Last month, the North Carolina Business Court entered a Consent Judgment in litigation between the North Carolina State Bar and LegalZoom.com. (LegalZoom filed that lawsuit seeking a declaratory judgment that it is not engaged in the unauthorized practice of law (in violation of the NC General Statutes); the State Bar filed a counterclaim alleging that LegalZoom’s activities constituted the unauthorized practice of law.) You may find the State’s Bar summary here and the consent judgment here.
Tom Gordon, Executive Director of Responsive Law, explains more in today’s USA Today:
Imagine that at tax time you’re required to either fill out your 1040 without help or pay a CPA hundreds of dollars to do it for you. There’s no H&R Block, and while TurboTax exists, it’s under constant siege by state regulators for being an unlicensed accountant.
That’s analogous to the situation that most Americans face whenever they have a legal issue. For even simple matters, they have to either do it themselves, hire a lawyer for over $200 an hour or use software that can do the job well but which the lawyer cartel is trying to put out of business.
Responsive Law’s Report Card on Barriers to Affordable Legal Help, which will be released Thursday, grades each state on how restrictions created by lawyers make legal help expensive and inaccessible for its residents. No state received a grade above a C. The two factors most responsible for the low grades are restrictions on who can provide legal services and restrictions on the corporate structure of law firms.
For a basic will or uncontested divorce, a consumer could be well served by a competent professional other than a lawyer. However, in most states, only lawyers are allowed to provide these services. State bars have used vaguely worded restrictions on the “unauthorized practice of law” to bring legal actions against everyone from major companies like LegalZoom to small mom-and-pop operations.
The worst offender in restricting competition is Florida, which received an F in the category of Barriers to Non-Lawyer Help. The Florida Bar has a $1.97 million annual budget dedicated to enforcement of unauthorized practice restrictions that it has used to pursue charges against people like Katie Vickers, a senior citizen who helped a fellow parishioner at her church with completing workers compensation forms.
From Forbes today comes this, “Lawyers Bump Advertising Spending to $890 Million in Quest for Clients.”
A few highlights:
The phrase “San Antonio car wreck attorney” is the most expensive search string on the Web, at $670 per click, followed by “Accident attorney Riverside CA,” at $626. In fact, 23 of the 25 most expensive search terms involve lawyers and litigation, according to a new survey by the U.S. Chamber’s Institute for Legal Reform, which doesn’t think much of lawyer advertising.
Defying the trend toward declining television advertising spending, lawyers have increased their spending by 68% over the past eight years to an expected $892 million this year, the ILR reports, as law firms seek clients for lawsuits over prescription drugs, medical devices and asbestos.
The ILR study paints a portrait of an industry that knows where its customers are – often in front of a television set, watching afternoon programs, or searching the web for information about a medical condition – and knows how to get their attention.
Law firm spending on TV ads has been rising six times faster than overall spending since 2008, the study found.
Lawyers have also flooded the Internet and social media with their messages, buying search terms and linking up with “influencers” and “Super Tweeters” who write about litigious subjects on Facebook and Twitter.
The Institute for Legal Reform thinks all this advertising stimulates too much litigation, and the example of pelvic mesh implants may demonstrate their point. But plaintiff lawyers and some academics make exactly the opposite argument: Advertising helps drive more socially useful litigation by people who otherwise might not realize they have a valid claim.
The U.S. Supreme Court has held the First Amendment applies to lawyers, too, noted Anthony Sebok, a professor at Cardozo Law School in New York who writes frequently on the merits of greater involvement in civil litigation. “Big Pharma is doing the same thing as Big Tort,” he noted in an e-mail to me, by advertising directly to consumers in order to prompt them to ask their physicians for prescription drugs. The important distinction is between advertising for potential clients and invading their privacy by directly contacting them after an accident or medical mishap.
“Obviously the line between advertising and solicitation is a hard one to draw, but at no time have the courts worried about the interests of defendants when talking about where to draw the line,” Sebok told me. “The concern is for the victims of accidents, who shouldn’t be harassed and pressured, and the state’s interest in maintaining the reputation of the legal profession.”
