-of-the-day websites is
unethical.81 Conversely, North Carolina, South Carolina, New York, and
Nebraska have concluded that if certain criteria are met, deal-of-the-day
marketing arrangements may be ethically permissible.82
[hereinafter ABA INTRODUCTION AND OVERVIEW], available at http://www.americanbar.org/content/dam/aba/
administrative/ethics_2020/20120508_ethics_20_20_final_hod_introdution_and_overview_report.authcheckda
m.pdf (advocating for changes in the Model Rules, which reflect changes in Internet technology).
73. Id. at 1.
74. Id. at 5.
75. Id. at 4 (explaining that technology offers lower cost and convenience for clients).
76. Id. at 9.
77. Id. at 7.
78. See opinions cited supra note 26.
79. See opinions cited supra note 26.
80. See opinions cited supra note 26.
81. See Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012) (stating the use of group coupons for
Indiana attorneys “is likely not permitted”). See also Ala. State Bar Office of Gen. Counsel, Ethics Op. 201201 (“The use of daily deal websites, such as Groupon, violates or potentially violates a number of rules of
professional conduct.”).
82. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012); N.Y.
State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011); N.C. State Bar, Formal Op. 10 (2011); S.C. Bar
Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011).
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A.
1.
[Vol. 2013
State Advisory Opinions Concluding that Deal-of-the-Day
Websites Are Unethical for Lawyers
Indiana
The Indiana Bar Association Legal Ethics Committee provides a dire
warning for lawyers using deal-of-the-day legal advertising, stating that it is
“fraught with peril and likely not permitted in its current form under the
Indiana Rules of Professional Conduct.”83 The Committee finds several issues
regarding the lawyer-client relationship, safekeeping of property, duties to
prospective clients, and fee-splitting.84
The Committee’s first issue is regarding the attorney-client relationship,
and the belief that the duty to determine whether or not to initiate that
relationship “rests with the lawyer.”85 Instead of the lawyer ultimately
determining whether or not to accept a client, the opinion claims that this
decision is made either by the deal-of-the-day website or the customer.86
Based on Indiana Rules of Professional Conduct 9.3(a), the duty to create an
attorney-client relationship cannot be delegated to anyone else.87
Further, assuming that the customer in the Groupon deal is the party that
ultimately creates the attorney-client relationship, the lawyer cannot comply
with Rule 2.1, which states that “[i]n representing a client, a lawyer shall
exercise independent professional judgment . . . .”88 According to the Indiana
Ethics Committee, “[t]his standard is difficult to meet if the decision to
represent the client is not the lawyer’s decision, but is the potential client’s
choice, made by the decision to purchase a coupon provided by a lawyer the
client may have never met.”89
Additionally, the fact that the consumer ultimately decides to initiate the
attorney-client relationship leads the Committee to conclude that the lawyer
may not properly run a conflicts-of-interest check.90 However, the Committee
only considers this hypothetically and presumes that the lawyer neglects to run
a conflicts check.91 The opinion makes no statements regarding whether
83. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012). However, the opinion considers the future
possibility for this advertising, noting that “the [B]ar is advised to conduct rigorous research before entering
into such an advertising arrangement, and any lawyers contemplating such action would be well served to
employ competent, private counsel to guide the lawyer through the dangers inherent in such marketing,
including discussion of alternative courses of action that may comply with the Rules.” Id.
84. Id.
85. Id.
86. Id.
87. INDIANA RULES OF PROF’L CONDUCT R. 9.3(a) (2013) (“A lawyer may not delegate to a non-lawyer
assistant: (a) responsibility for establishing an attorney-client relationship . . . .”). This Rule is unique to the
Indiana Rules for Professional Responsibility and does not appear in the ABA Model Rules. See generally
MODEL CODE OF PROF’L CONDUCT (2013).
88. INDIANA RULES OF PROF’L CONDUCT R. 2.1 (2013).
89. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012).
90. Id.
91. Id. Although the Committee does not say this is explicitly violated by the coupon purchase, the
court hypothetically considers that this could violate Rules 1.7 (conflicts checks) and 1.16 (terminating the
attorney-client relationship) if the lawyer does not properly run the conflicts check. If a lawyer neglects to
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accepting a coupon from a client would absolutely foreclose the possibility of
complying with conflicts-check rules.92 The nature of this potential violation
is speculative, at best.
According to the Committee’s interpretation, the purchase of a deal-ofthe-day coupon for legal services initiates an attorney-client relationship.93 As
a result, the lawyer cannot exercise independent judgment and could fail to
pre-screen the prospective client for a conflicts of interest check.94
The Committee does not consider in its opinion the possibility that the
Groupon purchase does not initiate the attorney-client relationship.95
Hypothetically, if the lawyer or the website could structure the arrangement so
that the coupon is contingent upon a conflicts-of-interest check, then the
concerns of the Indiana Committee become moot.96 If the lawyer retains the
right to cancel the groupon and refunds the client’s money, then he or she can
exercise independent professional judgment, can determine whether or not to
initiate the attorney-client relationship, and can run a conflicts-of-interest
check. Considering that Groupon offers to process refunds for the merchant,
there is no reason that the transaction cannot be structured in this way.97
The second major concern raised by the Indiana Ethics Committee is the
issue with safekeeping client funds.98 The Committee cites Indiana Rule
1.15(c), which states 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.”99 The problem arises
because of the way Groupon and other deal-of-the-day websites charge
advertisers.100 When the consumer purchases a coupon on the website, a
portion of the purchase price is kept by the company and the other portion is
passed along to the attorney.101 The portion that the lawyer receives, and quite
comply with a Rule 1.7 conflicts check, this would be a Rule 1.7 violation on its own and not necessarily the
fault of the Groupon arrangement. Thus, a Rule 1.7 violation does not have a logically causal relationship with
the Groupon deal.
92. See id. (“[T]he lawyer is responsible to assure that there are no conflicts of interests between the
interests of the potential client and the interests of existing clients of the lawyer or law firm.”). The Committee
later concludes that if a conflict of interest is “not . . . resolved by the lawyer prior to the beginning of the
engagement, then the lawyer has the responsibility to decline or terminate the representation . . . .” Id.
93. Id.
94. Id.
95. But see id. (“[W]hen a company solicits clients and takes advance payments of legal fees, and then
remits only a portion of the fees to the lawyer, we find that this arrangement likely violates the Rules regarding
lawyer-client relationship formation and safekeeping a client’s property.”).
96. Id. (noting that the lawyer is the one to “determine that there are no personal interests of the lawyer
or members of the law firm that are affected prior to entering an attorney-client engagement with the potential
client . . . .”).
97. See Merchant Terms and Conditions, GROUPONWORKS, https://www.groupon-works.com/
merchant-terms-and-conditions (last visited Sept. 17, 2013) (permitting merchant to refund Groupon
purchase).
98. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012).
99. INDIANA RULES OF PROF’L CONDUCT R. 1.15(c) (2013). This is the exact rule found in the ABA
Model Rules 1.15(c).
100. See Bhanu, supra note 46, at 4 (“[T]he Groupon company would take 30%-50% of money paid for
the Groupon and the business would take the remainder.”).
