Can a group of attorneys run lender-sponsored ads promoting that they can place loans at below-market fees with a particular lender?

Plain-English summary

A group of unaffiliated attorneys proposed to run advertisements offering to obtain loan commitments from a particular lender at lower-than-market placement fees. The lender would select the participating attorneys and pay part of the advertising, with an advertising agency billing the attorneys and lender; there was no arrangement with the lender as to attorney's fees. The Committee was asked whether the lender's payment of part or all of the advertising cost affected the propriety of the arrangement.

The Committee characterized the proposal as a "power broker" setup: the lender invites a particular group of attorneys to advertise and pay for the ads, the inducement being that those attorneys have access to below-market fees, and the attorneys in turn seek the closings the ads generate. Judging the proposal by its capacity to fairly advertise availability for legal services without misleading readers (RPC 7.1(a)), the Committee found it set up an exclusive group of lawyers publicly asserting an ability to place loans at apparently below-market rates while saying nothing about special expertise or legal skill and omitting mention of legal fees and closing costs other than points. Because the ad was, except for the attorneys' names and addresses, strictly about and for the lender, the Committee believed it tended to mislead the average interested person about the advertisers' legal expertise.

The Committee further concluded that the arrangement affects the independence of the participating attorneys: even though no money is paid by the lender, the permission to use the lender's name in this fashion is itself of value, and a lawyer handling a real estate matter owes the client a duty to exercise independent judgment (RPC 2.1). It also disapproved the proposal because each participating attorney gives value to the lender, who in turn appears to the public to be recommending the listed attorneys, which is objectionable under RPC 7.2(c) (citing In re Kamp, 40 N.J. 588 (1963)). Given these conclusions, the Committee held that whether the lender pays all or part of the advertising expense has no bearing on the result.

Currency note

This opinion was issued in 1985, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct, and the lawyer-advertising rules have been amended over time. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can attorneys advertise that they can place loans at below-market fees through a particular lender?

A: Not in the form proposed. The opinion held the "power broker" ad tended to mislead readers about the attorneys' legal expertise because it was essentially an ad for the lender with attorney names attached.

Q: Does it matter that the lender, not the attorneys, pays for the advertising?

A: No. The opinion held that whether the lender pays all or part of the advertising cost has no bearing, because the use of the lender's name is itself of value and the arrangement is independently objectionable.

Q: What is the independence concern?

A: Per the opinion, a lawyer in a real estate matter owes the client a duty to exercise independent judgment under RPC 2.1, and the lender arrangement would compromise that independence.

Background and rules framework

The opinion applies the lawyer-advertising rules RPC 7.1(a) (communications about a lawyer's services must not be misleading) and RPC 7.2(c) (a lawyer may not give value for a recommendation of the lawyer's services), together with RPC 2.1 (independent professional judgment). It draws on In re Kamp, 40 N.J. 588 (1963), on the lawyer's independence in real estate transactions.

Citations and references

Rules of Professional Conduct:

• MR 7.1 / NJ RPC 7.1(a) (communications concerning a lawyer's services must not be misleading)
• MR 7.2 / NJ RPC 7.2(c) (giving value for recommending the lawyer's services)
• MR 2.1 / NJ RPC 2.1 (independent professional judgment)

Cases:

• In re Kamp, 40 N.J. 588 (1963) (lawyer's duty of independence in real estate transactions)

See also

• NJ ACPE Op. 624: Lawyer Operating a For-Profit Adoption Referral Service
• NJ ACPE Op. 645: Attorney Participation in Joint Advertising and Client Referral Programs
• NJ ACPE Op. 594: Advertising Through Sponsorship of Sports Teams

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp557-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

115 N.J.L.J. 613, May 23, 1985

OPINION 557

Mortgage Broker Extending Preferred Placement Fees to Selected Attorneys

This inquiry deals with a proposal on behalf of a group of attorneys who seek to place a series of advertisements offering to obtain loan commitments from a particular lender at lower than market placement fees. Although the lender makes the arrangement with attorneys of its own choosing and will pay for a portion of the advertising, the attorneys are not to be affiliated with one another. An advertising agency is to bill the attorneys and lender as may be determined from time to time. The advertisements are on behalf of all of the attorneys available under the plan, and identify where they may be reached. We are asked whether or not payment of part or all of the advertising cost by the lender affects the propriety of the arrangement. There is no arrangement with the lender as to attorney's fees.

What we have here may be described as a "power broker" set up. The lender selects or invites a particular group of attorneys to do the advertising and pay all or part of that expense. The inducement in the advertisement is that the attorneys selected have access to the below market fees. The attorneys in turn seek to perform the closings so generated.

A proposal of the above nature is to be judged by reference to its capacity to fairly advertise availability for legal services without in any way misleading readers interested in obtaining legal services. See RPC 7.1(a).

This project sets up an exclusive group of lawyers who publicly assert their ability to place loans at rates which by inspection appear below market. The advertisements say nothing about special expertise or legal skill and omit mention of legal fees and closing costs other than the "points". As to the lender, the advertisements say nothing about specific interest rates. Except for the inclusion of the attorneys' names and addresses, the proposed advertisement is strictly about and for the lender named. In effect, the lender is saying that the particular attorneys named are able to offer better loan commitment terms than attorneys not so named. We believe that for these reasons the material tends to mislead the average interested person (if not the sophisticated developer) as to the legal expertise of the advertisers.

We also are of the opinion that the arrangement between the lender and each attorney on the list affects the independence of such participating attorneys. Even though no money is paid by the lender, the fact that an attorney is permitted to use the lender's name in this fashion is of value to that attorney.

A lawyer undertaking a real estate matter owes the client a duty to exercise independent judgment. RPC 2.1. The above proposal will compromise that independence. We also disapprove of the proposal for the reasons that each attorney participating is giving value to the lender who in turn appears to the public reader to be recommending the services of the attorneys listed. This is objectionable under RPC 7.2(c). See also, In re Kamp, 40 N.J. 588 (1963).

In view of the above, the question whether the lender pays all or a part of the advertising expense has no bearing on the result.