Rutgers School of Law, OAL case opin06

126 N.J.L.J. 894
October 4, 1990

ADVISORY COMMITTEE ON PROFESSIONAL ETHICS

COMMITTEE ON ATTORNEY ADVERTISING

Appointed by the New Jersey Supreme Court

JOINT OPINION

Opinion 645 - Advisory Committee on Professional Ethics

Opinion 6 - Committee on Attorney Advertising

Attorney Membership and Participation in
Joint Advertising/Client Referral Programs

A number of inquirers have raised several questions relating to the practice of two out-of-state organizations, hereafter A and B, which advertise in New Jersey. The advertisements invite members of the public who have specific types of legal problems, detailed below, to call a toll-free number and receive a referral to a New Jersey attorney. Since these inquiries involve matters within the jurisdiction of both the Advisory Committee on Professional Ethics and the Committee on Attorney Advertising, the two Committees are issuing a joint opinion in response.
The inquiries involve consideration of the conduct of both the non-New Jersey organizations and the New Jersey attorneys who are their members and are accepting their referrals. This opinion addresses the propriety of New Jersey attorneys being involved, and concludes that such involvement is improper, based upon the facts as they now appear.

FACTUAL BACKGROUND
    Three organizations are involved. One, A, concentrates on personal injury matters, and the other, B, on defense of driving while intoxicated cases. Both are based in a city in the southern United States. While both A and B claim to be nonprofit, no evidence has been offered to demonstrate this fact. There is no evidence that either is registered as a not-for-profit corporation in New Jersey. Both appear to be under the control of a third organization, C, which is a for-profit advertising agency. C collects a commission from A and B for all ads placed. This same advertising agency also appears to control a similar advertising/referral operation in the health care area. The ad agency apparently receives a 15% to 20% commission for all ads placed on the air.
    Both A and B follow very similar patterns:
    * Both solicit lawyers to become "members" by paying an initial fee of several hundred dollars, along with continuing monthly charges, also of several hundred dollars.
    * They promise in the attorney membership solicitation that they will spend "100% of all monies on advertising marketing expenses in local markets" specified in the "membership" contract.
    * They utilize advertisements for legal services in a variety of media, principally television messages which rely on dramatizations. These ads urge interested prospective legal clients to call a toll-free number. They state that incoming calls will be screened by a "trained paralegal," and then referred to an experienced member attorney in the prospective client's local area. Oral sales representations to a prospective member attorney by a representative of one of the organizations indicated that these "trained paralegals" make a determination (in the case of personal injury matters) as to whether, inter alia, the case involves "good liability and damages." These calls go to a city in the South. There is no evidence (i) that the calls are handled by attorneys, (ii) what the qualifications of the paralegals are, (iii) that the paralegals are supervised by any attorneys, or (iv) whether attorneys admitted and licensed to practice in New Jersey have any involvement in any training or supervision that may be conducted. No local or member attorney is identified by name in any advertisement.
    * They include language in the written materials soliciting attorney membership, and in some reported oral solicitations, stating that members will "receive three or four cases per month" as a result of the advertising. Plainly the inducement to member attorneys to spend as much as $700 per month is the promise of receiving such case referrals.
    * Their television advertisements to the public tout that the referrals will be to "experienced" attorneys. The membership requirements stipulate only that the attorney must have "participated in the resolution of at least 50% of the type of cases to be referred. There is no requirement of a minimum number of years of experience, trials, or other court appearances, nor any indication of what "participation in resolution" is supposed to mean.
    * Neither organization is affiliated with, or endorsed or sponsored by, any New Jersey bar association, or the New Jersey

Supreme Court.

FINDINGS AND CONCLUSIONS
    1. We find A and B are primarily lawyer referral schemes which utilize advertising. Lawyers pay fees to receive referrals of cases. The names of specific lawyers and/or law firms are not mentioned in the ads.
    2. A lawyer participating with A or B by paying money and accepting cases would violate RPC 7.2(C), in that the flow of payments to and apparent control by C, a for-profit entity, do not meet the not-for-profit requirements of that rule. Further, it is unclear whether A and B are, in fact, not-for-profit corporations, and whether they are properly authorized to do business in New Jersey. A lawyer considering giving anything of value to an organization for case referrals is under a duty to establish, before making such payment, that the organization meets the "not- for-profit lawyer referral service or other legal service organization" test of RPC 7.2(c).
    3. A lawyer paying money to A and B would also violate RPC 7.3(d), since neither entity is sponsored or approved by a New Jersey bar association. An attorney seeking to give anything of value to any entity for referring a case must establish affirmatively, before making any such payment, that the organization complies with RPC 7.3(d).
    4. The activities of the "paralegals" working for A and B may well constitute the unauthorized practice of law, in that (a) they appear to be acting without the direct supervision of a New Jersey attorney, and indeed, not even in a bona fide New Jersey law office, but in a distant state; and (b) they are asking potential clients questions about their legal cases or claims and making a determination thereon (as to, inter alia, whether it involves "good liability and damages"). This determination is communicated to the client, either explicitly or implicitly, by either giving the client a referral to a specific lawyer or declining to make such a referral. A lawyer accepting a referral under such circumstances would be violating RPC 5.5(b), by assisting a person who is not a member of the New Jersey bar in that person's unauthorized practice activities. A lawyer who contemplates paying money and accepting referrals based on the "screening" activity of an outside party bears affirmative responsibilities. The lawyer must first establish that the party is either a New Jersey lawyer or someone acting under the direct supervision of a New Jersey lawyer, in accordance with the Rules of Professional Conduct.
    5. A lawyer or law firm purchasing advertising which does not mention the lawyer or law firm by name, but which still leads to client referrals or other benefits to the lawyer or firm, remains fully bound by the ethical rules governing attorney advertising, RPC 7.1 through RPC 7.5. If a lawyer is deriving benefit from ads directed toward the general public, the ads must comply in all respects with the advertising rules.
    6. The ads relating to the screening and referral services of A and B, which presumably are placed by C, are potentially misleading under RPC 7.1 in that:
    (a) The ads use the term "experienced," when the minimum standards do not even require that the lawyer have ever appeared in court. This is exacerbated by the fact that the word "trial" appears in the name of organization A. We note that the use of advertising making claims about a large number of lawyers carries an especially high potential for misleading the public, because of the inevitable variations among the lawyers in ability, background, experience, and the like. Consequently, if the term "experienced" is to be used at all in a way that is not misleading, the standards for the term must be clear and articulated, must fully support the normal meaning of the term, and must be met by all of the lawyers covered by the claim.
    (b) Organization A's name also contains the words "lawyers association," which may mislead some members of the public into thinking that they are dealing with a traditional, broad-based bar association.
    (c) The use of the terms "screened" and "trained paralegal" are likely--and indeed appear designed--to raise an expectation in members of the public that their case will be reviewed by someone familiar with applicable New Jersey law before the matter is referred. This expectation is not correct.
    (d) The Supreme Court's new Attorney Advertising Guideline 1, effective September 4, 1990 (well after the dates of these inquiries), requires that an ad by an attorney or law firm include the bona fide street address of the attorney or firm. This Guideline requires that in the future any lawyer or law firm participating in generic advertising must ensure that the lawyer's or firm's name and street address is included in the advertisements.
    For the foregoing reasons, both Committees conclude that association or involvement of New Jersey attorneys with advertising and referral schemes possessing the characteristics outlined above would be improper.

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