Business Development: The Ethical Boundaries

In recent years, business development has meant different things in different segments of the American legal community. To some attorneys, extensive media campaigns and billboards are the preferred method. To others, in the mass tort context for example, the aggressive pursuit of victims and their families has been all too commonplace. Elsewhere, Web sites and computer chat rooms have supplemented or supplanted the traditional firm brochures and client seminars.

In reaction to these trends, a number of jurisdictions have revamped their business development ethics rules in recent years. Unfortunately, the necessarily “one size fits all” approach to explicit rules has led to some curious and counterintuitive results. In states that forbid direct in person contacts with non-clients who aren't lawyers, for example, it may make sense to prevent attorneys from badgering widows and orphans. But these same rules likewise prevent lawyers in such states from telephoning a sophisticated, educated company president.

These factors have led to general uncertainty regarding which client development techniques lawyers are permitted to undertake and where. Such uncertainty is exacerbated by the answers to three questions. First, what's the most important subject in today's law firm that law schools don't teach and bar examiners don't test? Second, what area of legal ethics presents the greatest hodge-podge collection of variations and inconsistencies across state lines? Third, especially for law firms that operate in multiple jurisdictions, what is one of the trickiest ethics issues facing the profession? The answer to all three questions is business development.

In this article, I will explore the various facets of business development ethics issues, from direct client contact to advertising and the Internet. There is no simple resolution to any of these issues. The three most important things for firms to remember are: 1) to have a central ethics function to oversee the process; 2) to train attorneys and other legal personnel how to develop business through methods that bar grievance committees will find acceptable; and 3) to develop a culture where people will ask questions before embarking upon client development efforts that may subject the attorneys to discipline by licensing authorities, and could tarnish the firm's reputation.

Have a Plan and Stick To It

A small firm in Lancaster, PA, all of whose clients are located in Lancaster County, only needs to worry about Pennsylvania ethics rules. In contrast, a national law firm with offices in multiple jurisdictions needs to consider applicable ethics principles in a lot more places. Does the national firm try to develop and implement a uniform policy for all jurisdictions? Or can each office have its own policy? There is no right answer to this question. A lot depends upon how close the firm's offices are to each other, and how frequently firm attorneys want to solicit potential clients across state lines.

For example, consider a District of Columbia-based firm with two other offices in Virginia and California. That firm might decide to have one policy for the DC and Virginia offices, and a second policy for the California office. The latter could follow California ethics rules, but how should the two East Coast locations be handled? Virginia's business development rules are much more stringent than the DC rules. In the District of Columbia, as long as the attorney tells the truth and does not use coercive tactics he or she can do just about anything to develop business ' except soliciting public defender criminal clients in close proximity to the District of Columbia courthouse. Because the two offices typically would have lawyers practicing on both sides of the Potomac River, most firms would decide to follow the stricter Virginia rules in both offices.

By analyzing the particulars of the business development ethics rules in the locations where the firm is located, and by being sensitive to the nature of the law firm's practice areas, the firm can develop policies to fit its needs. Then the firm needs to make sure that people know about and follow the policies. That task is typically harder than developing the policies in the first place.

In Person Contact of Potential Clients

A number of states, including Maryland and Virginia, have amended their ethics rules in recent years to focus heavily upon in person contacts of potential clients. Typically, “in person contacts” are defined to include face-to-face, telephone, and real-time electronic contacts. Such contacts are more closely regulated because (in the words of the comment to Maryland's rule) the layperson is being subjected to the “private importuning of the trained advocate in a direct interpersonal encounter.”

Ethics rules in these jurisdictions limit the categories of individuals who can be directly contacted. For example, a lawyer is permitted to solicit family members and close personal contacts, clients, former clients, and attorneys. A lawyer also can respond to requests from potential clients, and can participate in trade organizations that recommend legal services to its members.

In states like these, a lawyer is not permitted to telephone an Oxford-educated businessman with a legal problem, unless he happens to be a lawyer or falls into one of the other categories of people who can be contacted. Some complain that such strictures violate the First Amendment. Personally, I'd prefer to keep attorneys at my firm from being the test case, especially since there are multiple techniques for soliciting business that are in compliance with applicable ethics requirements.

For example, instead of just telephoning the Oxford-educated businessman, the attorney could e-mail all firm personnel to see if anyone knows or has worked with the businessman. If there is a prior connection with another firm lawyer, that attorney could make the first call, and ask the businessman if he's interested in speaking with the colleague of the attorney who called.

The lawyer also could check the firm's conflicts database to see whether the firm has ever represented the businessman in the past. If so, then the lawyer could contact the businessman directly because the latter would qualify as a former client of the firm.