101. Id.
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possibly the portion kept by the company, will be considered an advance
payment of legal fees.102
As the opinion points out, this problem is exacerbated when the lawyer,
for any reason, determines that he cannot provide the services and must refund
the client’s advance payment pursuant to Rule 1.15(d).103 In this situation, the
Committee believes that the lawyer could not comply with Rule 1.15(d)
because the lawyer could only refund a portion of the client’s coupon price,
since the company has already extracted its fee.104 Additionally, since the fees
may not be immediately disbursed from the deal-of-the-day website to the
lawyer, the lawyer could presumably violate other rules because he would only
be able to pay back the client’s money from other clients’ trust accounts, an
obvious violation.105
The Committee assumes that the attorney must pay back the deficiency of
a refund from the other clients’ funds, but it does not consider that the attorney
could capitalize the account with his own funds to remain compliant.106
Although this puts the attorney’s own money at risk, this could represent a
necessary cost of doing business in order to take advantage of the arrangement.
Further, attorneys would be deterred from offering these deals unless they had
a reasonable basis for believing they could handle all the work.
The final issue raised by the Indiana Ethics Committee involves the costs
of the actual advertisement.107 Specifically, the Committee is concerned with
fee-splitting and the reasonable costs of advertising.108 Although fee-splitting
with a non-lawyer is generally allowed for advertising purposes,109 this only
applies to advertising that is appropriate under Rule 7.2.110 The opinion finds
that this is not ethical advertising under the Indiana Rules because: (1) it
102. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012); INDIANA RULES OF PROF’L CONDUCT R.
1.15(c) (2013).
103. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012); INDIANA RULES OF PROF’L CONDUCT R.
1.15(d) (2013) (“Upon receiving funds or other property in which the client or third person has an interest, a
lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by
law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or
other property that the client or third person is entitled to receive and, upon request by the client or third
person, shall promptly render a full accounting regarding such property.”).
104. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012). The Committee then backtracks, stating
“[it] believes that this type of arrangement would not violate the Rules” in situations where the client directly
pays the lawyer and “the client paid a nominal fee for this coupon, in line with the reasonable costs of the
marketing.” Id.
105. See Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012) (“If the lawyer gave a refund to [the
prospective client with the coupon] the lawyer does not have [the client’s] money to return to her. If the
lawyer gave a refund to [the prospective client] out of his Trust Account, this would violate the Rules, because
he would be paying [the prospective client] with his other client’s funds.”). See generally INDIANA RULES OF
PROF’L CONDUCT R. 1.15(a), (c) (2013) (explaining that advanced payments for legal fees must be placed in a
separate trust account for that client and can only be withdrawn when these funds are earned).
106. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012); see also infra Parts III.B.3–4 (discussing
abilities of attorney to issue refunds in different states).
107. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012).
108. Id.
109. Id. (“Advertising normally would not be a violation of fee sharing.”).
110. See INDIANA RULES OF PROF’L CONDUCT R. 7.2 cmt. 4 (2013) (allowing “a lawyer to pay for
advertising and communications permitted by this Rule”).
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amounts to illegal channeling of professional legal work111 and (2) the costs of
the coupon are not reasonable.112 Considering that many of the online coupon
companies will charge up to fifty percent113 of the coupon price for their own
fees, the Committee does not find this to be a “reasonable” cost of
advertising.114 The Committee fails to determine what represents a reasonable
cost of advertising; therefore, any further attempt to comply with this opinion
would be uncertain at best.
In summary, Indiana finds three fundamental issues with the deal-of-theday coupon, which implicate various Ethical Rules. First, the purchaser
initiates the attorney-client relationship at the time the coupon is bought,
stripping the attorney of his independent judgment and preemptive conflictchecking abilities.115 Second, the fact that the company will take some of the
purchase price completely precludes the lawyer from fully refunding the
client’s money in certain situations when the lawyer cannot ethically complete
the work.116 Third, since the company is retaining half of the purchase price
and channeling work to a specific attorney, this amounts to unreasonable
advertising costs and violates the fee-splitting rule.117
2.
Alabama
Similar to Indiana, the Alabama Disciplinary Commission concludes that
advertising with deal-of-the-day websites “violates or potentially violates a
number of rules of professional conduct.”118 This decision rests primarily on
the nature of the company’s percentage fee of the coupon, the inability of the
lawyer to fully refund a client’s money if necessary, and a general concern
with the failure to effectively manage the clients he or she retains via this
advertising.119
Many of the concerns posited by the Indiana Ethics Committee are
reiterated in the Alabama opinion.120 The Commission first rejects the
argument that this is simply a form of advertising rather than fee-sharing
111. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012); see INDIANA RULES OF PROFESSIONAL
CONDUCT R. 7.2 cmt. 4 (2013) (“Lawyers are not permitted to pay others for channeling professional work.”).
112. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012); see also INDIANA RULES OF PROF’L
CONDUCT R. 7.2(b)(1) (2013) (permitting only “the reasonable costs of advertisements or communications”).
113. See Bhanu, supra note 46, at 4 (noting that the website usually takes between thirty percent and
fifty percent of the customer’s total payment).
114. Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012) (“[T]he business models employed by
many of the online coupon providers do not ask the attorney to pay ‘reasonable costs.’ Rather, some of the
Companies ask for half of the fees collected. . . . [S]uch an arrangement violates Rule 7.2(b)(1), because the
fees being kept by the Company are not tied to the ‘reasonable cost’ of the advertisements.”).
115. Id.
116. Id.
117. Id.
118. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01; accord Ind. State Bar Ass’n Legal
Ethics Comm., Op. 1 (2012) (holding that deal-of-the-day legal marketing is “fraught with peril and is likely
not permitted”).
119. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01.
120. Id.; accord Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012).
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prohibited by Rule 5.4(a).121 The Commission reviews Alabama precedent set
forth in Alabama State Bar Ass’n v. R.W. Lynch Co., which held that lawyers
pooling resources to create a referral-based “Injury Helpline” was a
permissible form of advertising.122 The dispositive fact in the Lynch decision
was the flat-fee nature of the advertising according to the Alabama
Commission.123
Conversely, the Commission finds that the deal-of-the-day company’s
typical fifty percent splitting fee with the attorney is enough to depart from a
traditional flat-fee advertising arrangement and render the cost a fee-sharing
agreement rather than an advertising cost.124 Since deal-of-the-day coupon
advertising cannot be classified as an advertising expense, the Alabama
Commission concludes that engaging in this type of marketing would violate
Rule 5.4 as illegal fee-splitting with a non-attorney.125
The Commission’s opinion then draws a seemingly arbitrary line between
contingent-based and flat advertising fees. However, this is a distinction based
on form and not substance. According to the Alabama Commission’s
reasoning, an attorney could, hypothetically, pay well over half of what the
advertising produces, but it is deemed reasonable as long as it is a flat fee.126 It
may be the case that the advertising does not draw in any business; thus, the
cost of the arrangement is far greater than the benefit. A contingency-based
structure removes this up-front risk for the attorney; it ensures that the
advertising cost will only become a liability if, and only if, it produces an
increase in business.
Second, the Alabama Commission believes that the fee structure
established by deal-of-the-day websites also violates several professional
ethics rules because the attorney is unable to refund one hundred percent of the
client’s money, if necessary.127 If the lawyer had to terminate the attorneyclient relationship after the coupon was purchased, but prior to initiating the
work, the lawyer would only be able to refund the portion received after the
company’s deduction.128 Thus, the Alabama Commission concludes that the
attorney would retain half of the customer’s fee for not completing any work, a
121. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01; ALABAMA RULES OF PROF’L CONDUCT
5.4(a) (2013) (“A lawyer or a law firm shall not share legal fees with a nonlawyer . . . .”).
122. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01; see Alabama State Bar Ass’n v. R.W.
Lynch Co., 655 So. 2d 982, 984 (Ala. 1995) (“[T]he ‘Injury Helpline’ is a form of group advertising rather
than a lawyer referral service.”).
123. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01 (“In reaching its decision, the Court
noted that lawyers who participate in the helpline pay a flat-rate fee for the advertising, regardless of the
number of calls forwarded to them.” (citing Lynch, 655 So. 2d at 984 (Ala. 1995))).
124. Id.
125. Id.
126. See id. (relying solely on the flat-fee structure noted in Lynch for concluding that the Groupon fee is
unreasonable).
127. Id.; but see infra Part IV.C (proposing a plan for attorneys to provide a full refund to clients).
128. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01 (“[I]f the purchaser were to demand a
refund prior to any services being performed by the lawyer, the purchaser would be entitled to a complete
refund, regardless of the fact that half of the fees were claimed by Groupon. Failure to make a full refund
would be considered charging a clearly excessive fee in violation of Rule 1.5(a) [Fees] and/or failing to return
the client’s property as mandated by Rule 1.16(d) [Declining or Terminating Representation].”).
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“clearly excessive fee in violation of Rule 1.5(a),” or would fail to return all
the client’s property “as mandated by Rule 1.16(d).”129 Again, there is no
consideration of the possibility that the lawyer simply may pay out-of-pocket
to reimburse these clients.130
Third, the Alabama Commission speculates that this marketing
arrangement could violate Rules 1.1 and 1.3, pertaining to competence and
diligence of the lawyer.131 It reaches this conclusion based on a concern that
this marketing arrangement could generate too much work for the lawyer, thus
rendering him unable to effectively manage all of the new clients.132 Since the
lawyer will likely receive a rapid increase in the amount of clients and will be
unable to ethically turn down these clients, he or she will not be able to
diligently and competently manage the increased workload.133
First, the Commission ignores the reality of Groupon.com. The lawyer
can structure the Groupon sale so that it is limited to a pre-determined amount
of sales.134 The lawyer can simply establish up-front the maximum amount of
vouchers that are sold, thus minimizing the risk that he cannot handle the
influx of new work. Second, if the lawyer does in fact capitalize the client’s
escrow account with his own funds, it would be irrational for attorneys to jump
head first into this arrangement without doing their due diligence. It is in the
attorney’s best interest to determine the exact amount of new work he can
handle, because if he is forced to refund a large number of clients’ vouchers,
the entire arrangement will result in a sizeable loss.
B.
1.
State Advisory Opinions Permitting Attorney Marketing on
Deal-of-the-Day Websites
North Carolina
North Carolina’s State Bar Association released a 2011 Ethics Opinion
that raises potential concerns with the deal-of-the-day marketing arrangement,
but ultimately concludes that a lawyer may ethically engage in this business.135
129. Id.
130. See infra Part IV.C (explaining how an attorney can provide a full refund).
131. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01; ALABAMA RULES OF PROF’L CONDUCT
1.1, 1.3 (2013).
132. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01. The Commission finds that this would
jeopardize attorney competence rules “[b]ecause there is no meaningful consultation prior to the payment of
legal fees, the purchaser may be retaining a layer [sic] that does not possess the requisite skills or knowledge
necessary to completely represent the purchaser.” Id. Furthermore, the lawyer may not be able to diligently
represent clients if there is an influx of new work because “the lawyer may find that his caseload becomes
unmanageable.” Id.; see Bruce, supra note 24 (noting that in these arrangements there is a possibility that a
“sudden throng of new clients puts pressure on the ability to service existing full pay clients, and could harm
long term business relationships, if not handled well”).
133. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01.
134. See Groupon FAQs, GROUPONWORKS, https://www.grouponworks.com/merchant-resources/
FAQs (last visited Oct. 1, 2013) (explaining that Groupon provides “specialized calculators and a
knowledgeable staff” to help limit the amount of Groupon vouchers to be sold).
135. N.C. State Bar, Formal Op. 10 (2011).
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The opinion addresses and dispels several concerns raised by this practice.136
The opinion states that a lawyer may advertise on these websites, but must
provide certain disclosures, place the client’s funds in a trust account, and
consider the client’s prospective at the time of purchase.137
The North Carolina opinion considers the issue of a Rule 5.4 fee-splitting
violation, but looks to the comments section to bolster its conclusion.138 The
opinion reasons that comment one demonstrates that the purpose of Rule 5.4 is
only to prevent interference with the independent judgment of the lawyer. 139
The linchpin of the decision is that “there is no interaction between the website
company and the lawyer relative to the legal representation of purchasers at
any time after the fee is paid on-line other than the transfer of the proceeds of
the ‘daily deal’ to the lawyer.”140 The arrangement does not implicate the
independent professional judgment of the lawyer and, thus, does not frustrate
the intent of Rule 5.4 and cannot be considered an illegal fee-splitting
arrangement.141
The opinion instructs that certain disclosures must be provided prior to
purchasing the groupon in order to avoid a Rule 7.1 misleading advertising
violation.142 First, the attorney must have a stated price for the service such
that the discount is not “illusory.”143 Second, the voucher must explain that the
decision to hire a lawyer should be made after investigation into the lawyer’s
credentials, the relationship is contingent upon a conflicts check, and that
money will be refunded if a conflict of interest is ultimately discovered.144
Third, the client’s proceeds shall be considered advanced payment of legal fees
and placed in a trust account, either to be drawn upon as work is completed or
refunded if necessary.145
The opinion also binds the lawyer to several conditions if a refund is
136. Id.
137. Id.
138. See id. (“The purpose for the fee-splitting prohibition is not confounded by this arrangement.”).
139. Id. (“[T]he traditional limitations on sharing fees prevent interference in the independent
professional judgment of a lawyer by a nonlawyer.”). See also MODEL RULES OF PROF’L CONDUCT R. 5.4 cmt.
1 (2013) (“These limitations are to protect the lawyer’s professional independence of judgment. Where
someone other than the client pays the lawyer’s fee or salary, or recommends employment of the lawyer, that
arrangement does not modify the lawyer’s obligation to the client.”).
140. N.C. State Bar, Formal Op. 10 (2011).
141. See id. (“The purpose for the fee-splitting prohibition is not confounded by this arrangement.”).
142. Id.; see MODEL RULES OF PROF’L CONDUCT R. 7.1 (2013) (“A lawyer shall not make a false or
misleading communication about the lawyer or the lawyer’s services.”).
143. N.C. State Bar, Formal Op. 10 (2011).
144. Id.
The advertisement must explain that the decision to hire a lawyer is an important one
that should be considered carefully and made only after investigation into the lawyer’s
credentials. In addition, the advertisement must state that a conflict of interest or a
determination by the lawyer that the legal service being offered is not appropriate for a
particular purchaser may prevent the lawyer from providing the service and, if so, the
purchaser’s money will be refunded . . . .
Id. Until the lawyer is able to perform a conflicts of interest check, the “purchaser must be considered
a prospective client entitled to the protections afforded to prospective clients under Rule 1.18.” Id.
145. Id. (“The payments received by the lawyer from the website company are advance payments of
legal fees that must be deposited in the lawyer’s trust account and may not be paid to the lawyer or transferred
to the law firm operating account until earned by the provision of legal services.”).
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necessary.146 If the voucher “expires” then the lawyer must still provide the
work or refund the future advance payment.147 If the lawyer does not properly
price the coupon and it requires more work than anticipated to complete the
task, then the lawyer is still bound to the stated price.148 Arguably, the most
burdensome requirement is that if a refund is necessary, the attorney must
return the client’s money from the trust account and the money received by the
deal-of-the-day website.149 Thus, in the case of a fifty-fifty split with the
website company, the lawyer will accept a two-to-one risk that the lawyer can
ethically complete the purchaser’s transaction without having to terminate the
relationship.150 Provided that the attorney complies with these requirements
and is willing to internalize the risk of a conflict of interest, then the North
Carolina Ethics Committee concludes that this marketing arrangement is
acceptable under the Model Rules.151
2.
