[NOTE: POST UPDATED 11/8/09 at 2:30 pm. Jump to end of post for updates]
Turns out that at least three of the five Connecticut lawyers who are the subject of a disciplinary proceeding for their participation in Total Bankruptcy.com‘s haven’t completely been hung out to dry as I described in my earlier post. I received an email from Total Attorneys’ founder, Ed Scanlan (which I’ll publish as a comment to the earlier post) in which he described that the company is paying the costs of representation for its attorney customers caught up in this mess.
Even better, I’ve just come across a copy of the Pre-Hearing Response filed on behalf of three of the Connecticut respondents by David Atkins and Marcy Tench Stovall of Pullman & Comley, that knocks the Disciplinary Counsel’s case right out of the park. In my view, the Pullman & Comley effort is more persuasive than the Total Attorneys Response (which I hadn’t really read closely until now). Pullman & Comley offer a detailed explanation of how the Total Attorneys site works as well as a tight analysis focusing on the precise language of the ethics rules at issue. By contrast, the Total Attorneys’ response reminds me a bit of the “analysis-lite” of the Bush torture memos. Just as the Bush memos attempted to justify the previous Administration’s harsh interrogation methods in the name of national security and the President’s broad powers as Commander-in-Chief, likewise, the Total Attorneys Response suggests (perhaps unintentionally) that because its pricing model is part of the great wave of innovative and enlightened Internet-enabled marketing practices, conventional ethics standards must give way to progress. Given the heavy hitters who authored and signed the Total Attorneys’ Response (including a law professor and an ethics and professional responsibility “consultant” among others), the end product is surprisingly lightweight on the issues that matter most and as discussed below misses the most persuasive argument.
The Critical Distinction Between Referring and Recommending
As the Pullman & Comley Pre-Hearing Response emphasizes, the Connecticut attorneys are charged with a violation of Connecticut Ethics Rule 7.2, which according to Disciplinary Counsel, “prohibits an attorney from providing anything of value to another person in exchange for a client referral.” But Disciplinary Counsel’s charges ignore the actual language of the rules (don’t you just hate it when the darn code gets in the way of a neat theory?). Specifically, Rule 7.2 states, in relevant part that:
(c) A lawyer shall not give anything of value to a person for recommending the lawyer’s services, except that a lawyer may:
(1) pay the reasonable cost of advertisements or communications permitted by this Rule;
(2) pay the usual charges of a not-for-profit or qualified lawyer referral service. A qualified lawyer referral service is a lawyer referral service that has been approved by an appropriate regulatory authority;
As Pullman & Comley argues, there’s a significant difference between a “recommendation” (which is prohibited conduct if paid for by the lawyer) and a for-fee referral which is not. Dictionary.com defines refer as “directing to a source for information,” whereas recommend means “providing a favorable statement of character or qualifications.” The Total Bankruptcy sites refer clients to lawyers by asking them to provide a zip code, at which point clients are referred to the sponsoring attorney’s website for that geographic location. (Response at 10). But Total Bankruptcy doesn’t recommend or endorse any of the Sponsoring Lawyers – a fact that is highlighted in the site’s terms of service [as well as the site’s disclaimer (update, 11/8/09]..
The distinction between a “referral” and “recommendation” makes all the difference. For starters, Disciplinary Counsel can only charge lawyers if they’ve violated a rule. Rule 7.2 very explicitly prohibits lawyers from giving something of value for recommendations, not referrals. Since Total Attorneys doesn’t recommend lawyers, seems to me that the case is closed right there.
Disciplinary Counsel conflates the meaning of recommend and refer, treating them as synonymous. Yet, think about it logically: if Rule 7.2 prohibited lawyers from giving anything of value to a person for “referring” a lawyer’s service, the Rule would render unethical every for-fee lawyer directory, included the venerable Martindale Hubbell. Directories “refer” users to a lawyer’s website or phone number and lawyers pay a fee for inclusion for the very purpose of receiving those referrals. (As an aside, it occurs to me that under the Disciplinary Counsel’s theory, a listing service like Martindale-Hubbell, which now charges users $59 to list favorable ratings would be unethical. A Martindale Rating is a peer recommendation by third parties; by paying Martindale for this recommendation, wouldn’t lawyers violate Rule 7.2?)
