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                                        132 N.J.L.J. 267
                                        October 5, 1992

                                        1 N.J.L. 1588
                                        October 12, 1992


Appointed by the New Jersey Supreme Court


Attorney Participation in Cooperative
or Commercial Advertising Programs

    Since publication of Opinion 6, 126 N.J.L.J. 894 (October 4, 1990), jointly issued by the Advisory Committee on Professional Ethics as Opinion 645, this Committee has received numerous inquiries from attorneys who have been solicited by, or have themselves established, entities which advertise and in some way refer clients to participating attorneys. The entities differ from one another in varying degrees, yet they all have a primary purpose of generating clients for participating attorneys. They have also steadfastly maintained that they are not lawyer referral services.
    Given the number of inquiries we have received, it is apparent that an additional opinion is necessary to answer certain questions left unresolved by Opinion 6. Although we will be focussing our attention on three particular programs, this opinion has general application to similar situations that may arise in the future.
    The first program characterizes and bills itself as a "talking yellow pages." Participating attorneys pay a flat monthly fee for what are initially exclusive rights to zip code-defined geographical areas. The fee is not subject to adjustment or rebate, or otherwise related to the number of clients or potential clients who call them or retain their services. However, in the event a "guaranteed" minimum number of contacts is not met, the attorneys' listing periods are extended until the contractual provision is satisfied. The "listing agreement" between the attorney and the entity mentions that the attorney will be placed on the "reference list."
    Each attorney must complete a questionnaire providing such information as educational background, professional credentials and achievements, any discipline imposed, areas of law in which cases will be accepted, fees, office hours, office location, office and emergency telephone numbers, foreign languages spoken and professional and client references. This information is not reviewed or evaluated by the program in order to determine eligibility for participation. Rather, it is the information that will ultimately be provided to callers responding to the program's television advertisements.
    When a prospective client responds to a television advertisement and calls the program's toll-free number, the caller is provided with the name and background information of an attorney located within the zip code area of the caller's home or business. In the event there is more than one participating attorney in a given zip code area, names are chosen on a rotational basis. If, for whatever reason, the caller does not wish to contact the attorney whose name has been provided, he or she is given the name and background information of another participating attorney in the same or nearest zip code. The names of the participating New Jersey attorneys are scrolled rapidly at the end of the program's broadcast advertisements which also include the following statement: "When you call [the program], we will provide you with a choice of lawyers."
    The second program, which characterizes itself as a "lawyer cooperative," describes its service as follows:
        The 1-800[number] cooperative allows subscriber attorneys to advertise their services as personal injury attorneys in a particular location while simultaneously sharing the advertising expenses. [The program] is not engaged in the practice of law. [The program] is not a lawyer referral system. [The program] does not screen calls in any way [sic] whatsoever. [The program] directs call [sic] through a computer system directly to member law-firms based on the phone number of the consumer. NXX numbers correspond generally to specific geographic territories. Rates are based on population within subscriber's territory.

    Specifically, subscribing attorneys pay a flat monthly fee plus "pass-through" telephone charges for exclusive rights to geographic areas loosely defined by New Jersey counties and New York boroughs. In the event of overlapping caused by the presence of more than one county in a given area code, subscribers are granted the rights to specific three digit exchanges.
    When a prospective client responds to a television advertisement and calls the toll-free number, a pre-recorded message asks the caller to punch in his or her area code and three digit exchange. A computer then automatically routes the call to the office of the attorney owning the rights to the given exchange. If the caller misdials the area code or three digit exchange, or does not respond to the computer's prompt quickly enough, the call is directed to the program's business office. A program representative requests the caller's name, address and telephone number and provides that information to a subscribing attorney who in turn calls the prospective client "as if the call [had come] directly to that attorney in the first place."
    The third program characterizes itself as a cooperative advertising plan which would enable a number of attorneys to advertise "under a common banner." As envisioned, participating attorneys would pay a flat annual fee or a flat fee plus a percentage of the attorney's total annual income. The program's fee would not be related in any way to the number of responses or amount of billings generated by the advertising.
    All advertisements, regardless of the medium, will focus on a particular area of the law (e.g. real estate; personal injury; wills, trusts and estates) and be limited in content to a message concerning the competence and professionalism of the participating attorneys. Prospective clients will be instructed to consult the program's display advertisements in the Yellow Pages for the names, addresses and telephone numbers of participating attorneys. During the period of time it will take to place advertisements in the various editions of the Yellow Pages, program advertising will include a toll-free telephone number. Prospective clients calling this number will be asked for their names and addresses and will be sent a complete list of participating attorneys in their county or state. With the exception of the Yellow Pages display advertisements, there will be no scrolling or listing of participating attorneys' names in program advertising.
    Participating attorneys will be authorized to use the program's trade name and corporate logo on letterhead, business cards and signage, as well as in all individual advertising, "as allowed by the Rules of Professional Conduct."See footnote 1 1
    The three situations illustrate how this type of activity has elements of both a lawyer referral service and advertising. To the extent that an enterprise has advertising elements, it is fully subject to the strictures of RPC 7.1 and RPC 7.2. In particular, we note that an attorney may not, by advertising through a consortium, collective, or any other kind of group or association, be involved in any kind of advertising activity which would be prohibited if the attorney advertised directly. Cf. Opinion 8, 127 N.J.L.J. 753 (March 21, 1991). An attorney remains responsible for the ethical propriety of all advertising with which he or she has any connection or involvement. The remainder of this opinion, however, will address the question of how to determine whether these and similar schemes constitute improper lawyer referral services.

