Alabama State Bar Disciplinary Comm'n, Op. 2012-01
Key Guidance: Alabama lawyers would violate the ethics rule against
fee-sharing with nonlawyers and possibly other rules by using group coupon
websites to market their services.
Potential Impact: Casts a pall over lawyers' use of Groupon and
similar “daily deal” websites as a marketing tool in states that have not yet
addressed the issue.
By Joan C. Rogers
Alabama lawyers must steer clear of Groupon and similar “daily deal” websites
as a tool for obtaining new clients, the state bar's ethics commission has
advised (Alabama State Bar Disciplinary Comm'n, Op. 2012-01).
Contrary to opinions from several other state bars that have addressed this
subject, the commission concluded that a lawyer's use of such sites to sell
legal services violates the ethics rule against sharing legal fees with
nonlawyers, as well as the ethics rule requiring all unearned fees to be placed
into a trust account.
Lawyers who offer legal services through these sites also risk violating
rules on conflicts of interest, competence, diligence, and communication, the
The opinion addresses the ethical propriety of using Groupon and other daily
deal websites as a marketing tool for legal services. As described in the
opinion, these websites typically send consumers an email offering the
opportunity to purchase a certificate for services or products from a retailer
at a discounted rate of at least 50 percent.
For example, the commission related, a law firm might agree to sell a coupon
entitling the purchaser to $500 worth of legal services for a discounted rate of
$250. A purchaser would pay the website $250 and receive a certificate for $500
to redeem legal services with the law firm. The website would keep half of the
revenue--$125 in this example--and remit the remaining $125 to the law firm.
New York, North Carolina, and South Carolina have issued opinions approving
lawyers' use of websites like Groupon, but an Indiana opinion disapproved of
such sites. All of these opinions have acknowledged that marketing discounted
legal services through these sites is fraught with potential peril, the
The commission found that the chief ethical impediment to lawyers' use of
daily deal websites such as Groupon is Alabama Rule of Professional Conduct
5.4(a), which prohibits lawyers from sharing legal fees with nonlawyers.
Agreeing with Indiana Ethics Op. 1 of 2012, 28 Law. Man. Prof. Conduct 153,
the commission concluded that the share of fees websites of this type keep
cannot be justified as a reasonable cost of advertising permitted under Rule
7.2(c). The sites do not charge a flat-rate fee or even a fee based on the
website's traffic, but instead take a percentage of each and every purchase and
charge an amount not tied in any manner to the “reasonable cost” of the
advertisement, the commission explained.
In reaching this conclusion, the commission drew heavily on Alabama State
Bar Ass'n v. R.W. Lynch Co., 655 So. 2d 982 (Ala. 1995), which held that an
“injury helpline” touted in a television commercial was a permissible form of
group advertising rather than a forbidden referral service. The court in that
case pointed out that participating lawyers paid a flat-rate fee for the
advertising regardless of the number of calls forwarded to them, the commission
The commission was unconvinced by North Carolina Ethics Op. 2011-10, 27 Law.
Man. Prof. Conduct 744 (2011), and South Carolina Ethics Op. 11-05, 27 Law. Man.
Prof. Conduct 570, which found that the portion of fees retained by daily deal
websites is merely an advertising cost.
New York State Ethics Op. 897, 28 Law. Man. Prof. Conduct 15 (2011), did not
address the fee-sharing issue, the commission said.
The commission also pointed out that under the fee model Groupon uses, half
of the legal fee the customer pays is claimed by Groupon at the time of
purchase. This makes it impossible for the lawyer to place the entire unearned
legal fee into trust as required by Rule 1.15(a), the commission observed.
The opinion also states that a participating lawyer would be obligated to
make a full refund to a purchaser who demanded his money back before any legal
services were provided, regardless of the fact that half of the fees were
claimed by Groupon. Failure to make a complete refund would be viewed as
charging a clearly excessive fee in violation of Rule 1.5(a) or as failing to
return the client's property as required by Rule 1.16(d) when a client's
representation ends, the commission advised.
In addition to those problems, the commission said, a lawyer's participation
in daily deal websites could:
the lawyer in potential conflicts of interest among the lawyer's former and
current clients, due to the inability to perform any conflict check before the
payment of legal fees by the potential client;
in violations of Rule 1.1, which requires competent representation, because the
lawyer would have no opportunity to determine his ability to represent each
purchaser before being hired; and
an unmanageable case load that keeps the lawyer from complying with Rule 1.1
(competence), Rule 1.3 (diligence), and Rule 1.4 (communication with
The commission pointed out that a lawyer would be bound to honor all
purchases made through sites like Groupon under Rule 7.2(f), which requires
lawyers who include fees in their advertising to provide the advertised service
at the advertised rate.
Full text at http://www.alabar.org/ogc/PDF/2012-01.pdf.
The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.
Copyright 2012, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.