South Carolina
The South Carolina Bar Ethics Opinion also grants approval of attorney
marketing on “daily deal” websites, but cautions against certain ethical
problems that may arise if the attorney does not properly plan for them.152
This opinion reflects the notion that the attorney is in the best position to
determine how and when to address ethical issues that may arise with this
advertising.153
This opinion, like North Carolina’s, finds that the marketing arrangement
does not violate Rule 5.4 with regard to fee-splitting and reaches this
conclusion with two alternative explanations.154 In the first, the Committee
146. Id.
147. Otherwise, the lawyer receives a windfall upon the expiration date and receives a fee for not
completing any work, which is an “inherently excessive” fee. Id. However, upon expiration the lawyer “may
charge his actual rate at the time the service is provided but must give the prospective client credit for the
advance payment on deposit in the trust account.” Id.
148. Id. (holding that the lawyer must complete all work despite unforeseen overages in time “without
additional charge”).
149. Id. (“[T]he lawyer must refund the prospective client’s entire advance payment, including the
amount retained by the website company, to make the prospective client whole.”).
150. In the case of a $250 coupon, the lawyer would split the fee with the website. Id. Assuming that
the website will not return its share of the fee in this instance, if the attorney discovers a conflict of interest and
must return the full $250 to make the client full, he will return the $125 in the client’s trust account and have
to dip into his own pocket to cover the website’s $125 take. See id. (“Similarly, if upon consulting with a
prospective client the lawyer determines that the prospective client does not need the legal service or that a
conflict of interest prohibits the representation, the lawyer must refund the prospective client’s entire advance
payment, including the amount retained by the website company, to make the prospective client whole.”).
151. Id.
152. S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011) (cautioning lawyers to watch
out for logistical issues and maintain compliance with Rules 7.1 and 7.2).
153. This characterization of South Carolina’s approach is converse to Indiana and Alabama’s; in those
two states the opinions reflect the notion that since ethical issues may arise out of the use of daily deal website
marketing, the attorney must not be allowed to even venture down this path. Ala. State Bar Office of Gen.
Counsel, Ethics Op. 2012-01 (opining that the marketing arrangement is unethical because it “potentially
violates a number of rules of professional conduct”); Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012)
(concluding that this arrangement likely violates the ethical rules because it is “fraught with peril”).
154. S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011) (“The use of services as
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concludes that this arrangement constitutes an exception to Rule 5.4 since the
“fee” is only a reasonable cost of advertising.155 The nature of the payment
does not change the substance of the transaction.156
Alternatively, the Committee concludes that it is technically fee-splitting
with a non-lawyer, but it does not violate Rule 5.4 because it does not frustrate
the independent judgment of the attorney.157 Relying on comment one of Rule
5.4, the Committee concludes that the Rule is only violated when the feesplitting violates the independent judgment of the attorney.158
The Committee then proceeds to describe potential issues with this
marketing practice because of concerns with Rules 7.1 and 7.2, which relate to
advertising.159
Although the Committee reiterates that advertising
“effectiveness and taste . . . are matters of speculation and subjective
judgment,”160 the coupon must comply with Rule 7.1, and the communication
must not contain “any false, misleading, deceptive or unfair information about
the lawyer or her services.”161 Assuming that the lawyer also complies with
other standard practices, such as placing the advance fees in a client trust
account and performing a conflicts check,162 then the deal-of-the-day website
marketing arrangement is permissible according to the South Carolina Ethics
Advisory Committee.163
3.
New York
The New York Ethics Committee believes that daily deal marketing
websites present four main issues: Whether the arrangement is an improper
referral payment, whether the fee may be excessive, whether the advertising
may be false or misleading, and whether there is a premature formation of the
described in the facts does not violate Rule 5.4(a) prohibiting the splitting of a fee with a non-lawyer.”).
155. Id. (“The fee charged for use of its service . . . constitutes the payment of ‘the reasonable cost of
advertisements or communications’ permitted under Rule 7.2(c)(1) . . . .”).
156. Id. (“The fact that the charge for this form of advertising service is deducted up front by the
company rather than invoiced and then paid from the lawyer’s operating account does not transform the
transaction from the payment of advertising costs into an improper fee split.”).
157. Id. (holding that the arrangement is not a prohibited fee-splitting arrangement with a non-lawyer
when the site does not exercise control over the services provided by the attorney); see also N.C. State
Bar, Formal Op. 10 (2011) (“The purpose for the fee-splitting prohibition is not confounded by this
arrangement.”).
158. S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011); see also MODEL RULES OF
PROF’L CONDUCT R. 5.4 cmt. 1 (2013) (“These limitations are to protect the lawyer’s professional
independence of judgment. Where someone other than the client pays the lawyer’s fee or salary, or
recommends employment of the lawyer, that arrangement does not modify the lawyer’s obligation to the
client.”).
159. S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011) (“[T]he lawyer is cautioned
that the use of ‘daily deal’ websites must be in compliance with Rules 7.1 and 7.2.”).
160. Id. (quoting MODEL RULES OF PROF’L CONDUCT R. 7.2 cmt. 3 (2013)).
161. Id.; MODEL RULES OF PROF’L CONDUCT R. 7.1 (2013).
162. S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011) (“[T]he lawyer must ensure
that she is in compliance with Rule 1.15(c) which requires unearned fees to be deposited into a client trust
account . . . . [and] must address the logistical issue of how she will handle conflict of interest situations that
may arise under Rules 1.7 and 1.9.”).
163. S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011).
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attorney-client relationship.164 Provided that certain criteria are met, the New
York Committee concludes that a lawyer may market on these types of
websites.165
New York follows the approach of South Carolina, concluding that the
fees paid to the website are a reasonable form of advertising, which is
protected by Rule 7.2.166 This determination hinges upon the hands-off
approach of the website within these arrangements.167 The website is simply
acting as an advertising outlet to potential subscribers, not attempting to
channel purchasers to a particular attorney.168 Thus, according to the New
York Committee the arrangement is a reasonable cost of advertising.169
In order to avoid violating Rule 1.5 for an excessive fee, the New York
Committee explains that a lawyer must return a full refund if the lawyer or
client terminates the attorney-client relationship.170 However, if the voucher
expires or the purchaser never redeems it, the Committee believes that the
attorney may retain the advance payment as a form of a retainer.171
The premature formation of the attorney-client relationship has been a
troubling scenario in most of the advisory committee opinions regarding this
advertising arrangement.172 The New York Opinion follows the South
Carolina conclusion and believes that this problem can “be avoided with
proper logistical arrangements and disclosures.”173 Proper disclosures on the
coupon website must indicate that the attorney-client relationship is contingent
upon: a conflicts of interest check, a determination that the lawyer is competent
to handle the desired services, and that a full refund will be provided if these
invalidate the coupon.174
Therefore, assuming that the lawyer’s advertisement provides these
disclosures and is not false or misleading,175 then the attorney can manage this
marketing arrangement without violating ethical considerations according to
164. N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011).
165. Id.
166. Id.; see also MODEL RULES OF PROF’L CONDUCT R. 7.2(a)(1) (2013) (“[A] lawyer may . . . pay the
reasonable costs of advertisements or communications . . . .”).
167. N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011) (“The website has not taken any
action to refer a potential client to a particular lawyer – instead it has carried a particular lawyer’s advertising
message to interested consumers and has charged a fee for that service.”).
