An internal analysis has revealed a troubling fact for law firms.  There is a disturbing trend of disreputable “lead generators” whose criminal actions are likely putting their law firm clients licenses at risk.

Many of these marketing companies are disappearing as quickly as they have emerged and it raises the question if you are a law firm: do you know who you are doing business with?

More importantly, are you putting your law license at risk?

A NJ Joint Opinion from the Committee on Attorney Advertising and the Advisory Committee on Professional Conduct correctly summarizes the issue.

They became aware of an out-of-state marketing that was sending emails to New Jersey lawyers offering to connect the lawyers with clients for specific mass tort cases.

The emails list prices for claimants “starting at” $700 for persons adversely affected by the drug Zantac; $500 for persons injured by faulty earplugs made by 3M; $1,000 for persons suffering side effects after hernia mesh surgery, and $1,800 for persons whose eyesight was damaged by the drug Elmiron.

For purposes of clarity, throughout this article we will reference the Model Rules of Professional Conduct.  Each state’s particular rule may vary.  The issue raised in the NJ Joint Opinion concerns of their state’s version of ABA Rule 7.2 which states in part:

“A lawyer shall not compensate, give or promise anything of value to a person for recommending the lawyer’s services…”

Attorneys know this as the bar against referrals from non-lawyers.  Lawyers may not pay a non-lawyer or marketing company to refer clients to them.  Furthermore, payment of a referral fee is considered impermissable fee-sharing , in violation of Rule of Professional Conduct 5.4(a).

The purpose of this joint opinion was to warn NJ lawyers of their ethical duties and responsibilities.

As an aside, we would argue that the above prices tended to be on the lower end of starting prices for mass tort leads.  The marketing firm referenced by the NJ bar was probably selling leads vs. signed retainers.  We can say this confidently because we understand the cost involved to generate leads for these cases and those prices are not far off.  Signed retainers for the above cases would be in the multiple thousands of dollars, not hundreds of dollars. 

But the NJ Bar raises an important ethical issue, the issue of lawyers paying for referrals, or as they are commonly know in the lead generation space, “signed retainers.”  Unfortunately this problem seems to be getting worse in the legal profession.

So what are signed retainers and what is the appeal to them?

Signed retainers are where a marketing company and its associates get prospective clients to sign a law firm’s retainer agreement and HIPAA authorization forms.  The marketing company then sells that signed retainer to the law firm for a much higher price, sometimes 4-5 times the price of a qualified lead.

From the attorney’s perspective, the signed retainer represents a guaranteed client.  All the law firm needs to do is to perform a conflict check, review the case, and then countersign their retainer documents.  At that point, the client is officially a client.

The attorney doesn’t have to deal with the problems that they have with leads: multiple follow-ups, time spent trying to connect with the prospective client, clients who slip through the cracks because the lead came in at a busy time when no one was paying attention, lost money on expensive leads.

Signed retainers are lower risk for the law firm, but there is a major problem with this, one that the NJ bar recognized in its joint opinion.

Signed retainers are referrals and attorneys have an ethical duty not to compensate or give anything of value to non-lawyers for referrals.  It violates rules 7.2 and 5.4(a) of the Model Rules of Professional Conduct.

And from the marketing company’s side, they are engaging in the unauthorized practice of law.  As an aside, this means that doing business with these shady marketing companies means that, by doing business with them, you as a lawyer are assisting them in the unauthorized practice of law.  This is yet another ethical violation (Model Rule 5.5(a), which reads, “A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.”)

But getting back to the main point at hand, it is important to analyze exactly “how the sausage is being made.”  Getting a signed retainer from a client is not easy.  Very few people just sign their name to a set of legal documents without first understanding what they are signing and who they are doing business with.

Which means that, in all likelihood, these disreputable marketing companies are telling prospective clients how this law firm is the best and how they will take care of them and how they are in good hands.

We at Premium Practice understand the sales process better than just about anybody.  And it is our educated guess that in order to get prospective clients to sign these retainers, these marketing companies most likely have to work through some objections to reduce the prospective client’s fear and increase their confidence level that the law firm they are signing up for is the right law firm to help them solve their problem. 

Which means that, in order to get the signed retainer, these marketing companies must recommend and refer that law firm.  By entering into these agreements and purchasing signed retainers, these law firms are purchasing referrals, in violation of several ethical rules as outlined above.

And it’s not just ethical rules you are violating.  Many are aware of Texas’s barratry law, a criminal statute that forbids the unlawful solicitation of clients by lawyers and other licensed professionals.   

Which brings us to our original question… is your marketing firm putting your law license at risk?

We found multiple marketing companies offering these signed retainer agreements to law firms.  

Don’t believe us?  Just enter the search term “signed retainers” into Google and see for yourself.  You’ll find several disreputable marketing companies offering these shady arrangements to law firms, including a few prominent marketing companies known throughout the industry.

We’ve thought about “naming and shaming” these shady marketing firms, but we aren’t going to.  We think it is much more effective to call out the industry practice in general. 

One company that we reviewed in particular claimed that they were “Client Acquisition Specialists,” clearly advertising client referrals, almost bragging that they are going to help you violate several rules of professional conduct and put you in position to lose your law license.

But let’s give this company the benefit of the doubt.  Let’s assume that they didn’t know and are unaware of your ethical duties as a lawyer.  It makes you ask the question: what else don’t they know?

How are they generating these client leads, and what are they saying to them on the phone?  How can you be assured their advertising is compliant and honest?

We recently became aware of another marketing company that was advertising for personal injury attorneys on Facebook and their ad claimed that prospective clients WILL receive injury compensation, not MAY receive (based on the facts and circumstances), but WILL receive.  It may seem minor, but it is the differences between this choice of words is a red line between advertising that is misleading and advertising that is not misleading.  

Which is why we created Premium Practice.  Premium Practice was created by an attorney, for attorneys.

We help law firms help more people and improve their practice, without violating ethics rules or putting their law licenses at risk. 

We deliver leads to law firms through our group legal advertising program.  But in order to be a part of our group advertising program, your firm has to qualify in order for us (and our lawyer network) to stay compliant.  If you are interested, click or tap the button below to see if your practice qualifies. 

While our business is growing rapidly, there are some states where we don’t do business currently, including CA, FL, MO, OH, TN, TX, WY.  We expect to be in all 50 states within the next 12 months, so if you are interested, still enter your information below and we will contact you once we offer our services in your state.