A excerpt from the article appearing in Sunday’s NYT Magazine:
Hedge funds, banks and insurance companies have long been quietly funding the occasional lawsuit, but no major United States investment outfit in the commercial arena specialized in the practice until Juridica was founded in 2007. The industry’s early growth was driven in part by the recession, which made lawyers at big companies eager to hand off risk and also increased the demand among investors for opportunities that could pay off no matter what was happening in the world’s markets. Today the industry seems to have become a permanent part of the financial landscape, with shares of prominent funders trading every day on stock exchanges in London and Sydney.
Anthony Sebok, a professor at Cardozo Law who advises Burford, says he sees the practice as part of a broader trend toward the financialization of the law. ‘‘Why can’t I promise a stranger some piece of the game?’’ he asked me, paraphrasing Bentham’s writings. ‘‘Is there something icky about it, like I’m commodifying my rights? Bentham says these legal rights are our property. Why shouldn’t we be able to sell them?’’ Jonathan Molot, a professor at Georgetown Law who serves as Burford’s chief investment officer, has written that stock offerings by law firms could improve morale, lower rates and help lawyers focus on maximizing long-term profits. Like lawsuits, the firm itself should evolve into an asset. ‘‘It’s a mistake for lawyers to hunker down and say we’re different, we’re excluded, we’re not part of the economy,’’ he said.
But the interests of financiers and plaintiffs are not always so well aligned. Depending on the structure of the deal and the ultimate payout, plaintiffs sometimes walk away with a few crumbs after the funders and lawyers take their share. One such outcome happened in 2007, when Altitude Capital, a funder, invested $8 million in an intellectual-property suit filed by DeepNines, a small network security company, against McAfee, a much larger competitor. The case was settled for $25 million, but after expenses ($2.1 million), lawyers’ fees (roughly $11 million) and Altitude’s cut ($10 million), DeepNines took home $800,000, a little over 3 percent of its settlement. Then, Altitude questioned DeepNines’ math, arguing that the company shouldn’t have deducted its own expenses before calculating contingency fees. It sued its former partner for $5 million more, eventually dropping the suit in 2011.
This kind of falling out is unusual, but it shows the fundamental conflict that can occur.
Full article here.
The Supreme Court, split 5-4, in 1992 concluded that in a 1983 action that yielded only nominal damages the reasonable fee was no fee. the broad language of Justice Thomas for the plurality set the tone for pegging fees to damages under the Civil Rights Attorneys Fee Awards Act of 1976 [42 U.S.C. 1988]. But that obviously is a shallow approach to what it means to be a prevailing party – especially if forward looking equitable relief is achieved. Awards that achieve “furthering the vindication and deterrence goals of § 1983” deserve to be recognized as substantially prevailing and support an award of fees. – gwc
h/t Torts Prof Blog
Thomas Eaton and Mike Wells have posted to SSRN Attorney’s Fees, Nominal Damages, and Section 1983 Litigation. The abstract provides:
We argue that a “low award, low fee” approach is misguided for two main reasons. First, the majority opinion in Farrar is fragmented and the factual record is opaque regarding what and how the plaintiff’s constitutional rights were violated. These complexities render Farrar a poor case upon which to frame a rule regarding the relationship between damage awards and the proper calculation of attorney’s fees. Second, the “low award, low fee” approach is inconsistent with congressional intent. When Congress enacted § 1988 it emphasized the public benefit of vindicating constitutional rights and deterring constitutional violations. No less important, it recognized that the harms caused by constitutional wrongs often are not easily measured in terms of traditional monetary remedies – a circumstance that would discourage attorneys from taking on the representation of plaintiffs in this important set of cases. The low award/low fee approach contravenes these purposes because it effectively discourages the bringing of large numbers of highly meritorious cases involving the abridgment of constitutional rights. Indeed, the effect of this approach is perverse, because it blocks the recovery of meaningful attorney’s fees in the very set of low damages-serious constitutional wrong cases in which the need to incentivize the provision of legal services is most pressing.
The personal injury law firm of Searcy Denney Scarola Barnhart & Shipley PA sued the Florida Bar challenging two aspects of its rules concerning lawyer advertising. On September 30, 2015, Judge Hinkle from the Northern District ruled that the challenge to the requirements that references to past results must be “objectively verifiable” was not yet ripe for review.
The lawsuit also challenged the Florida Bar’s ban on truthful statements regarding a lawyer’s specialty or expertise, absent certification under the Florida Bar certification program or some outside certifying organization. Judge Hinkle found that this rule failed all three prongs of the Central Hudson analysis, and granted the plaintiff’s summary judgment motion in part.