Total Attorneys Response Misses the Point, Favoring Sexy First Amendment Arguments Over Dull Parsing of Verbiage
The Total Attorneys Response barely mentions the referral versus recommendation distinction (if at all). Instead, the Response launches into broad platitudes about the First Amendment (which, incidentally, is invoked 53 times compared to the 7 times for “recommendation” and “recommend”) and the wonders of the brave new world of Internet marketing and its potential to empower solos and small clients alike. Now, I’m as much of a fan of the First Amendment and 21st Century internet marketing as anyone, but those issues are more appropriately raised in a court than presented as the focal point of a Disciplinary Proceeding. In fact, it’s apparent from the Disciplinary Counsel’s Order that it must have tired of Total Bankruptcy’s propaganda given Counsel’s harsh rejection of Total Bankruptcy’s policy argument that:
the company “saves attorneys time they might otherwise spend on generating leads and in turn frees them up to participate in pro bono.”
To which Disciplinary Counsel retorts:
None of the five respondents in these cases have claimed that because of their payments for clients to Total Lawyers, they were able to spend more time in public service. And Total Bankruptcy has not made any claim that there is empirical evidence of an upswing in charitable acts by attorneys since its website’s inception.
Total Bankruptcy Is Not Operating As A Referral Service
To generate operating revenues, most state bars run referral services and seek to barricade their monopoly from competition. As such, virtually every state bar prohibits third parties from running for fee referral services. The definition of a referral services, however, tracks the language of Rule 7.2 in that a referral service does not passively forward names, but rather, collects information and recommends a lawyer based on that intake.
Both Pullman & Comley and Total Bankruptcy argue fairly persuasively that Total Bankruptcy does not operate as a referral service. They compare the service to 1-800 Lawyers, Injury Hotlines and other types of cooperative advertising ventures where clients call and are referred to lawyers who have purchased a particular geographic area. Disciplinary Counsel argues that the Injury Hotline scenario is distinguishable because Hotline does not evaluate clients’ claim.s Disciplinary Counsel notes that by collecting data on clients’ financial condition (through an optional form), Total Bankruptcy is evaluating the case, which transforms the service into an unlawful referral operation.
Pullman & Comley explain that clients aren’t required to complete these forms. Further, any information gathered is not used to refer the cases (which are distributed by zip code alone) but rather, are passed on to assist lawyers who accept the cases by providing information on clients.
Disciplinary Counsel’s apparent belief that worker bees are personally evaluating consumers’ claims and handpicking specific lawyers to handle the cases not only shows a misunderstanding of how Total Bankruptcy works but portends a troubled road for Internet based referral services. As technology improves, computers can scan an intake form and assign a client to a suitable attorney with more accuracy than a live person. To me, this type of system would improve referrals by providing an objective option for assignment. Thus, a computer-selected referral system would be superior to state run referral services which might send the best cases to big honchos in the bar or the assigning clerks’ friends. (I’m not suggesting that a computer generated referral should substitute for due diligence by clients or personal referrals by other lawyers. But if the choices are only bar referral or computer generated referral, to me, the latter option is preferable).
A referral based system that assigns lawyers based on keyword matches does not provide a recommendation, merely a referral based on objective criteria. This is much the same as gmail, where computers scan the words in email to select appropriate ads – but live people are not reading the mail. Most lawyers, however, do not understand the capabilities of technology. Thus, many lawyers criticized gmail for not preserving client confidentiality because they actually thought that individuals at Google were reading emails and figuring out where to place ads. Likewise, lawyers need to realize that much of the referral process can be automated and made more accurate through computer systems – but the fact that a computer sorts through information does not mean that it is making recommendations. Only human beings can do that.
The Total Bankruptcy Rates Are Reasonable
Section 7.2 (c)(2) provides that notwithstanding the bar on “giving something of value for recommendations,” attorneys are allowed to pay the reasonable cost of advertisements permitted by the Rule. In a situation where a lawyer pays more than “reasonable cost” for ads, the authors of the rule must have assumed that the above market component, though disguised as advertising, was really intended as a recommendation fee.
The Pullman & Comley brief and the Total Attorneys brief explain the breakdown of Total Attorneys’ $65 cost per click: in addition to marketing, it covers Total Attorneys’ back-end call service and client management system. But I think there’s a much easier answer. I took a look at Google Adwords’ Cost Estimator and priced the cost per click (CPC) for the term “bankruptcy” in Hartford and New Haven, Connecticut. According to the Estimator, the CPC is between $4.49 and $6.26, with the assumption that my ads will generate up to 4 clicks daily, assuming a budget of $30/day. That means, I could expect to pay $900 for 120 clicks. Though that’s more than Total Attorneys’ $750/month, it’s not unreasonable. Moreover, Total Attorneys will also provide contact information for many of these clicks, which Google ads does not.
