ABA 2013-10-21

Can a lawyer sell legal services through a daily-deal or group-coupon site like Groupon?

Short answer: Coupon-style deals can be structured to comply, but prepaid deals are harder. The opinion concludes the marketer's retained percentage is an advertising cost (not fee sharing) if reasonable, and that prepaid funds are advance fees that must go into trust and likely be refunded if unused.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ethics opinion (PDF)

ABA Formal Opinion 465: Deal-of-the-Day Marketing Programs

Short answer: The opinion concludes that coupon-style deal-of-the-day marketing can be structured to comply with the Model Rules, but prepaid deals raise numerous difficult issues, especially the handling of advance legal fees, and the Committee is less certain those can be structured to satisfy all ethical obligations.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the American Bar Association's Model Rules of Professional Conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

Plain-English summary

The opinion distinguishes two structures. In a "coupon deal," the buyer pays a small sum for a discount and pays the lawyer additional fees as services are used; in a "prepaid deal," the marketing organization collects the entire fee and the lawyer receives no further payment. The opinion notes that "deal-of-the-day or group-coupon marketing programs offer an alternative way to sell goods and services," and that "truthful advertising, including that for legal services, is constitutionally protected commercial speech."

On fee sharing, the opinion treats the percentage the marketer retains as the cost of advertising and processing, not improper fee sharing under Rule 5.4, with "the one caveat" that "the percentage retained by the marketing organization must be reasonable" under Rule 7.2(b)(1). Advertising must not be false or misleading under Rule 7.1, and the lawyer must clearly define the scope of services and refund terms. The opinion stresses that "mere purchase of a deal for legal services does not make the buyer either a prospective client or a current client," so the relationship forms only after a consultation and a conflict and competence check under Rules 1.1, 1.3, and 1.18.

On handling the money, the opinion explains that coupon-deal proceeds are not legal fees and may go into the general account, while prepaid-deal funds are advance legal fees that must be identified by purchaser and held in trust under Rule 1.15(c). Unredeemed coupon-deal proceeds may be retained if a no-refund policy was disclosed, but prepaid-deal funds likely must be refunded to avoid an unreasonable fee under Rule 1.5. Where the lawyer cannot perform, for example because of a conflict, the full amount, including the marketer's retained portion, must be refunded, and that obligation cannot be waived by the offer's terms. As one cited opinion put it, the situation is "fraught with peril."

In practice

Under this opinion, a lawyer using a daily-deal site can treat the site's cut as an advertising cost so long as it is reasonable, but must keep prepaid fees in trust, identify them by purchaser, and be prepared to refund them. The opinion holds that buying a deal does not create a client relationship, that the lawyer must run conflict and competence checks before forming one, and that a lawyer who cannot perform must refund the entire amount paid, including the marketer's share.

Common questions

Q: Is the cut taken by a daily-deal site improper fee sharing with a nonlawyer?

A: Per the opinion, no, provided it is reasonable; the retained percentage is payment for advertising and processing under Rule 7.2(b)(1), not fee sharing under Rule 5.4.

Q: Does buying my deal make someone my client?

A: No. The opinion concludes mere purchase of a deal does not make the buyer a client or prospective client; the relationship forms only after a consultation and conflict and competence check.

Q: Where do the funds go, coupon versus prepaid?

A: The opinion says coupon-deal proceeds are not legal fees and may go into the general account, while prepaid-deal funds are advance fees that must be identified by purchaser and held in trust under Rule 1.15(c).

Q: What if I cannot take the matter because of a conflict?

A: The opinion holds the lawyer must refund the entire amount paid, including the portion the marketer kept, and cannot avoid this by the offer's terms.

Background and rules framework

The opinion interprets Model Rule 7.2(b)(1) (paying the reasonable cost of advertising) and Model Rule 5.4 (no fee sharing with nonlawyers), together with Model Rule 7.1 (no false or misleading communications). It applies Model Rule 1.15(c) (advance fees in trust), Model Rule 1.5 (reasonable fees), Model Rule 1.18 (prospective clients), and Model Rules 1.1 and 1.3 (competence and diligence).

Citations and references

Rules of Professional Conduct:

ABA Model Rule 7.2(b)(1); 7.1; 5.4
ABA Model Rule 1.15(c); 1.5; 1.18
ABA Model Rules 1.1, 1.3, 1.4(b)

Other opinions cited:

ABA Formal Op. 87-355 (1987): for-profit prepaid legal service plans
Maryland Op. 2012-07; North Carolina Formal Op. 10 (2011); NY State Bar Op. 897 (2011)

Cases:

Bates v. State Bar of Arizona, 433 U.S. 350 (1977)

Source

Landing page: ABA Formal Ethics Opinions index
Original PDF: formal_opinion_465.pdf