Ethics Opinon 1975-13

September 25, 1975

SUBJECT: ADVERTISING LEGAL SERVICES AT REDUCED RATES

I
QUESTION PRESENTED

A private business concern advertises, as part of a "package" of products and services which it offers, legal services at reduced rates. What are the ethical considerations in such advertisement and in the offering of such services?

II
SUMMARY

Assuming that the private business concern is not a nonprofit organization, any attorney participating in such a plan faces the following probable ethical violations:

(a) The interposing of a third party between attorney and client.
(b) The giving of something of value to a third party in order to secure employment by offering his services at reduced or discount rates.

(c) The possibility of being considered as having shared legal fees with a nonlawyer.

(d) The influence of compromising influences and loyalties to the detriment of his client.

(e) The accusation of using a "capper" or "runner" to procure clients.

The organization in question faces the following possible violations of the California Business and Professions Code:

(a) Acting as a "capper" or "runner" on behalf of attorneys.

(b) The unauthorized practice of law.

III
STATUTES AND CANONS

Canon 2 of the Code of Professional Responsibility of the American Bar Association provides that a lawyer should assist the legal profession in fulfilling its duty to make legal counsel available. However, the disciplinary rules applicable to this Canon impose strict limitations as to the means by which such legal counsel may be publicized and solicited. Canon 3, in addition, provides that a lawyer should assist in preventing the unauthorized practice of law. And Canon 5 warns that a lawyer should exercise independent professional judgment on behalf of a client. Rules 3, 20, and 23 of the Rules of Professional Conduct of the State Bar of California prohibit (1) the employment of another to solicit employment for any attorney, (2) the furnishing of legal services by a member of the State Bar to a member of a group if such group derives a profit therefrom either directly or indirectly and (3) the furnishing of prepaid legal services to other than a nonprofit organization.

Section 6125 of the California Business and Professions Code prohibits anyone from practicing law in the State of California unless he is an active member of the State Bar and Sections 6152, 6153, and 6154 of that Code make it unlawful and provide for the punishment of "cappers." Section 6151 defines a runner or capper as ". . . any person, firm, association or corporation acting in any manner or in any capacity as an agent for an attorney at law . . . in the solicitation or procurement of business for such attorney at law . . .

IV
INFORMAL OPINIONS

Informal Opinion No. 1236 of the Committee on Ethics and Professional Responsibility of the American Bar Association, although it deals with the operations of a nonprofit organization (as opposed to this case in which it is assumed that the organization has a profit-making motive), is nevertheless analogous in almost all other respects and a substantial part of the pertinent portion of it is therefore quoted as follows:

"We address ourselves . . . to the . . . issue which is whether the arrangement by which the attorney would render services to members at a discount would be proper. DR 2?103(B) of the Code of Professional Responsibility states that, except for situations that are here irrelevant, 'A lawyer shall not . . . give anything of value to a person or organization to recommend or secure his employment by a client . . .' In our opinion the proposed arrangement contravenes DR 2-103(B) because the attorney under the proposed arrangement, in exchange for its recommendation of him to its members, would be giving the club a thing of value -- namely, the ability to provide its members with another type of savings, legal services at a discount."

Based on the foregoing, the Committee reached the conclusion that it would be unethical for an attorney to participate in such club activities by providing his professional services to club members on a reduced rate or discount basis.

Informal Opinion No. 1212, although not nearly so on point as the previously cited opinion, deals with a broker-appraiser employing lawyers to represent third parties and much of its opinion bears directly on the question at hand. In part, the Opinion states:

"Disciplinary Rule 3-102(A) provides as follows: . . . A lawyer or law firm shall not share legal fees with a nonlawyer."


And, further:

"EC 5-1 'The professional judgment of lawyer should be exercised, within the bounds of the law, solely for the benefit of his client and free of compromising influences and loyalties. Neither his personal interests, the interests of other clients, nor the desires of third persons should be permitted to dilute his loyalty to his client.'"

The Opinion concluded that it would be improper for a lawyer to enter into an attorney-client relationship through such a third party. There are two considerations here. First, it is assumed that a profit making organization offering legal services is thereby realizing at least some sum of money by such a transaction. This could readily be interpreted as the sharing of fees by the lawyer with the nonlawyer organization acting as the third party intermediary between the lawyer and his future client. Second, there is at least the possibility that the lawyer will have neither free selection as to whether or not he wishes to accept such clients nor would he have full freedom of action once such clients have been accepted. Either would be an ethical violation, the Opinion states, because of the fact that a third party is interposed between the attorney and the client.

Informal Opinion No. 1234, also relevant in part, quotes DR 2-103(D) which states:

"A lawyer shall not knowingly assist a person or organization that recommends, furnishes, or pays for legal services to promote the use of his services or those of his partners or associates."

Rule 23 of California's Rules of Professional Conduct modifies this only to the extent that it applies to nonprofit organizations.

An opinion of the San Diego County Bar Association, EO 1974-20, dated November 11, 1974, rejected as unethical two plans which contemplated the advertising by a corporation, either formally or informally, of the fact that legal services were available to its customer through a firm which would then give a reduced rate to such customers.

V
ANALYSIS

Informal Opinion No. 1236 has stated that it is unethical for an attorney to agree to offer to members of a club his services on a reduced rate or discount basis. Informal Opinion No. 1212 has prohibited the sharing of fees with a nonlawyer and has further concluded that it would be an ethical violation to interpose a third party between attorney and client. Informal Opinion No. 1234 prohibits an attorney from assisting an organization which recommends or promotes his legal services. And a recent San Diego County Bar Association opinion concurs in the fact that it would not be ethical for an attorney to participate in a plan in which a third party offers his services at reduced or discount rates. From a purely statutory point of view, the California Business and Professions Code makes it unlawful for an organization, with certain limited exceptions not applicable here, to solicit or procure business for attorneys.

This opinion is advisory only. It is not binding upon the State Bar, the Board of Governors, its agents or employees.

EDITOR'S NOTE: State Bar Rule 3 is now found in Rule 2-104 and 3-101 through 3-103, and Rules 20 and 23 are found in Rule 2-104.


Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.