The lawyer also could try to find out the identity of another attorney who represents the businessman, and contact that attorney to solicit the work. Or, through an industry trade organization or other group in which the lawyer and the businessman participate, the lawyer could investigate whether the group's executive director would be willing to recommend the lawyer to the businessman.

These are some examples of techniques that the lawyer could use to solicit the businessman's legal work. Other steps, through creative brainstorming, could undoubtedly be devised by the firm. The point is that all of these techniques, which basically involve old-fashioned networking, are probably more effective, at the end of the day, than a cold call to a stranger in any event.

A more difficult question to answer is whether e-mail communications are governed by the more restrictive “in person contact” rules or by the rules that apply to snail mail. Arguments can be made to support either position, depending upon the precise language in the applicable state's ethics rules, and authorities will undoubtedly clarify the issue over time. Until then, the conservative approach for law firms would be to follow the most restrictive rule across the board – and the most restrictive interpretation of that rule. In other words, the conservative approach would be to treat e-mail as “in person contact.”

There is one final note on the subject of direct contacts with prospective clients. Even when the person can be directly contacted, many states regulate the communication in other ways. In these states, for example, lawyers cannot use coercive measures, provide misleading information, or make material misstatements or omit material facts. By way of illustration, an unsubstantiated comparison of the lawyer's fees to the fees of other attorneys is generally improper. In such states, attorneys also cannot make assertions or comparisons regarding legal services that cannot be factually substantiated. They cannot state or imply that the outcome of a particular matter will not be related to its facts or merits. Likewise, they cannot solicit individuals whose physical, emotional, or mental state impact their judgment ' or who have made it known that they don't want to be solicited.

Written Communications and Advertising

Typically an attorney's written communications and advertising must not run afoul of the principles identified in the preceding paragraph. In addition, a number of jurisdictions specify a wide variety of requirements for written communications made for the purpose of soliciting legal business, as well as television, radio, and written advertising. These rules vary widely from place to place and must be analyzed carefully to avoid non-compliance.

In New York, for example, copies of many types of legal advertisements must be filed with the Departmental Disciplinary Committee of the appropriate judicial department and must be retained (together with a copy of the mailing list) for at least 1 year. Other states (such as Maryland) require that ads be maintained for at least 3 years after their dissemination. New York lawyers advertising contingent fee rates also must disclose whether percentages are computed before or after costs and disbursements are deducted, and that, if there is no recovery, the client shall remain liable for court costs and disbursements.

Three interesting variations on these themes are contained in the ethics rules of Virginia and a number of other states. First, the lawyer must disclose the fact that a non-client is appearing in a firm advertisement, and whether the non-client is being paid. Second, advertisements including specific or cumulative case results must include a prominent disclaimer, preceding the case results, that: i) contributes to a context that is not misleading; ii) specifies that results depend upon a variety of factors unique to each case; and iii) states that results do not guarantee or predict a similar result in any future cases. Third, written or e-mail communications to promote employment for a fee must be identified by the phrase “Advertising Material” in upper case letters in type size at least equal to the largest type used in the communication.

As these examples demonstrate, an important lesson for all attorneys and firm administrators is that advertising ethics rules must be carefully analyzed before embarking on an advertising campaign. Equally important, attorneys must be familiar with the types of communications that are not covered by most advertising ethics rules. Generally speaking, communications that are not initiated for the purpose of soliciting legal business aren't covered by advertising ethics rules. Some examples include: general firm announcements such as personnel or office location changes; newsletters; seminars; Web sites (in a number of, but not all jurisdictions), and articles ' with appropriate disclaimer language. Likewise, most press releases and charitable and community service communications are not typically regarded as advertising.

Law firms with offices in multiple jurisdictions must be especially sensitive to varying rules governing attorney advertisements. So must firms that communicate such advertisements to potential clients in other jurisdictions. This is one area, in particular, where most firms will implement an advertisement policy that adopts the most restrictive elements of the ethics rules where the advertisements are going to be disseminated.

Conclusion

Improved communication technologies have not made the practitioner's efforts to comply with ethics rules any easier. Client development is one such area that has been made more complicated. The larger firms become and the more often they use more sophisticated technologies, the greater the risk that ethical violations will occur.

By way of illustration, in deciding whether Web site activities constitute advertising and/or the unauthorized practice of law, there is a real risk that the bar authorities in a far-flung state could apply their client development ethics rules in a manner that differs dramatically from the lawyer's home jurisdiction. What might be permitted in New Jersey might not be permitted in Florida. The prudent law firm will have an experienced ethics committee to monitor developments and to devise strategies for thriving and surviving in this rapidly changing environment.