168. Id.
169. Id. However, the Committee does not discuss the amount of the fee arrangement and whether or
not that is a reasonable amount. Id. It qualifies this conclusion by explaining that it rests upon the assumption
“that it is a reasonable payment for this form of advertising . . . . Different arrangements between the lawyer
and the website could lead to the opposite conclusion . . . .” Id.
170. Id. (noting that in circumstances such as a discovered conflict of interest, the Committee requires
the lawyer “to give a full refund, subject to any quantum meruit claim for services rendered prior to the
termination of the representation”).
171. Id.
172. See, e.g., id. (describing the danger of creating a lawyer-client relationship prior to a conflict
check).
173. Id.
174. Id. (“This arrangement should be disclosed as part of the coupon offer on the website, along with
any other information needed to avoid making the offer misleading in any way.”).
175. Id. (“Like all lawyer advertising, the ‘daily deal’ advertisement must not be false, deceptive or
misleading, Rule 7.1(a)(1).”).
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the New York Bar.
4.
Nebraska
Nebraska’s Advisory Committee similarly concludes that the use of dealof-the-day website marketing is permissible for attorneys, provided that they
comply with five explicit conditions.176 These restrictions replicate some, or
all, of the conditions provided in the ethics committee opinions in New York,
North Carolina, and South Carolina.177 The committee states that in order for a
lawyer to engage in this marketing arrangement:
(1) the Groupon must clearly identify the service being offered and
cannot be false, deceptive, or misleading;
(2) the Groupon must clearly disclose that no lawyer-client
relationship is established until after a conflicts check has been
performed;
(3) the Groupon must state that it is “advertising material;”
(4) payment received from Groupon must be placed in the attorney’s
trust account until earned;
(5) if the services cannot be performed due to conflicts, or if the
customer later decides not to utilize the service, the entire fee paid
by the customer must be refunded.178
In accordance with the other opinions, the Nebraska Committee dispels
the notion that Groupon advertising is an illegal sharing of fees with nonlawyers.179 In its opinion, this rule is only implicated if the advertising
company exerts an undue influence on the attorney, and the Committee
determines that Groupon does not.180 The Committee views this arrangement
as an advertisement rather than a referral.181
As an advertisement, the Nebraska Committee concludes that the groupon
must comply with Rules 7.2 and 7.3.182 However, the committee does not
determine what a reasonable percentage fee for advertising is.183 Considering
that Groupon charges a fee of fifty percent, a court could easily find this
unreasonable.184 The Committee explicitly states that the burden is on the
attorney to assure that the fee is reasonable.185 This ultimately adds another
176. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012) (allowing
the use of groupons, but only if five “ethical safeguards [are] taken”).
177. Id.
178. Id.
179. Id.
180. Id.
181. Id.
182. Id. (holding that the advertisement must not be false or misleading and must also be reasonable).
183. Id.
184. Id. (refusing to make a recommendation as to the level of percentage change that would be
appropriate in any given case).
185. Id. Although the opinion allows the marketing arrangement, the industry standard fifty percent fee
could easily fall outside of the realm of “reasonable.” Id. Considering that the committee places the burden on
the attorney to ensure this reasonableness, but does not suggest what a reasonable percentage is, there is still
some uncertainty involved in this advertising. Id.
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layer of uncertainty for Nebraska attorneys attempting to use deal-of-the-day
arrangements in the future.
In order to alleviate the problems with the advanced payment nature of
the groupon, Nebraska advises that the lawyer place the money from the
coupon into the client’s trust account until the work is completed.186 Further,
the committee places another burden on the attorney: if the client is entitled to
a refund of the fees, the attorney must cover the portion retained by the website
company.187
5.
Summarizing the Concerns of These States
The four advisory opinions offered by the Ethics Committees of North
Carolina, South Carolina, Nebraska, and New York share the conclusion that
online deal-of-the-day marketing arrangements are ethically permissible
provided certain provisions are met.188 These opinions use similar approaches
to deem that this arrangement is a reasonable form of advertising,189 that the
client is entitled to a full refund of the purchase price,190 and that the attorneyclient relationship is contingent until certain determinations are made.191
Concluding that these arrangements can be performed ethically, these states
place the onus upon the attorneys to ensure that they comply with the rules if
ethical issues arise out of these deals.
These four opinions are able to simultaneously balance both the
underlying principles of the Model Rules and the need for attorneys to leverage
technology in growing their practice.192 These opinions require that the
186. Id.
187. Id. (“[T]he attorney is responsible for returning the full amount paid by the purchaser, including the
amount retained by Groupon.”). This approach was similarly advised in the New York ethics opinion and the
North Carolina ethics opinion. N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011); N.C. State
Bar, Formal Op. 10 (2011).
188. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012)
(concluding that since the website does not exert undue influence on the attorney, there is no concern with feesplitting); N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011) (holding that unless the
advertisements are misleading or deceptive, they constitute a reasonable cost of advertising since the website
does not exercise any independent control of the attorney-client relationship); N.C. State Bar, Formal Op.
10 (2011) (holding that this arrangement reflects the reasonable cost of advertising because the lawyer retains
his independent judgment); S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011) (concluding
that the arrangement is a reasonable form of advertising and not impermissible fee splitting).
189. See supra note 188 and accompanying text.
190. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012) (“[T]he
entire fee paid by the customer must be refunded.”); N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op.
897 (2011) (concluding that the lawyer must give a full refund in certain situations where the attorney-client
relationship is terminated); N.C. State Bar, Formal Op. 10 (2011); S.C. Bar Ethics Advisory Comm., Ethics
Advisory Op. 11-05 (2011) (advising that certain considerations must be addressed by the attorney in order to
comply with aspects of Rule 1.5).
191. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012)
(“Groupon must clearly disclose that no lawyer-client relationship is established until after a conflicts check
has been performed.”); N.Y. State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011) (explaining what
elements need to be disclosed on the coupon in order for it to comply with the rules); N.C. State Bar, Formal
Op. 10 (2011) (“The lawyer has offered his services on condition that there is no conflict of interest . . . .”);
S.C. Bar Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011) (holding that certain disclosures should
be made in order to comply with the rules).
192. See ABA INTRODUCTION AND OVERVIEW, supra note 72, at 9 (stating that the principles are
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voucher contain explicit disclosures, which are designed to prevent false and
misleading adverting. Further, the confidence of each prospective client will
be preserved because the attorney will be able to run a full conflict-of-interest
check before the attorney-client relationship can be initiated. Finally, the
public will not be subject to undue influence of solicitation because Groupon
and other deal-of-the-day websites require users to actively engage in the
process.193 Indiana and Alabama, on the other hand, stray too far in the other
direction and stifle the expansion of technology in legal services.
The pro-Groupon opinions are far from a free pass into the realm of dealof-the-day marketing, but they do give the power to the attorney to control his
or her own destiny with regard to this arrangement. Although these four
represent a more liberal approach versus the inflexible advisory opinions of
Indiana and Alabama, they do not resolve all uncertainty in the matter. Most
importantly, none of the four committees would provide any bright-line
recommendation regarding what percentage retained by Groupon would
constitute an unreasonable advertising fee.194 If an attorney follows all the
prescribed conditions set forth in these opinions, but the fee is later determined
to be unreasonable, then the entire transaction could be deemed an ethics
violation by a court.195
“preventing false and misleading advertising, protecting the public from the undue influence of solicitations,
and safeguarding the confidences of prospective clients . . . .”).
193. See supra Part II.A.
194. All four opinions do not venture a recommendation but instead place the onus on the attorney to
determine whether or not the fee is a reasonable advertising cost. See generally State of Neb. Lawyer’s
Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012); N.Y. State Bar Ass’n Comm. on Prof’l
Ethics, Op. 897 (2011); N.C. State Bar, Formal Op. 10 (2011); S.C. Bar Ethics Advisory Comm., Ethics
Advisory Op. 11-05 (2011).
