Ethics Advisory Opinion advises lawyers: stay away from Expertise.com

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Ethics Advisory Opinion 22-02 fielded two marketing questions from a lawyer concerning a website, Expertise.com. This website finds and reviews service professionals and states that it researches businesses by using customer referrals, public records, accreditations and licenses and mystery shoppers.

Some law firms are listed on the site without the knowledge of the lawyers through the site’s unilateral research and screening. The site states that it lists businesses alphabetically, but it allows law firms to submit to be reviewed and included at no cost. The site indicates this process takes approximately one year to complete.  A law firm can also purchase a “featured placement” to take advantage of being seen first on the website page and to include links to the law firm’s social media.

The lawyer’s questions were:

  1. If an attorney or law firm pays for a featured placement on Expertise.com, does that attorney violate Rule 7.4(b) by holding the law firm and its attorneys out as experts by virtue of the website’s name?

2. Does paying for a featured placement on Expertise.com violate Rule 7.2(c)?

The Ethics Advisory Committee responded definitely: “Lawyer may not participate in any way in marketing via Expertise.com.” Actively participating in an online business listing at a website whose stock language violates the advertising rules is itself a violation of the advertising rules, according to the Committee.

The Committee referred to an earlier EAO: 09-10 which opined that a lawyer who adopts, endorses, or claims an online directory listing takes responsibility under the Rules for all content of the listing and general content of the directory itself, regardless of who created the material. While the prior opinion focused on comparative language contained in client testimonials and endorsements submitted to the website, the reasoning applies to content created by the host that violates some other rule, like 7.4(b), according to the current EAO.

Regardless of the creator of the offending content and regardless of which rule it violates, the Committee’s view is that a lawyer may not adopt, endorse, claim, or contribute to any online listing that contains language or other material that would violate the Rules if created and disseminated directly by the lawyer.

Paying for a featured placement within a business directory website is not itself a violation of Rule 7.2(c) if the payment obligation or amount is not tied to the referral of business as a quid pro quo, according to the EAO. In the Committee’s view, if a featured placement is the only benefit received in exchange, the payment would be a “reasonable cost of advertisement” under the 7.2(c)(1) exception.

However, the Committee believes a lawyer may not pay Expertise.com for a featured placement because that step would be prohibited by Rule 7.4(b).

Be careful out there, lawyers!

First Ethics Advisory Opinion of 2022 discusses “Land Title Dispute” email

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Is a unilateral non-client communication entitled to confidentiality?

We have our first Ethics Advisory Opinion of 2022 and it touches on a real estate matter.  In EAO 22-01, a lawyer posed a question to the Ethics Advisory Committee about an unsolicited email from an individual with whom the lawyer had no prior relationship.

The subject line of the email read “Land Title Dispute”. The email requested the lawyer’s “legal insight on a real estate situation” and included a description of the underlying facts with an inquiry of the lawyer’s opinion about whether the sender had a “legitimate claim.”

The lawyer immediately recognized that the facts recited in the message related to a matter in which the lawyer and the lawyer’s client had adverse interests to those of the sender. The lawyer replied to the email informing the sender of the adverse interests and stating that the lawyer could not represent the sender. The email further stated, “Please let me know if and when you are represented by other counsel and I will (be) happy to communicate with them regarding this matter.” The lawyer then took the opportunity to inform the sender that the lawyer believed the sender’s “proposal to profit off of this mistake is both theft and fraud.”

The lawyer asks the Committee whether the lawyer has an ethical obligation to maintain confidentiality of the information in the email since it was provided in the course of seeking legal advice.

The Committee first stated that the sender was neither a current nor a former client of the lawyer. The answer to the question depended on whether the sender is a “prospective client” under Rule 1.18. This rule reads: “A person with whom a lawyer discusses the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client only when there is a reasonable expectation that the lawyer is likely to form the relationship.” Comment 2 reads: “Not all persons who communicate information to a lawyer are entitled to protection under this Rule. A person who communicates information unilaterally to a lawyer without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship, therefore, is not a “prospective client” …

The Committee concluded that the lawyer had no ethical obligation to maintain confidentiality of the information in the email.

This is excellent news! We’ve all heard stories of an individual about to seek a divorce who holds meetings with all the divorce lawyers in town to limit the spouse’s choice of counsel. Thankfully, that tactic should not extend to an unsolicited email.

Happy New Year!