So even though Google ads produces more clicks, the conversion rate is likely far less. In other words, we’re not talking about advertising fees that are either out of the ordinary or tied to the results of a particular case (such as one Connecticut scenario, described here in Opinion 89-5. There, the Grievance Committee nixed a motorcycle trade group recommended lawyers to members in exchange for a cut of any resulting contingency settlements. According to the summary description, the Grievance Committee found that the fee was not just for advertising but for a recommendation. Though I haven’t seen Opinion 89-5, my guess is that the bigger issue was fee splitting.
Does A Ruling Against Total Bankruptcy Really Harm the Solo?
As the last bastion of the employed within the legal profession, solo and small firm lawyers and practice are awfully popular with for fee service providers these days. Total Bankruptcy’s memo urges that cracking down on its cooperative advertising scheme would devastate the solo:
Total Bankruptcy’s model helps provide attorneys in solo practice or small-sized law
firms with the advantages of modern Internet performance-based advertising. Large law firms with prodigious marketing budgets already have the purchasing power, acting unilaterally, to purchase certain key search words (“keywords”) from search engine companies such as Google. As a result of such purchases anytime those words appear in a user’s search, the law firm’s ad, in the form of a “link”, will appear as a sponsored link on the screen. It would discriminate against
those segments of the legal profession engaged in solo practice or small-firm practice, to deny those attorneys the opportunity to take advantage of the same performance-based advertising opportunities that large firms enjoy. So too, such discrimination works against those members of the public most likely to need the services of lawyers in small firms or solo practice. There ought not be any class bias or wealth bias to the application of the Rules of Professional
I don’t mean to criticize the services that Total Attorneys’ provide to solos. The company has proven itself a friend of solos with its services and Total PMA venture (plus, it deserves mega-kudos for paying the cost of defense in these cases). But come on! Solo and small firm lawyers aren’t a band of idiots who lack the capability to establish Internet presence without paying $750 a month to engage in a cooperative marketing venture. Moreover, claiming that solos are unsophisticated in Internet marketing doesn’t really help Total Attorneys’ cause. If anything, TA’s characterization of solos will subject to TA to increased bar scrutiny in a paternalistic effort to help the poor, not-too-savvy solo (just like the bars want to “help” us by requiring CLE and practice management training).
The solo stereotype that Total Attorneys portrays is belied by the very tool — the search engine — that the company believes solos lack the ability to make use of. If you search terms like “bankruptcy lawyer” and [geographic location], lots of individual solo websites come up even higher than Total Bankruptcy. And while certainly, some of these firms may have shelled out money to other marketing companies for SEO enhancement, many solo and small firms are creating a strong Internet presence through individual blogging and social media efforts. That’s not to say that solo and small firms shouldn’t collaborate, but they’re not going to go up in smoke if they don’t do it through mega-companies, nor are they precluded from teaming up colleagues to share marketing costs even if services like Total Attorneys weren’t around.
What Lies Ahead
After reading the Pre-Hearing Response, I’m confident that the Connecticut lawyers are in good hands and will almost surely prevail — if not at this lower level then up the chain at an appeals court.
I’m curious about the upcoming hearing. Will respondents provide a demonstration of how the site works in action and compare it to other tools? I certainly hope so. Perhaps they can bring in consumers who actually used the site and ask whether they believed that they were paying for a recommendation or more appropriately understood that the participating lawyers were paying sponsors. Stay tuned here for what’s to come.
UPDATE (11/8/09) ABA Blawg 100 Winner Mark Bennett of Defending People criticizes my view of this case and argues in this detailed post that the Connecticut 5 deserve discipline for having participated in a dubious marketing scheme out of greed. I refer you directly to Mark’s post because I don’t want to take Mark’s points out of context and because he describes how the site works from a consumers perspective. But I disagree with Mark for these reasons:
1. Even after a full test run of the site (I’d visited the site and poked around before, but hadn’t gone through the entire registration process), I continue to disagree that Total Bankruptcy makes a “recommendation.” First, the Total Bankruptcy disclaimer says that an attorney will evaluate information on financial means submitted at the option of site users. (On my computer, the disclaimer was clearly visible; that was not the case on the computer used by Mark’s colleague to run the test. Perhaps the site has been changed recently or perhaps there are browser-based differences). In the face of this disclaimer, it’s simply not reasonable for a consumer to conclude that the information will be used to make a recommendation of services. Further, once a consumer submits information, the site spits out the a link to a lawyer website immediately. Given the speedy response time, consumers will logically realize that there’s an automated process taking place, because three seconds isn’t sufficient time for a recommendation to be developed and transmitted.