195. The advertising exception to a Rule 5.4 fee-splitting violation is contingent upon the cost
constituting a reasonable advertising fee. See generally MODEL RULES OF PROF’L CONDUCT R. 5.4, 7.2 (2013).
Thus, if the cost is not reasonable, Rule 5.4 could invalidate the transaction as an illegal sharing of fees with a
non-lawyer. E.g., N.C. State Bar, Formal Op. 10 (2011) (explaining how groupon usage interacts with
unethical fee-splitting).
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IV. RECOMMENDATION196
Although the majority of states’ ethics advisory committees have not
weighed in on deal-of-the-day marketing, a conservative stance on this issue
threatens to stifle the trend of online innovation in legal advertising. This is
especially true for solo practitioners and small firms that do not have the same
resources available to larger firms. The current regulatory scheme is unfit to
legitimately police current methods of Internet advertising. However, as the
four pro-Groupon opinions have demonstrated,197 it is possible to interpret
current ethics laws in such a way that allows the lawyer to responsibly use
these websites.
Moreover, these online marketing tools offer a relatively inexpensive way
of broadcasting a service to millions of potential consumers. They remove
significant barriers to entry for younger legal professionals attempting to enter
the market. These benefits can reduce a firm’s costs and pass these savings on
to consumers. The opportunities presented by Internet marketing overall are
unlimited. However, if practitioners fear ethical sanctions for exploiting these
new avenues, they will remain woefully underused.198
A.
Technology and the Regulation of Legal Advertising
Traditionally, there have been two general justifications for regulating
legal advertising: (1) protecting clients from being misled by attorneys and (2)
protecting the image of the legal profession.199 With regard to image concerns,
the Supreme Court has explained that a State’s desire to uphold the image of
196. While this Note was undergoing final revisions, the ABA weighed in on the issue of Groupon-style
advertising for lawyers. ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 465 (2013). In the
opinion, the ABA recognizes the benefits of such advertising, but nevertheless adds to the uncertainty of its
ethical compliance. Id. The ABA claims that there are two types of deals: “coupon deals” and “prepaid
deals.” Id. It concludes that the so-called coupon deals “can meet the requirements of the Model Rules[]” if
structured in a certain way, but it “is less certain that prepaid deals can be structured to comply with all ethical
and professional obligations under the Model Rules.” Id. Unfortunately, the deal supported by the ABA—the
coupon deal—is not in fact a true groupon arrangement. The ABA’s example of this deal is a lawyer that
charges an up-front fee for a coupon that entitles the purchaser to redeem the lawyer’s services for a
discounted hourly rate. Id. The attorney simultaneously pays a marketer to advertise this coupon. Id. This is
not a groupon because it does not utilize collective purchasing, which requires a large number of up-front
purchasers committed to the entire service in order to justify the deep discounts offered by the firm. See supra
Part I.A. This coupon deal is simply a basic advertising arrangement, analogous to a firm paying a newspaper
to advertise a sale price for goods or services. The ABA’s so-called “prepaid deal” describes the true groupon
arrangement, which has myriad advantages described in this Part based on the collective purchasing theory.
Unfortunately, since the ABA remains uncertain as to whether or not these deals are Model Rules compliant,
the opinion does little to encourage this arrangement or provide a concrete resolution to the issue. ABA
Comm. on Ethics & Prof’l Responsibility, Formal Op. 465 (2013).
197. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012); N.Y.
State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011); N.C. State Bar, Formal Op. 10 (2011); S.C. Bar
Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011).
198. See Dreiling, supra note 21, at 29 (detailing the fight between Texas and the FTC regarding a state
ethics ruling which forbade lawyers from using the online market tool LegalMatch, a site designed to help
match lawyers with new clients).
199. Fred C. Zacharias, What Direction Should Legal Advertising Regulation Take?, PROF. L. SYMP.
ISSUES 45, 51–53 (2005).
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attorneys cannot necessarily trump the right to free speech.200 Moreover, the
reality is that regulating legal advertising has little bearing on actually
improving the image of the profession.201
Curbing misleading advertising focuses on minimizing the danger that
clients will consult the wrong attorneys and ensures that lawyers do not gain an
unfair advantage over each other.202 However, relying on a traditional scheme
of regulation while advertising technology continues to evolve carries with it
the risk that these justifications will be misapplied.203 Traditional means of
regulation are inappropriate for Internet advertising because such advertising is
fundamentally different from the prior forms of media advertising that the
regulations were designed for.204 Thus, Internet advertising cannot be
appropriately regulated under the guise of the traditional regulatory scheme.205
If regulators and state bars continue to apply regulations designed for dated
methods of advertising or if they interpret current laws from a conservative
perspective, there is a danger that legal professionals will be discouraged from
using innovative Internet advertising.
The ABA has recognized that the ethics rules need to be modified in
order to encompass technological improvement.206 The ABA noted that
“[t]echnology is changing the way that clients find lawyers. The Internet
provides immediate access to information about lawyers through search
engines, websites, blogs, and ratings and rankings services.”207 Recently, the
ABA has taken steps to recognize the increasing role of the Internet in client
development.208 The ABA has recommended proposals that will allow lawyers
to leverage technology in order to provide clients with cost effective
services.209
The ABA recently announced that the Rules require updating in order to
specifically address the issues of online marketing services.210 The ABA
realizes that lawyers are increasingly using technology to reach out to
prospective clients and that this movement should not be stifled so long as the
200. Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 648 (1985).
201. See Zacharias, supra note 198, at 51–53 (arguing that it is unlikely that regulation of advertising
will cure negative stereotypes about lawyers, especially considering that negative press, television, literature,
and gimmicky advertising are all working against this objective).
202. Id. at 54.
203. Id. at 55.
204. See id. at 56 (referring to the “blitz effect,” which characterizes the quantity and ease of Internet
advertising, and Internet anonymity, which allows users to change or delete information without a trace).
205. See id. (explaining that the blitz effect and anonymity of Internet advertising requires a new method
of regulation). See generally ABA INTRODUCTION AND OVERVIEW, supra note 72 (advocating for changes in
the Model Rules reflecting the changes in Internet technology).
206. ABA INTRODUCTION AND OVERVIEW, supra note 72, at 1 (“Since [2002], communications and
commerce have become increasingly globalized and technology-based.”).
207. Id. at 5.
208. See generally ABA Comm. on Ethics 20/20, Resolution 105B (2012), available at
http://www.americanbar.org/content/dam/aba/administrative/ethics_2020/2012_hod_annual_meeting_105b.aut
hcheckdam.pdf (amending rules to include terms such as “Internet” and “email”).
209. ABA INTRODUCTION AND OVERVIEW, supra note 72, at 3.
210. Id. at 9.
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principles underlying the Rules are preserved.211 Thus, clarifying language
must be added in order to provide guidance to lawyers using these
technological resources.212
B.
Accepting Economic Realities and Supporting the Movement
into Solo Practice and Smaller Firms
After the 2008 recession, the overall economic downturn caused dips in
market growth across the board in the legal community.213 The transactional
work that was the bread-and-butter of the largest firms dried up.214 These
firms could no longer support pre-recession entry-level hiring rates.215
Simultaneously, smaller firms lost clientele, government jobs were lost to
budget cutbacks, and the trickledown effect continued.216
Admittedly perhaps more by necessity than choice, new law graduates are
entering the workforce as solo practitioners.217 Regardless of the motivation, it
appears that this statistic will continue to grow, as new job prospects are
bleak.218 Larger corporations have even used the economic realities to
pressure large firms into offering lower prices and alternative billing
methods.219 Considering that the legal labor market forces young attorneys
into solo practice, the Internet is an obvious way to grow a new practice at a
relatively inexpensive cost.