    The framework for considering this conduct is set by RPC 7.3(d) and (e). In RPC 7.3(d), a lawyer is barred from giving compensation or anything of value "to a person or organization to recommend or secure the lawyer's employment by a client," except that a lawyer "may pay for public communications permitted by RPC 7.1," and "usual and reasonable fees or dues charged by a lawyer referral service operated, sponsored, or approved by a bar association." In a parallel vein, RPC 7.3(e)(3) exempts from a general prohibition on allowing others to promote the use of the lawyer's services "a lawyer referral service operated, sponsored, or approved by a bar association."
    The primary motivation for the prohibition against giving compensation for recommending a lawyer historically has been the desire to protect the public from unscrupulous and undignified solicitation practices. RPC 7.3(d) and (e) represent New Jersey's own recrafting of several source rules, most notably former DR 2- 103 and DR 2-104, and ABA Model Rules 7.2(c) and 7.3(a).
    Regulation of activities concerning referral services may be considered a more specific application of this general concern. On the one hand, advertising and lawyer referral, done properly, can provide useful information and guidance to individuals in need of legal assistance. The opportunities in such activities for inappropriate conduct, however, are evident.
    Bar association referral services have been operating for much of this century, and are known and understood by a significant portion of the public. While New Jersey has no formal standards for these county-based services, and while the degree of screening varies widely (there is at best only screening by the legal subject area, not quality or competence), these services carry an aura of legitimacy, executing a public purpose of putting people in touch with lawyers. At the least, they are viewed as even-handed, policed by the collective scrutiny of the local organized bar. While national studies suggest that only a fraction of the public is aware of these services, those individuals who are may be assumed to view them as objective and worthy of reliance.
    The key to the regulatory activity in this area is to discern the dividing line between acceptable advertising ("public communication") and a prohibited referral service. To do so, it is necessary to consider the factors which distinguish referral activity, namely:
    1.    Limited access to information. Unlike an advertising medium such as the Yellow Pages, consumers interacting with referral services do not have access on their own to the entire list of participating attorneys. Rather, this access is controlled by the referral source. Scrolling of names on a television screen at a pace far too rapid to allow retention or even recognition is a current illustration of this limited access.
    2.    Directive conduct. Explicitly or implicitly, referral services guide consumers to specific attorneys. Unlike Yellow Pages or even public media advertising, there is a directing intermediary, not just an encounter between the consumer and the passive information made available by the attorney. This directive conduct tends to invite from the consumer a sense of reliance.
    3.    Public purpose. The historical regulation of referral services has invested the existing bar-related services with an aura of public purpose. While there is undeniably a business intent on the part of participating lawyers, the bar association and non- profit (in the ABA Model Rules) trappings connote an overriding public purpose of putting people in touch with lawyers, rather than making money for the referral service. While a profit-making referral service may not be inherently flawed (if it is a way to finance the provision of more information to consumers), the temptation to make the greatest possible profit from the fee to lawyers for entry onto the referral list cuts sharply against a public purpose of providing the greatest possible amount of information about the largest possible number of lawyers. Concern about this primary commercial purpose of a profit-making referral scheme may be assumed to undergird RPC 7.3's limitation of impermissible referral activities to those affiliated with bar associations. We recognize that non-profit referral services not affiliated with bar associations might well serve a similar public purpose.
    Under these criteria, the first two of the subject programs, while undeniably containing significant aspects of advertising, are also referral services. The third, since it ostensibly provides the consumer with a list of all participating attorneys, arguably is more advertising collective than lawyer referral service. Since neither of the first two are in any way affiliated with or approved by a bar association, lawyer association with them is improper under the express language of RPC 7.3(d) and (e). The third runs the risk, because of its design, of being confused with a lawyer referral service. In any situation where its advertisements appear alone, not accompanied by or placed among other attorney advertisements (as would be the case with the Yellow Pages), the ads must be accompanied by the phrase "ATTORNEY ADVERTISEMENT, NOT A LAWYER REFERRAL SERVICE," prominently and effectively displayed in capital letters.
    We observe, however, that a per se bar on such activities may tend to restrict the flow of some useful information to the public. In the future, it may be important to consider modification of RPC 7.3(d) and (e) so as to permit referral service activities by legitimate non-profit organizations. Consideration also might be given to moving away from a blanket prohibition on commercial referral services, instead requiring the effective "ATTORNEY ADVERTISEMENT" label even for those which do include elements of referral services, although we do not endorse such an approach at this time.

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Footnote: 1 1Including the program's trade name and corporate logo on letterhead, business cards and signage, as well as in all individual advertising, may be problematic. Cf. Opinion 10, 129 N.J.L.J. 270 (September 26, 1991).

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