2. After testing out Total Bankruptcy, I also checked Lawyers.com, the Reed-Elsiever owned property. Lawyers.com allows users to search for a lawyer by location and topic area and produces a list of several lawyers (which differs from Total Bankruptcy which only generates one lawyer’s name). The Lawyers.com results list differentiates between lawyers who are “peer reviewed” and unrated and includes the rankings for those who are peer reviewed. From a consumer perspective, the Lawyers.com rating system resembles a “for fee recommendation” far more than TotalBankruptcy because of the inclusion of “peer review ratings” for certain lawyers. Though lawyers don’t pay to obtain “peer review ratings,” they do pay Lawyers.com for a listing which displays those ratings. Moreover, the “peer review ratings” assume far more credibility as an endorsement because they are prepared by Martindale.com, a Lawyers.com affiliate. So should the Bars now go after all of the lawyers who list on Lawyers.com?
3. I completely agree with Mark’s position that consumer protection is paramount. But a lawyer initiated the TotalBankruptcy case, not a consumer. I’d give far more credence to the complaints against Total Bankruptcy if any client, even a completely and unjustifiably disgruntled one, had filed a the complaint. If the Connecticut Disciplinary Counsel is going to start punishing attorneys in the name of protecting consumers, shouldn’t there be some evidence, even anecdotal, of consumer harm?
4. I don’t take a position one way or another on the usefulness of sites like Total Bankruptcy or for-fee directories. I believe that they work for some lawyers, don’t work for others and that there are many, many ways for solo and small firm lawyers to find clients whether or not they partake of these services.
But I do strongly disagree with punishing lawyers with a disciplinary proceeding where the law is not clear and the bars offer limited options for attaining certainty. Most bars have been slow to address ethics in the context of Internet marketing practices and there are few guidelines to consult. In addition, many bars have already approved 1-800-LAWYERS and hotlines; TotalBankruptcy is not all that different. Finally, though I can’t speak for how the Connecticut system works, I know that in DC or Maryland, obtaining a ruling from disciplinary counsel on a proposed practice can take as long as a year. At a time when the Internet is changing at a rapid pace, a year is a long time to wait to obtain 100 percent certainty.
Also, while I agree with Mark that lawyers can’t outsource ethics, how far must lawyers go in exercising due diligence? As I’ve already conceded in a comment at Mark’s site, these lawyers probably should have done additional independent research instead of relying on TotalBankruptcy’s assurances of ethics compliance. Still, in this context, the attorneys can be excused to some extent because TotalAttorneys is a sponsor of ABA activities. I believe that it’s reasonable for lawyers to rely on services provided by companies that have been accepted as bar sponsors since I’ve always assumed that bar associations vet the legality and ethics of the products of those companies providing financial support. In other words, TotalBankruptcy isn’t some kind of fly-by-night Ollie’s cabdriver runner service, but a respected sponsor of the nation’s largest association of lawyers – and in my view, that makes reliance on its representation of the site’s ethical compliance reasonable.
5. Disciplinary Counsel had other options available than taking action on this complaint. For starters, Counsel could have used this proceeding to acknowledge uncertainty and to provide guidance prospectively. Disciplinary Counsel could have suggested that Total Attorneys increase the size of its disclaimer or included an added statement that “information on financial circumstances is optional and further, is not used to recommend lawyers.”
Despite Total Attorneys’ cries of First Amendment violations, the outcome of this case is going to focus on the technical elements of ethics violations, such as whether the lawyers intended to violate Rule 7.2 or whether any non-compliance caused harm to the public or the integrity of the attorney-client relationship. Sure, there’ll be discussion of the meaning of Rule 7.2, but it will be in the context of this specific matter. As a result, the ruling is unlikely to provide the kind of guidance that lawyers need to evaluate the ethics of Internet marketing issues moving forward. And that means that even if the Connecticut Five win, in the absence of guidance, all lawyers will lose.