In recent years, business development has meant different things in different segments of the American legal community. To some attorneys, extensive media campaigns and billboards are the preferred method. To others, in the mass tort context for example, the aggressive pursuit of victims and their families has been all too commonplace. Elsewhere, Web sites and computer chat rooms have supplemented or supplanted the traditional firm brochures and client seminars.

In reaction to these trends, a number of jurisdictions have revamped their business development ethics rules in recent years. Unfortunately, the necessarily “one size fits all” approach to explicit rules has led to some curious and counterintuitive results. In states that forbid direct in person contacts with non-clients who aren't lawyers, for example, it may make sense to prevent attorneys from badgering widows and orphans. But these same rules likewise prevent lawyers in such states from telephoning a sophisticated, educated company president.

These factors have led to general uncertainty regarding which client development techniques lawyers are permitted to undertake and where. Such uncertainty is exacerbated by the answers to three questions. First, what's the most important subject in today's law firm that law schools don't teach and bar examiners don't test? Second, what area of legal ethics presents the greatest hodge-podge collection of variations and inconsistencies across state lines? Third, especially for law firms that operate in multiple jurisdictions, what is one of the trickiest ethics issues facing the profession? The answer to all three questions is business development.

In this article, I will explore the various facets of business development ethics issues, from direct client contact to advertising and the Internet. There is no simple resolution to any of these issues. The three most important things for firms to remember are: 1) to have a central ethics function to oversee the process; 2) to train attorneys and other legal personnel how to develop business through methods that bar grievance committees will find acceptable; and 3) to develop a culture where people will ask questions before embarking upon client development efforts that may subject the attorneys to discipline by licensing authorities, and could tarnish the firm's reputation.

Have a Plan and Stick To It

A small firm in Lancaster, PA, all of whose clients are located in Lancaster County, only needs to worry about Pennsylvania ethics rules. In contrast, a national law firm with offices in multiple jurisdictions needs to consider applicable ethics principles in a lot more places. Does the national firm try to develop and implement a uniform policy for all jurisdictions? Or can each office have its own policy? There is no right answer to this question. A lot depends upon how close the firm's offices are to each other, and how frequently firm attorneys want to solicit potential clients across state lines.

For example, consider a District of Columbia-based firm with two other offices in Virginia and California. That firm might decide to have one policy for the DC and Virginia offices, and a second policy for the California office. The latter could follow California ethics rules, but how should the two East Coast locations be handled? Virginia's business development rules are much more stringent than the DC rules. In the District of Columbia, as long as the attorney tells the truth and does not use coercive tactics he or she can do just about anything to develop business ' except soliciting public defender criminal clients in close proximity to the District of Columbia courthouse. Because the two offices typically would have lawyers practicing on both sides of the Potomac River, most firms would decide to follow the stricter Virginia rules in both offices.

By analyzing the particulars of the business development ethics rules in the locations where the firm is located, and by being sensitive to the nature of the law firm's practice areas, the firm can develop policies to fit its needs. Then the firm needs to make sure that people know about and follow the policies. That task is typically harder than developing the policies in the first place.

In Person Contact of Potential Clients

A number of states, including Maryland and Virginia, have amended their ethics rules in recent years to focus heavily upon in person contacts of potential clients. Typically, “in person contacts” are defined to include face-to-face, telephone, and real-time electronic contacts. Such contacts are more closely regulated because (in the words of the comment to Maryland's rule) the layperson is being subjected to the “private importuning of the trained advocate in a direct interpersonal encounter.”

Ethics rules in these jurisdictions limit the categories of individuals who can be directly contacted. For example, a lawyer is permitted to solicit family members and close personal contacts, clients, former clients, and attorneys. A lawyer also can respond to requests from potential clients, and can participate in trade organizations that recommend legal services to its members.

In states like these, a lawyer is not permitted to telephone an Oxford-educated businessman with a legal problem, unless he happens to be a lawyer or falls into one of the other categories of people who can be contacted. Some complain that such strictures violate the First Amendment. Personally, I'd prefer to keep attorneys at my firm from being the test case, especially since there are multiple techniques for soliciting business that are in compliance with applicable ethics requirements.

For example, instead of just telephoning the Oxford-educated businessman, the attorney could e-mail all firm personnel to see if anyone knows or has worked with the businessman. If there is a prior connection with another firm lawyer, that attorney could make the first call, and ask the businessman if he's interested in speaking with the colleague of the attorney who called.

The lawyer also could check the firm's conflicts database to see whether the firm has ever represented the businessman in the past. If so, then the lawyer could contact the businessman directly because the latter would qualify as a former client of the firm.

