Clash of Titans: Groupon v. The Model Rules of Professional Conduct

• Author: Michael J. Conroy
• Position: J.D. Candidate, The University of Iowa College of Law
• Pages: 1329-1361

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Clash of Titans: Groupon v. The Model

Rules of Professional Conduct

Michael J. Conroy

ABSTRACT: Daily deals, like those offered by Groupon and LivingSocial,

have become a popular and highly effective form of advertising. The success

of daily deals is not without concern in the legal community. State bar

associations are split as to whether the Model Rules of Professional

Conduct—namely Rules 5.4, 7.2, and 1.15—permit lawyers to advertise

through daily deals. This Note argues that lawyers may ethically sell their

services through daily deals as a reasonable cost of advertising authorized by

Rule 7.2 and that the fee retained by the daily deal company is not an

impermissible fee-sharing arrangement outlawed by Rule 5.4. Instead, such

fees should be considered an alternative way of charging for advertising—

one that will not interfere with the lawyer’s professional independence.

Moreover, the flexible daily deal business model enables lawyers to comply

with the client trust requirements of Rule 1.15.

I. INTRODUCTION .................................................................................... 1331

II. THE DEAL ON DAILY DEALS ................................................................. 1332

A. WHAT ARE DAILY DEALS AND WHY WOULD A LAWYER USE THEM

TO SELL LEGAL SERVICES? .............................................................. 1333

B. RELEVANT RULES OF PROFESSIONAL CONDUCT ................................ 1336

1. Rule 5.4: Professional Independence of a Lawyer ............. 1336

2. Rule 7.2: Legal Advertising ................................................. 1337

3. Rule 1.15: Safekeeping Client Property ............................. 1339

C. STATES THAT FOUND VIOLATIONS OF THE RULES OF PROFESSIONAL

CONDUCT WHEN LAWYERS USE DAILY DEAL SERVICES ..................... 1339

1. The Formal, Binding Opinions of Alabama, Arizona,

and Indiana........................................................................... 1339

 J.D. Candidate, The University of Iowa College of Law, 2014; B.A., Tufts University,

2009. I would like to thank Professor Emily Hughes and members of Volume 99 of the Iowa

Law Review for their help on this Note. Most of all, I thank my parents, John and Terry Conroy,

grandmother, Joan Conroy, and fiancée, Melissa Lee, for their continued support, and

members of the University of Notre Dame “Fighting Irish” Fo otball Team for inspiring me to

“[Write] Like a Champion Today.”

1330 IOWA LAW REVIEW [Vol. 99:1329

2. The Informal, Non-Binding Opinions of Oregon and

Pennsylvania ......................................................................... 1341

D. STATES THAT FOUND NO VIOLATION OF THE RULES OF

PROFESSIONAL CONDUCT WHEN LAWYERS USE DAILY DEAL

SERVICES ........................................................................................ 1342

1. The Ethical Opinions of Maryland, Nebraska, North

Carolina, and South Carolina ............................................. 1343

2. New York’s Ethical Opinion ................................................ 1346

III. PROBLEMS WITH THE SPLIT IN AUTHORITY .......................................... 1347

IV. THE MODEL RULES OF PROFESSIONAL CONDUCT ALLOW LAWYERS

TO ADVERTISE VIA DAILY DEALS ........................................................... 1349

A. DAILY DEALS ARE PERMITTED BY RULE 5.4 ..................................... 1349

B. DAILY DEALS ARE ALLOWED BY RULE 7.2 ....................................... 1352

1. Daily Deals Are Not Improper Referrals ............................ 1353

2. Daily Deals Comply with Rule 7.2(b)(1) ............................ 1354

C. SOLUTIONS TO THE TRUST REQUIREMENTS OF RULE 1.15(C) ........... 1358

D. ADDITIONAL RULES LAWYERS SHOULD CONSIDER WHEN

ADVERTISING THROUGH DAILY DEALS ............................................ 1359

1. Steps to Prevent the Evils of Too Much Success ................ 1359

2. What Happens When Daily Deals Go Unused? ................. 1360

V. CONCLUSION ....................................................................................... 1361

2014] CLASH OF TITANS 1331

I. INTRODUCTION

The development of daily deal advertising—online coupons targeted to

consumers based on their geographic location or other identifiable tastes

and preferences—has revolutionized the marketing industry.1 Since the

founding of Groupon in 2008,2 daily deals have “transform[ed] marketing

for small businesses.”3 The year 2008 was also transformative for the legal

industry; the recession reduced legal work at most firms and put immense

pressure on lawyers to seek new ways to develop business.4 Craig Redler, a

Missouri solo-practitioner, was the first attorney to test whether daily deal

advertising could work for lawyers.5 Mr. Redler’s online daily deal offered

clients a will and durable power of attorney, a $750 value, for $99, to “keep

[their] brain from being inserted into any future Frankensteins.”6 Needless

to say, the daily deal was controversial amongst state bar associations,7

although not for its advertising ploy.

State bar associations were concerned that a lawyer’s use of daily deal

advertising violated their respective rules of professional conduct (styled

after the Model Rules of Professional Conduct, or the “Rules”).8 Currently,

ten states have issued opinions on whether it is ethical for lawyers to

advertise via daily deals—four states found the practice unethical while six

states concluded that lawyers may ethically use daily deals.9 Although each

state’s analysis was slightly different, their ethical opinions focused primarily

1. Kirk Kardashian, The Pros and Cons of Groupon, TUCK SCH. BUS. DARTMOUTH (Nov. 7,

2011), http://www.tuck.dartmouth.edu/news/articles/the-pros-and-cons-of-groupon/.

2. About Groupon, GROUPON, http://www.groupon.com/about (last visited Jan. 21, 2014).

3. Kardashian, supra note 1.

4. See infra Part II.A.

5. Sergei Tokmakov, Groupon Attorney Advertising, BLOGZ.ORG (Jan. 27, 2012),

http://blogz.org/Blog812035-Groupon-Attorney-Advertising.htm.

6. Law Offices of Craig S. Redler & Associates, LLC - Olivette, GROUPON, http://www.groupon.com/

deals/law-offices-of-craig-s-redler-associates (last visited Jan. 21, 2014).

7. Debra Bruce, Did a Groupon Really Work for a Solo Lawyer?, SOLO PRAC. U. (Jan. 19, 2012),

http://solopracticeuniversity.com/2012/01/19/did-a-groupon-really-work-for-a-solo-lawyer/;

Tokmakov, supra note 5.

8. While this Note uses different states’ applications of their own adopted ethics rules (all

of which were styled after the Rules) as examples of diverging viewpoints and applications, this

Note’s analysis is intended to speak to the proper application of th e Rules generally as it relates

to lawyers’ use of daily deals, and should not be understood to prescribe an application within

any particular state, which may be constricted by past precedent and/or informed by state-

specific modifications to the Rules.

9. See infra Parts II.C–D. This issue has also come up outside of the United States as we ll.

The Israeli Bar Association held that lawyers may not advertise their services through daily deals

because of concerns that the advertisements will be misl eading and dishonor the profession.

Hila Raz, Discount Law on Groupon: Consumer Book or Ripoff?, HAARETZ (Oct. 24, 2012, 5:13 AM),

http://www.haaretz.com/business/discount-law-on-groupon-consumer-book-orripoff.premium-

1.471928.