Internet advertising allows lawyers to access new potential clients that
have been underserved by traditional advertising methods. Large law firms
have already tapped into the benefit of online marketing tools to increase
productivity.220 While large law firms are able to leverage technology for
more complex objectives, smaller-scale practitioners require more basic
tools.221 Instead of deal-tracking programs, online conferencing, auction sites,
and proposal generation systems, small firms and solo practitioners need
simpler resources to market to potential clients. Unfortunately, the websites
developed for these purposes are consistently under the scrutiny of ethical
211. Id.
212. Id.
213. See HILDEBRANDT, supra note 4, at 2.
214. See Leipold, supra note 9, at 6.
215. Id.
216. Id. at 7.
217. Id. at 8.
218. Debra Cassens Weiss, A ‘Mild Uptick’ in 2012 Legal Hiring Doesn’t Keep Pace with U.S. Job
Growth, A.B.A. J. (Jan. 22, 2013, 8:15 AM), http://www.abajournal.com/news/article/a_mild_uptick_in_
legal_hiring_doesnt_keep_pace_with_us_job_growth (explaining that job growth for lawyers is slower than
the growth in overall employment).
219. See Patrick G. Lee, Pricing Tactics Spook Lawyers, WALL ST. J. (Aug. 2, 2011),
http://online.wsj.com/article/SB10001424053111904292504576482243557793536.html (detailing how large
corporations having been using a reverse auction method to drive down the price of large-scale legal services).
220. Sue Stock Allison & Leslie Meagley, Tracking Law Firm Marketing Technology, 34 L. PRAC. 35,
36–37 (2008) (outlining the various technologies used for purposes of client relationship management, deal
tracking/productivity, online conferencing, social networking/alumni networking, and proposal generation).
221. See id. at 37 (noting that, when examining product use by firm size, results showed that larger firms
more often use the newer and more expensive technologies while smaller firms often use more basic
technologies).
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review.222 Smaller-scale firms and solo practitioners should have the ability to
access cutting-edge Internet marketing tools to grow new practices. Marketing
tools, such as deal-of-the-day websites, can benefit these firms and solo
practices by lowering start-up costs, providing more competitive fees to
clients, and accessing new markets.
1.
Lowering Start-Up Costs
It should come as no surprise that larger law firms spend the most money
on Internet marketing.223 These firms understand the importance of marketing
to their clients using the newest technology.224 The costs of marketing are
high, yet marketing to consumers is an integral aspect of driving a new
practice.225 With Groupon’s developed consumer base, lawyers can access a
larger amount of prospective clients at a lower cost versus directly marketing
to a similar amount of people.226 Solo practitioners and young attorneys trying
to drive a new firm need to maximize every dollar spent; this is especially true
in marketing.
Lawyers do not pay up-front to use Groupon, they pay out of each sale
that is generated on the website.227 In the case of traditional advertising, such
as on a bus stop bench, billboard, or TV commercial, the lawyer may pay a
large up-front fee for advertising.228 This fee is not necessarily proportionate
to the advertisement’s success in creating new clients.229 Lawyers can make a
hefty up-front investment on one of these advertisements with no guarantee
that they will see a return on that investment.230 On the other hand, the cost of
deal-of-the-day arrangements is directly proportional to the amount of sales
that the coupon generates.231 Thus, this arrangement lowers up-front costs and
presents less initial risk to the attorney.232
2.
Providing Lower Fees to Clients
The costs of legal services are rising at an alarming rate—twice as fast as
222. See supra Part III (discussing the pushback to deal-of-the-day deals); see also Dreiling, supra note
21, at 28–29 (explaining the ethical challenge to LegalMatch and similar sites).
223. Allison & Meagley, supra note 219, at 36.
224. See id. (noting that between one-third and nine-tenths of firms surveyed believe that their Internet
marketing is “highly effective”).
225. See id. (stating that budget constraints are the most common barrier preventing firms from
instituting new marketing technologies).
226. Uptal M. Dholakia & Gur Tsabar, A Startup’s Experience with Running a Groupon Promotion 13–
14 (May 1, 2011) (unpublished manuscript) (on file with Jones Graduate School of Business, Rice University),
available at http://ssrn.com/abstract=1828003 (detailing how a start-up company running a Groupon
promotion requires low up-front investment compared to advertising on the newspaper or TV, because the
only up-front cost is maintaining inventory to fill orders).
227. Id.
228. See id. (discussing the costs of various advertising options).
229. Id.
230. Id.
231. See Bruce, supra note 24 (explaining that companies such as Groupon make their money by taking
a portion of the proceeds from sales of coupons that are later redeemed at the business).
232. Dholakia & Tsabar, supra note 225.
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inflation in the prior decade.233 This has caused commentators to suggest
several avenues for reform.234 While this may have to be addressed at the front
end, such as decreasing the cost of legal education, price can also be driven
down at the back end. Utilizing innovative online marketing services could be
one method to drive down the cost of legal services.
The foundation of Groupon is to use “collective purchasing” to provide
lower costs to a great number of purchasers.235 This method comports with the
economics of starting up a law firm. When the firm is young and has few
clients, the marginal cost of providing service to another client is decreasing
compared to the increase in revenue.236 In order to take advantage of
economies of scale, the new firm needs to increase the amount of service it
provides. Groupon’s “collective purchasing” arrangement emphasizes the
power of group purchasing and has the power to drive this rapid expansion of
new clients.237
3.
Accessing a New Supply of Clients
According to the Pew Internet & American Life Project, an estimated four
million people used the Internet to search for legal services in 2006.238 This
number was expected to jump to seven million by 2007.239 With Internet
browsing capabilities on smart phones, televisions, tablets, and other devices,
this growth is only increasing.240 The ability to reach these potential clients is
integral to developing or sustaining a legal practice. Internet marketing tools,
such as Groupon, have the ability to provide access to these consumers and
bolster new or struggling firms.241 The Groupon website boasts that ninetyone percent of its users already returned or plan to return to the merchant again
for repeat business.242 Creating loyal clientele is crucial for a law firm of any
233. America’s Lawyers: Guilty as Charged, ECONOMIST (Feb. 2, 2013), http://www.economist.com/
news/leaders/21571141-cheaper-legal-education-and-more-liberal-rules-would-benefit-americas-lawyersandtheir?fsrc=scn%2Ffb%2Fwl%2Fpe%2Fguiltyascharged.
234. See id. (discussing the possibilities of shortening the length of law school, allowing outside
investment in law firms, or making law degrees available through undergraduate studies).
235. Bhanu, supra note 46.
236. See Microeconomics—Marginal and Average Total Cost Curves, INVESTOPEDIA,
http://www.investopedia.com/exam-guide/cfa-level-1/microeconomics/marginal-average-total-costcurve.asp#axzz2NAQAKmKl (last visited, Oct. 1, 2013) (explaining that the marginal cost curve and the total
cost curve for a company will initially decrease as the fixed costs are spread over the course of a larger number
of units). The fixed costs of starting up a law firm include office space, furniture, research material, office
products, and other various business expenses. These costs will accrue regardless of whether or not the firm
has any revenue.