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Watch out for those recurring dreams…

And don’t forget the mortgage subordinations!

As the last blog of the year, I thought I’d tell you the story of one of my recurring dreams, or more accurately, one of my recurring nightmares, for your entertainment.

Do you have recurring dreams? I grew up in Georgetown where everyone makes routine pilgrimages to Charleston for shopping, dining, and medical appointments. My first recurring nightmare as a child involved the fright of crossing that rickety, two-lane bridge between Mt. Pleasant and Charleston. Thank goodness that monstrosity was replaced by the beautiful suspension bridge we cross today!

Later came the dreams involving college at Carolina. I dreamed I couldn’t get into the mailbox in my dorm. I have no idea why I had that dream because nothing very important was ever there. I dreamed my meal card wouldn’t work but that was also a useless dream because missing those dorm meals would have been no great loss.

Then came law school. In those dreams, it was always time for the exam for a class I had forgotten I signed up for. A more accurate dream would have involved a class I knew I signed up for but failed to attend class because I didn’t understand a word the professor said (think international law). Thank goodness my boyfriend had a great “skinny” on that topic and I somehow made it through that class. And I later married that boy.

But my most vivid recurring dreams involve my professional life, and the stories are always based in fact. I’ll tell you the factual, not the fantasy version of this dream. And I’ll avoid the names for attorney-client and other confidentiality reasons. This is the biggest professional mistake I made or, more accurately, the biggest professional mistake I made that I know about. As dirt lawyers, we plant time bombs every day, right?

I represented real estate developers. They developed malls, shopping centers, residential subdivisions, residential condominiums, outlots for McDonalds and other fast-food restaurants and other properties. The story involves a very large tract that was developed into an upscale residential subdivision, a Walmart, a movie theater, a church, and a shopping center.

The development was complicated. It involved environmental issues that could have derailed the entire project. Multiple individuals formed various entities for buying, holding and selling the real estate. The underlying property was purchased from the Federal government, which created its own set of complications. The acquisition, for example, involved a bid process that was foreign to me at the time.

It all finally fell into place, and the residences and businesses are still in place in 2021.

The problem that I thought might derail my career came to light when one of the individual developers declared bankruptcy. When that happened, every legal step I had taken for that person in the prior three years was scrutinized. The main lawyer scrutinizing my work, along with a team of associates, was a law school classmate, and, thankfully, a very kind and smart lawyer. But I spent lots of time worrying that I had missed something important.

I can remember the phone call from my friend all these years later down to the clothes I was wearing and the coffee cup in my hand.

The commercial properties required easements because of the private roads the properties shared. They also had easements for maintenance, pedestrian access, shared utilities, etc. Here’s the pitfall. When properties with these legal connections are owned and mortgaged separately, the lenders almost always must subordinate their mortgages to the easements to ensure the easements remain in place in the event of foreclosure, or in this case, bankruptcy.

I knew that!

I routinely obtained mortgage subordinations at every step of the development, except for one commercial tract. To this day, I have no idea how I missed one set of subordinations. And I think I lost several years off my life between the phone call from my kind classmate until I was able to obtain the subordinations very much after the fact. I was very lucky because the lender I had to approach (hat in hand) was a local lender. I even knew the person I had to persuade to cure my problem. And the good Lord must have smiled on me that day because it all worked out. I kept my license and my clients.

So, as I wish you a very happy, healthy, and prosperous 2022, I remind you to avoid the mistake I made. Always obtain the necessary mortgage subordinations!

EAO 21-01 says it’s ethical to pay $249 to be on lender’s closing attorney list

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The first Ethics Advisory Opinion of the year is noteworthy for South Carolina real estate practitioners.

Here is a brief summary of the facts:  In a residential refinance, the lender’s loan estimate package provided the name of a specific South Carolina licensed attorney that the bank “identified” as one who could close the loan. The package expressly said the borrower could “shop for (the borrower’s) own providers” for legal and other services.

The borrower informed the bank that a different lawyer had been selected, but the bank’s second set of loan estimate documents again identified a different lawyer and again said the borrower could chose its own provider.

When the borrower asked why another lawyer’s name was identified, the bank responded that the borrower’s chosen lawyer could sign with a third-party company that the bank had contracted with to produce loan forms for an annual fee of $249 to be included on the list.

The borrower’s lawyer did not enroll in the program but did close the loan.