I expect this is not the last word from the federal courts on Florida’s efforts to regulate lawyer advertising. Stay tuned.
See Christian D. Searcy et. al v. The Florida Bar, 2015 WL 5769238
On Wednesday, US District Court Judge Robert L. Hinkle (Northern District FL) found unconstitutional the Florida Bar’s (the “Bar”) rule prohibiting lawyers from truthfully advertising that they are “a specialist, an expert, or other variations of those terms” unless they are board certified by the state, the ABA, or another state with standards comparable to Florida. (Rules Regulating the Florida Bar 4-1.14(a)(4)) The law firm of Search Denney, which included on its website that it specializes in mass-tort and unsafe- product cases, brought the case. The Bar did not dispute that the firm has handled many such cases.
The Bar argued that potential clients would be misled into assuming that lawyers who advertise that they “specialize” or have “expertise” are board certified. The Court found no evidence to support this argument, and even suggested that a better way for the Bar to deal with this concern is to educate the public about board certification, or require a disclaimer. In finding the Rule violated First Amendment protections on commercial speech, Judge Hinkle also noted that the Rule prohibits every lawyer in the state from claiming expertise in any practice area for which there is no board certification, as well as every law firm from claiming any specialties, as there are no board-certifications for law firms.
You may find the Order here.
Just what is a reasonable feeas required by RPC 1.5? How is it determined in practice? In the BP Gulf Oil Spill Compensation cases MDL – in which $5 billion has already been paid out, the “common benefit” fees to the Plaintiffs Steering Committee and those who bore the brunt of the litigation are not yet payable. Fees must, of course be reasonable. Judge Carl Barbier here lays out a road map and establishes guidelines for review of fee applications.
Judge Barbier Establishes Common Benefit Fee Committee and Issues Guidelines in BP Spill Economic and Medical Compensation Case
PRETRIAL ORDER NO. 59
(Appointment of Common Benefit Fee and Cost Committee and Guidelines for Common Benefit Attorneys’ Fees and Costs Reimbursement)
Even though a formal petition for an award of common benefit attorneys’ fees and reimbursement of costs (“Aggregate Fee and Cost Petition”) likely will not be filed in this litigation until 2016 or later, it is important at this time to begin the process of creating a structure, establishing guidelines, and setting a timetable for the eventual presentation to the Court of an Aggregate Fee and Cost Petition and a subsequent recommendation regarding allocation of the Aggregate Common Benefit Fee and Costs Award among eligible Fee Applicants “Allocation Recommendation”).
BP has agreed to pay up to $600 million in common benefit attorneys’ fees, costs, and expenses, as awarded by the Court.1 Under the Fee Agreement, “[a]ny common benefit Class Counsel fees and costs awarded by the Court will not be deducted from Class Members’ recoveries, but will be paid by BP in addition to other class benefits.” In re OIL SPILL by the OIL RIG “DEEPWATER HORIZON” in the Gulf of Mexico, on April 20, 2010, 295 F.R.D. 112, 126 (E.D. La. 2013), appeal dism’d in part, No. 13-30221 (5th Cir. Feb. 11, 2014).
Relevant to Chapter 3: see ASSOCIATION OF PROFESSIONAL RESPONSIBILITY LAWYERS 2015 REPORT OF THE REGULATION OF LAWYER ADVERTISING COMMITTEE . The opening paragraph of the Executive Summary states: “The rules of professional conduct governing lawyer advertising in effect in most jurisdictions are outdated and unworkable in the current legal environment and fail to achieve their stated objectives. The trend toward greater regulation in response to diverse forms of electronic media advertising too often results in overly restrictive and inconsistent rules that are under-enforced and, in some cases, are constitutionally unsustainable under the Supreme Court’s Central Hudson test. Moreover, anticompetitive concerns, as well as First Amendment issues, globalization of the practice of law, and rapid technology changes compel a realignment of the balance between the professional responsibility rules and the constitutional right of lawyers to communicate with the public. ……
Based on the survey results, anecdotal information from regulators, ethics opinions, and case law, the Committee concludes that the practical and constitutional problems with current state regulation of lawyer advertising far exceed any perceived benefits associated with protecting the public or maintaining the integrity of the legal profession, and that a practical solution to these problems is best achieved by having a single rule that prohibits false and misleading communications about a lawyer or the lawyer’s services. The Committee believes that state regulators should establish procedures for responding to complaints regarding lawyer advertising through non-disciplinary means. Professional discipline should be reserved for violations that constitute misconduct under ABA Model Rule 8.4(c).3 The Committee recommends that violations of an advertising rule that do not involve dishonesty, fraud, deceit, or misrepresentation under Rule 8.4(c) should be handled in the first instance through non-disciplinary means, including the use of advisories or warnings and the use of civil remedies where there is demonstrable and present harm to consumers.