237. Bhanu, supra note 46, at 2.
238. Dreiling, supra note 21, at 28.
239. Id.
240. See generally FINDLAW, ADVANCED MARKETING STRATEGIES FOR LAW FIRMS 9 (2009) (white
paper), available at http://www.lawyermarketing.com/assets/Advanced-whitepaper.pdf (“The Internet has
changed the marketing landscape for attorneys and law firms need to re-evaluate how they connect with new
clients in the digital world.”).
241. See Our Solutions, GROUPONWORKS, https://www.grouponworks.com/merchant-solutions (last
visited Oct. 1, 2013) (stating that Groupon offers “the most effective local marketing available today”).
242. Why Groupon?, GROUPONWORKS, https://www.grouponworks.com/why-groupon (last visited
Oct. 1, 2013).
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size.
One comprehensive study of a start-up company running a Groupon
promotion found that this technique most notably provided a large increase in
“exposure value” to the company.243 This led to repeat customers, who were
initially captured by the Groupon promotion but returned later to pay the full
price.244 Notably, the authors of this study concluded that the subject
company’s lack of reputation was key to achieving results with this
promotion.245 This predicts that a Groupon promotion could achieve
maximum potential for new attorneys, who are starting practices without any
reputational capital in the local economy. Young attorneys without an
established reputation can penetrate a new market by competing solely on price
rather than with reputation. Further, they can target a younger, underserved
demographic that is generally more price sensitive.246
C.
Dispelling the Concerns of the Indiana and Alabama Opinions:
How to Ethically Advertise on Deal-of-the-Day Websites
Based on the economic realities, state disciplinary committees should
promote the use of deal-of-the-day legal advertising. This will encourage
lawyers to embrace innovative legal marketing in the future. The state ethics
bars and attorneys can employ a framework that ensures that these websites do
not run afoul of the spirit of the ethics rules.
The Alabama ethics opinion echoes the concerns of the Indiana
opinion.247 Their shared concerns can be compiled into three basic categories.
First, the attorney-client relationship initiates at the time of purchase; thus, the
lawyer cannot complete a conflicts check prior to representation, independent
judgment is limited, and competence and diligence may be implicated.248
Second, Groupon keeps half the money; thus, the lawyer cannot issue a full
refund if necessary, rendering the fee excessive and unlawfully retaining the
client’s money.249 Third, the fee charged by the website is unreasonable for
advertising, representing an unethical splitting of fees under Rule 5.4.250
243. Dholakia & Tsabar, supra note 225, at 14 (“[T]he Groupon promotion had a significant exposure
value, amounting to a lift of 140% of baseline sales over the duration of the promotion.”).
244. Id. at 15.
245. Id.
246. Jack Marshall, U.S. Groupon Users Skew Younger than LivingSocial’s, CLICKZ.COM (June 13,
2011), http://www.clickz.com/clickz/news/2078607/groupon-users-skew-livingsocials (noting that the
majority of Groupon users are aged 18–44).
247. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01; Ind. State Bar Ass’n Legal Ethics
Comm., Op. 1 (2012).
248. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01; Ind. State Bar Ass’n Legal Ethics
Comm., Op. 1 (2012).
249. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01 (holding that this arrangement can
violate Rule 1.5(a) as an excessive fee and Rule 1.16(d) by failing to issue a full refund); Ind. State Bar Ass’n
Legal Ethics Comm., Op. 1 (2012) (holding that this arrangement can violate Rule 1.16(d) by failing to issue a
full refund).
250. Ala. State Bar Office of Gen. Counsel, Ethics Op. 2012-01 (distinguishing the current marketing
plan from Alabama State Bar Ass’n v. R.W. Lynch Co. because of the fee structure and concluding that it is not
a reasonable advertising cost); Ind. State Bar Ass’n Legal Ethics Comm., Op. 1 (2012) (concluding that
No. 2]
INNOVATIVE INTERNET-MARKETING FOR LAWYERS
421
These concerns can be preserved without blindly preventing lawyers from
attempting to use these sites, as the four pro-Groupon opinions suggest.251 The
following framework complies with the spirit of the ethics rules and ensures
that the client is afforded protection from misleading advertisements but allows
the attorney the autonomy to decide whether he or she is able to effectively use
these arrangements.
First, the groupon must state several disclosures. This is highly
compatible with the Groupon.com website, as groupons typically include a
section of “fine print” that is openly explained to the consumer.252 This
disclosure will explain that the groupon is subject to a conflicts-of-interest
check and that, in the event of a conflict, the attorney will refund the full
purchase price. It will further highlight that the purchaser is entitled to a full
refund if the voucher is not redeemed for any reason.
Second, the lawyer must escrow a sum of money that would represent the
client’s full purchase price charged by the website. This ensures that the client
can be refunded the entire purchase price in the event that the lawyer cannot
complete the work, there is a conflict of interest, or the client declines the
services. This escrow forces the lawyer to dip into his own pocket to cover the
risk that the groupon must be refunded. Therefore, lawyers will only use these
arrangements if they know that they can diligently and competently handle all
the potential work that the groupon will create.
The current regime of legal ethics must be amended in order for attorneys
to take full advantage of technology in legal advertising. This can be
accomplished in the following ways: (1) states should issue (or reissue)
advisory opinions that follow the framework of New York, North Carolina,
South Carolina, and Nebraska; (2) the ABA should continue to amend the
Model Rules to provide more latitude for the use of technology, specifically in
Internet marketing; and (3) more clarity needs to be provided with regard to
what objectively constitutes an unreasonable fee. Even if the ethics
committees determine that the current fifty-percent sharing agreement is
unreasonable, providing a bright-line percentage could encourage Groupon to
lower its fee for its legal users, or another website could use a deal-of-the-day
approach but arrange an ethically reasonable percentage fee.
V. CONCLUSION
The delivery of information to the legal consumer is changing along with
advances in technology. “Gone are the days when consumer clients pick up
splitting a fee in half with a deal-of-the-day website is not reasonable advertising).
251. State of Neb. Lawyer’s Advisory Comm., Ethics Advisory Op. for Lawyers 12-03 (2012); N.Y.
State Bar Ass’n Comm. on Prof’l Ethics, Op. 897 (2011); N.C. State Bar, Formal Op. 10 (2011); S.C. Bar
Ethics Advisory Comm., Ethics Advisory Op. 11-05 (2011).
252. See generally Rules for All Merchant Offers Purchased Through Groupon, GROUPON,
http://www.groupon.com/pages/universal-fine-print (last visited Oct. 1, 2013) (explaining the rules of each
groupon in a “fine print” section which is candidly displayed in normal-sized font).
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[Vol. 2013
the Yellow Pages to find a lawyer . . . .”253 While larger firms are able to
leverage new technology to cut costs for corporate clients, smaller firms and
solo practitioners face ethical pushback when trying to use innovative Internet
marketing, such as deal-of-the-day websites.254 Recent ethics advisory
opinions, such as those in Indiana and Alabama, exemplify how a closeminded approach to innovation can stifle new opportunities for up-and-coming
attorneys.255 Using the Internet to market services in innovative ways will
attract new legal consumers, lower costs to these consumers, and help young
attorneys and solo practitioners grow their practice.
The current uncertainty surrounding the ethics of this advertising should
be reconsidered. Granting lawyers the ability to market on deal-of-the-day
websites in an ethical and structured way has the potential to pay dividends to
the legal field as a whole. Amid a recession and an uncertain legal
marketplace, these considerations are increasingly important to ensure the
viability and success of smaller firms and solo-practitioners.
253. Nicole Black & Carolyn Elefant, Social Media for Solos and Small Firms: What It Is and Why It
Matters, 83 N.Y. ST. B.A. J. 18, 19 (2011).
254. See supra Part IV.B.
255. See supra Part IV.C.