Ethics in Brief: New Law to Be Aware Of

By Michael L. Crowley

         New rules concerning lawyer advertising or use of lawyer referral services (LRS) have been enacted as of January 1 that make profound changes in the law. For decades the rules concerning advertising and LRS were only weakly enforced by the state bar. One of the important parts of the new legislation is that it provides for private rights of action. This includes statutory damages and recovery of attorney fees along with injunctive relief. 

This could create a whole new area of law with the intended benefit being there would be enforcement of these rules by the private bar much like the Americans with Disability Act. Of course, with all the rules governing attorneys, they are intended to protect consumers. Anyone could bring an action for relief.

         First, as to advertising: Attorneys have the right to advertise. Bates v. State Bar of Arizona, 433 U.S. 350 (1977). Although Bates found advertising to be protected commercial speech, it allowed for regulation. In California, it is governed by B&P code section 6157.2 and Cal. Rules of Professional Conduct 7.2. Any false or misleading communication violates these provisions. 

         The author of the new legislation, Sen Tom Umberg, stated the legislation is “a necessary step to protect consumers, supplement state regulatory efforts, deter misconduct, empower victims, and foster a fair legal marketplace. By giving individuals the ability to hold unethical attorneys accountable, the legal profession can restore public trust and ensure that consumers receive honest and competent representation.” 

It was supported by the Consumer Attorneys of California, which stated “unethical attorney advertising misleads vulnerable consumers – many of whom are navigating the legal system for the first time. False guarantees, exaggerated claims, and undisclosed affiliations confuse the public and undermine confidence in the legal profession.”

         A second provision of the new legislation concerns lawyer referral services. Receiving client referrals from any entity that is not certified by the state bar and in compliance with the rules set forth by the bar is a violation. These rules are contained in B&P 6155. Some risks for attorneys include:

• Pay-per-lead arrangements
• Call centers that pre-qualify clients
• Marketing companies paid per signed case
• Co-owned intake entities 
• Cross-referral relationships tied to compensation
• Healthcare-provider referral arrangements

The specifics of the robust private enforcement mechanisms in the new legislation include the following:

A prevailing plaintiff may recover:

• Statutory damages
• Minimum: $5,000 per violation
• Maximum: $100,000 per violation or three times actual damages, whichever is greater
• Attorney’s fees
• Injunctive relief
• Declaratory relief
• Any other relief the court deems proper

Courts are directed to consider:

• Nature and seriousness of the misconduct
• Number and persistence of violations 
• Duration of conduct
• Willfulness
• Defendant’s assets and net worth

Included in the new legislation are also those strengthening the laws prohibiting illegal solicitation practices (often involving “runners” and“cappers”).

This new legislation is likely to make a profound change in the solicitations, lawyer referrals and advertising enforcement. These areas have gone without oversight for some time due to the limited resources of the state bar to investigate and prosecute these areas of the rules. Time will tell whether the incentives of the private sector will serve to provide enhanced consumer protection.