Our own Laurel Terry offers an insightful Jotwell review of a recent article by Andy Perlman, where he makes the case for a “law of legal services,” expanding regulation beyond what we traditionally conceive of as the “law of lawyering.” According to Terry: “…we may be getting close to a tipping point in which we begin to take seriously the notion of a ‘law of legal services.’ Professor Perlman’s thoughtful and measured article, his legal services ‘pyramid,’ and the model rule he includes in his article provide a useful way to start thinking about whether and how we might go about reimagining the regulatory space in which we operate.”
When I teach lawyer advertising and solicitation, I often pose the following hypothetical to my students: Is the use of social media like Facebook to reach potential clients permissible solicitation under the precedent of In re Primus (where the Supreme Court held that North Carolina could not bar an ACLU attorney from holding gatherings to inform women about their civil rights after they had been sterilized on condition of receiving public medical benefits) and Ohralk v. Ohio State Bar Association (decided the same day as Primus, with the Supreme Court holding that an ambulance chaser could be barred from soliciting clients at the hospital bedside). My hypothetical is now a reality–from Bloomberg News comes this article on how law firms are using Facebook to solicit medical victims (h/t Professor Elizabeth Tippett of Oregon Law, whose scholarship focuses on lawyer advertising and marketing, among other topics).
For ambulance chasers, persistence and a phone book just don’t cut it anymore. Law firms, which once relied on television commercials, billboards, and cold calling numbers in the white pages to find plaintiffs for medical lawsuits, have begun to embrace technology. To locate their ideal pharma victims more quickly and at lower costs, they’re using data compiled from Facebook, marketing firms, and public sources, with help from digital bounty hunters like Tim Burd.
by Bruce Greenberg
Templin v. Independence Blue Cross, ___ F.3d ___ (3d Cir. 2015). “A party seeking attorney’s fees under ERISA [the Employees Retirement Income Security Act] must show ‘some success’ on the merits. Here, the District Court incorrectly defined ‘some success’ by requiring evidence of judicial action.” So began Judge Nygaard’s opinion for the Third Circuit in this case. The panel reversed the denial of attorneys’ fees to plaintiff and remanded to the District Court for consideration of the fee application under the proper criteria.
Plaintiffs (two individuals and two pharmacies) sued the defendant insurance companies for improper denial of benefits under ERISA. After the District Court denied defendants’ motion to dismiss, defendants paid the claims and the case was dismissed. Both sides sought attorneys’ fees, but both the District Court and the Third Circuit denied both fee requests. The Third Circuit left one issue to be resolved: whether plaintiffs were entitled to interest on the delayed payment of benefits. The case was remanded to the District Court on that issue.
by Prof. Alberto Bernabe
As you know by now, I am sure, the comment to Model Rule 1.1 on competence has been amended to state that the duty of competence includes the duty to be knowledgeable about “technology.” And that probably includes “e-discovery.”Enter California’s Proposed Formal Opinion 11-0004, a proposed opinion, not yet adopted by the rules committee, that discusses the issues that arise when an attorney who doesn’t know anything about e-discovery suddenly finds himself facing e-discovery problems that have crept into his case. It suggests that litigators should have minimal competence in e-discovery and may be violating their duty of competence if they do not either become competent or bring in someone who is competent. Go here for a discussion of this important Opinion.
Last week the Supreme Court issued a 6-3 opinion affirming the Fourth Circuit’s decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission. In the decision below, the Fourth Circuit upheld the FTC’s determination that the Board of Dental Examiners violated antitrust law in issuing cease-and-desist letters to non-dentists performing teeth whitening services, finding that the Board acted as a group of private dentists rather than as a state actor. Agreeing with the Fourth Circuit, Justice Kennedy, writing for the majority, observed: “Limits on state-action immunity are most essential when the State seeks to delegate its regulatory power to active market participants, for established ethical standards may blend with private anticompetitive motives in a way difficult for even market participants to discern. Dual allegiances are not always apparent to an actor.” The decision may have implications for state bar regulators, particularly regarding unauthorized practice of law enforcement.