The lawyer also could try to find out the identity of another attorney who represents the businessman, and contact that attorney to solicit the work. Or, through an industry trade organization or other group in which the lawyer and the businessman participate, the lawyer could investigate whether the group's executive director would be willing to recommend the lawyer to the businessman.

These are some examples of techniques that the lawyer could use to solicit the businessman's legal work. Other steps, through creative brainstorming, could undoubtedly be devised by the firm. The point is that all of these techniques, which basically involve old-fashioned networking, are probably more effective, at the end of the day, than a cold call to a stranger in any event.

A more difficult question to answer is whether e-mail communications are governed by the more restrictive “in person contact” rules or by the rules that apply to snail mail. Arguments can be made to support either position, depending upon the precise language in the applicable state's ethics rules, and authorities will undoubtedly clarify the issue over time. Until then, the conservative approach for law firms would be to follow the most restrictive rule across the board – and the most restrictive interpretation of that rule. In other words, the conservative approach would be to treat e-mail as “in person contact.”

There is one final note on the subject of direct contacts with prospective clients. Even when the person can be directly contacted, many states regulate the communication in other ways. In these states, for example, lawyers cannot use coercive measures, provide misleading information, or make material misstatements or omit material facts. By way of illustration, an unsubstantiated comparison of the lawyer's fees to the fees of other attorneys is generally improper. In such states, attorneys also cannot make assertions or comparisons regarding legal services that cannot be factually substantiated. They cannot state or imply that the outcome of a particular matter will not be related to its facts or merits. Likewise, they cannot solicit individuals whose physical, emotional, or mental state impact their judgment ' or who have made it known that they don't want to be solicited.

Written Communications and Advertising

Typically an attorney's written communications and advertising must not run afoul of the principles identified in the preceding paragraph. In addition, a number of jurisdictions specify a wide variety of requirements for written communications made for the purpose of soliciting legal business, as well as television, radio, and written advertising. These rules vary widely from place to place and must be analyzed carefully to avoid non-compliance.

In New York, for example, copies of many types of legal advertisements must be filed with the Departmental Disciplinary Committee of the appropriate judicial department and must be retained (together with a copy of the mailing list) for at least 1 year. Other states (such as Maryland) require that ads be maintained for at least 3 years after their dissemination. New York lawyers advertising contingent fee rates also must disclose whether percentages are computed before or after costs and disbursements are deducted, and that, if there is no recovery, the client shall remain liable for court costs and disbursements.

Three interesting variations on these themes are contained in the ethics rules of Virginia and a number of other states. First, the lawyer must disclose the fact that a non-client is appearing in a firm advertisement, and whether the non-client is being paid. Second, advertisements including specific or cumulative case results must include a prominent disclaimer, preceding the case results, that: i) contributes to a context that is not misleading; ii) specifies that results depend upon a variety of factors unique to each case; and iii) states that results do not guarantee or predict a similar result in any future cases. Third, written or e-mail communications to promote employment for a fee must be identified by the phrase “Advertising Material” in upper case letters in type size at least equal to the largest type used in the communication.

As these examples demonstrate, an important lesson for all attorneys and firm administrators is that advertising ethics rules must be carefully analyzed before embarking on an advertising campaign. Equally important, attorneys must be familiar with the types of communications that are not covered by most advertising ethics rules. Generally speaking, communications that are not initiated for the purpose of soliciting legal business aren't covered by advertising ethics rules. Some examples include: general firm announcements such as personnel or office location changes; newsletters; seminars; Web sites (in a number of, but not all jurisdictions), and articles ' with appropriate disclaimer language. Likewise, most press releases and charitable and community service communications are not typically regarded as advertising.

Law firms with offices in multiple jurisdictions must be especially sensitive to varying rules governing attorney advertisements. So must firms that communicate such advertisements to potential clients in other jurisdictions. This is one area, in particular, where most firms will implement an advertisement policy that adopts the most restrictive elements of the ethics rules where the advertisements are going to be disseminated.

Conclusion

Improved communication technologies have not made the practitioner's efforts to comply with ethics rules any easier. Client development is one such area that has been made more complicated. The larger firms become and the more often they use more sophisticated technologies, the greater the risk that ethical violations will occur.

By way of illustration, in deciding whether Web site activities constitute advertising and/or the unauthorized practice of law, there is a real risk that the bar authorities in a far-flung state could apply their client development ethics rules in a manner that differs dramatically from the lawyer's home jurisdiction. What might be permitted in New Jersey might not be permitted in Florida. The prudent law firm will have an experienced ethics committee to monitor developments and to devise strategies for thriving and surviving in this rapidly changing environment.