Online Coupon Deals: Client Magnet or Ethical Headache?

With the continued growth of social media and technology, attorneys have taken creative approaches to tap into the Internet to attract clients. Efforts have included establishing “Blawgs” in addition to simple staples like firm websites. Electronic coupon deal sites such as Groupon and LivingSocial have become a new forum that some attorneys have chosen to utilize to stimulate business. However, attorneys must tread with exceptional care through the ethical landmine involved with using such coupon sites to gain clientele. ABA Formal Opinion 465, issued on October 21, 2013, expresses that while the ABA Standing Committee on Ethics and Professional Responsibility “believes that coupon deals can be structured to comply with the Model Rules,” there are “numerous difficult issues associated with prepaid deals” and the Committee is less than certain “that prepaid deals can be structured to comply with all ethical and professional obligations under the Model Rules.”

The opinion indicates that although the main concern is compliance with Rule 1.5, which governs attorney’s fees, numerous other ABA Model Rules are also implicated, including Rule 1.15, proper handling of fees; Rule 1.3, diligence; Rule 1.1, competence; Rule 5.4, fee sharing; and Rules 7.1, 7.2, and 7.3, information about legal services. The opinion even states that attorneys must take into account issues that may arise due to conflicts of interest, which implicates Rules 1.7, 1.9, 1.18. Some states have also opined on the use of Groupon, including Alabama, New York, North Carolina, South Carolina, Indiana, and most recently Arizona, which came to a similar conclusion as the ABA.

 The main issues with using these coupon sites concerns the proper management of advance legal fees that can only be collected when an attorney-client relationship is formed. According to Rule 1.15, such advance fees must be identified by each purchaser’s name and deposited into a trust account; each purchaser of a coupon must provide specific information in order for attorneys to comply with this requirement. Furthermore, the opinion highlights financial risks that attorneys must take into account when legal services are not used or performed due to conflicts of interest; and in many of these situations, the opinion states that the money must be refunded in full to the purchaser, including whatever fee the coupon dealer retained from the purchase transaction. Other issues the opinion considers include compliance with advertising rules, communication of clearly defined scope of services that the attorney is offering, and the presence of disclaimers specifying that no attorney-client relationship exists until there is an actual consultation between the attorney and the purchaser.

The takeaway from the opinion is that these coupons create a whirlpool of ethical considerations. Though the benefits and potential business are very attractive, the risk of violating professional obligations is not something to be ignored.

To read the ABA article on the opinion, click here. To read prior blog-posts on how states have handled the ethical issues arising from electronic coupons, click here.[/learn_more]


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