The question to the Ethics Advisory Committee was whether a lawyer may participate in a service provider network for an annual fee of $249 to be listed as an “identified” service provider without violating S.C. Rule of Professional Conduct 7.2(c)?

Rule 7.2 (c) generally provides that a lawyer shall not give anything of value to a person for recommending the lawyer’s services. One exception to the rule is that a lawyer may pay the reasonable costs of advertisements or communications permitted by the Rule.

The Committee pointed to Comment 7 which states that a communication contains a recommendation if it endorses or vouches for a lawyer’s credentials, abilities, competence, character, or other professional qualities. The bank’s form in this case only provides contact information for participating lawyers and indicates the lawyers on the list have been identified. And the borrower is told in each instance that he or she can choose a different lawyer.

The Committee said these limited statements hardly match up the verbs and nouns used to describe a “recommendation” in the comment because the language in the forms says nothing substantive about the credentials, abilities, competence, character, or professional quality of the listed lawyers.

The Opinion further stated that participation in the network appears to be open to any real estate attorney and that the fee appears to be reasonable considering the enrollment, onboarding, and maintenance charges for including attorneys in the network.

The short answer to the question was “yes”, a lawyer may pay the fee and participate in the network of legal service providers and be “identified” as a possible service provider.

It is interesting that the facts included this statement: “The package and disclosures are assumed to be compliant with federal and state requirements for loan applications and attorney-preference notices.” The Committee answered the very specific question put to it and clearly has no authority to address federal law.

SC Supreme Court disbars two lawyers

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red card - suit

On June 24, the South Carolina Supreme Court issued two disciplinary opinions that both resulted in disbarment. Both involved interesting fact patterns, and I invite you to read  them as cautionary tales.

In the Matter of Brooks* involved a lawyer who was sworn in on February 19, 2019. Her application had been based on the Uniform Bar Exam score from Wyoming. One day after her admission, the Office of Bar Admissions learned that the lawyer had knowingly provided false or misleading information in her application.

She failed to disclose information about 2005 and 2014 arrests for driving under the influence (DUI), a resulting license suspension, use of cocaine and marijuana during her release as well as issues with Character and Fitness Boards in bar applications in other jurisdictions.

Bottom line: do not lie or omit facts on bar applications if you seek to practice in other jurisdictions. And advise potential South Carolina lawyers in your life to tell the truth and the whole truth on their applications.

The other case** is interesting only because of an underlying criminal conviction. The lawyer stole about $440,000 from trust accounts and was sentenced to probation. Never having worked in the criminal law arena, this sentence sounds unreasonably lenient to me. The disbarment makes complete sense though.

Bottom line: do not ever touch client funds for your own use!  Don’t borrow client funds, planning to replace them. Remove from your thought processes the idea that client funds are available to you for any reason other than to protect them for your clients.

 

*South Carolina Supreme Court Opinion 27983 (June 24, 2020).

**In The Matter of Collins, South Carolina Supreme Court Opinion 27984 (June 24, 2020).

Is it ethical to buy a competitor’s name as a search engine “keyword”?

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Most South Carolina dirt lawyers don’t do much direct advertising, but some make use of Internet keyword advertising. For that reason, I wanted to make sure you noticed the recently issued Ethics Advisory Opinion 20-01, which you can read here.

South Carolina’s Ethics Advisory Committee was asked the following question:  “May a lawyer bid on and use the names of other lawyers and law firms as a part of a competitive keyword advertising strategy?” In other words, it is ethical for a lawyer to pay an internet search engine to insert his or her ads when a searcher types a competitor’s name into the search engine?

In some search engines, the resulting advertisements appear on the right side of the page. In other search engines, they may appear marked as an “ad” or “sponsored” above the organic search results.

The Committee pointed out that competitive keyword advertising is different from search engine optimization (SEO). SEO is the process of increasing the visibility of a web page by users of a search engine and is directed at optimizing unpaid placement organic results. This opinion addresses only keyword advertising.

The Committee followed the lead of New Jersey, Texas and Wisconsin and opined that a lawyer may purchase an internet competitive advertising keyword that is the name of another lawyer or law firm in order to display a “sponsored” website advertisement.

The Committee stressed that lawyers should be mindful to comply with all advertising rules and should use care to ensure that no derogatory or uncivil message is conveyed. The Committee also pointed out that surreptitious redirection from a competitor’s website to a lawyer’s own website via hyperlink is prohibited under our Rules.

What do you think?