For more about the potential impact of the case on the legal profession, see Ken Friedman’s Forbes article (he’s the VP of Legal and Government Affiars for LegalZoom) and commentary from PrawfsBlawg. (Disclaimer, I assisted in authoring an amicus brief on behalf of LegalZoom and others. I’m also working on a paper about antitrust enforcement and the legal profession—I hope to be posting it soon…)
OTHERWISE: Legal Ethics Forum: Catherine Lanctot, "Becoming a Competent 21st Century Legal Ethics Professor: Everything You Always Wanted to Know About Technology (But Were Afraid to Ask)".
Article. (Catherine Lanctot’s article, Attorney-Client Relationships in Cyberspace: The Peril and the Promise, 49 Duke Law Journal 147-259 (1999) was one of the first — the very first? — long form article applying the Law Governing Lawyers to lawyers’ behavior in cyberspace.) Abstract of her new article:
This Article provides a roadmap for rebooting the legal ethics curriculum. It describes how to revise a traditional legal ethics class to respond to twenty-first century law practice, and provides a detailed overview of the landscape of technological issues currently affecting the practice of law, including many cautionary tales of lawyers who ignored their ethical responsibilities.
We have finally hit the tipping point with respect to the use of technology within the legal profession, as bar regulators have begun to warn attorneys that they may no longer plead ignorance of technological advances if such ignorance harms the interests of their clients. With technological competence becoming more important for lawyers with each passing year, we do our students a disservice if we do not prepare them adequately for their future in the law.
Legal ethics professors are uniquely situated to impress upon our students the obligation to understand the risks and benefits of technology in the practice of law. But before we can ensure that our students are competent to enter a world of rapid and disruptive technological change, we need to be sure that we are competent ourselves. This may be unwelcome news for many colleagues, especially those who still harbor a little bit of the Luddite spirit that has always been a part of the legal profession.
Integrating ethical issues arising from technology can be readily accomplished if we commit ourselves to carrying out this objective. By embracing the challenge of imbuing our approach to the study of legal ethics with a focus on technological innovation, in both our teaching and our scholarship, we can be important voices at this time of transformation.
Plaintiffs counsel Michael Hausfeld
The NCAA has filed its opposition to the plaintiffs lawyers motion for $50 million in counsel fees in O’Bannon v. NCAA. The NCAA argues that plaintiffs should recover only $9 million in counsel fees and proposes steep reductions in cost recovery.
In August 2014 U.S. District Judge Claudia Wilkens ruled that the NCAA violated antitrust law by preventing student-athletes from being compensated for their name, image and likeness rights.
Wilken’s ruling allows schools to pay athletes licensing money into a trust fund starting in 2016. Financial damages were not part of the trial, but Wilken said the plaintiffs “shall recover their costs from the NCAA.”
The NCAA argues that plaintiffs lawyers application is flawed in that it they may not recover fees for work done on the case prior to September 1, 2012 when their theory of the case changed; they may not recover fees for work done solely to advance claims upon which they did not prevail in substantial part, or for claims that were essentially abandoned; nor may they recover for “work that was unnecessary, redundant and inefficient, unsupported by plaintiffs’ billing records, or that did not reflect sound billing judgment”. Finally the NCAA argues that much of plaintiffs’s claims of costs are “unsupported by their submission or the law”.
Legal Ethics Forum: A New Frontier for the Rules of Professional Conduct: Limited License Legal Technicians
by Andrew Perlman – Suffolk School of Law
On January 8, 2015, the Washington State Supreme Court adopted special rules of professional conduct to govern limited license legal technicians (LLLTs). The LLLT rules are closely analogous to the rules that govern lawyers, so there is nothing terribly new here substantively. But the very existence of professional conduct rules for a new class of legal professionals nicely illustrates why our traditional focus on the “law governing lawyers” has become too narrow. Our field might be more accurately described now as the “law of legal services.”
The Florida Bar Board of Governors has voted to drop its advertising guideline on “past results.” The prior interpretation was that it was inherently misleading to state past results in any lawyer advertisement. The Florida Bar acted In response to Judge Beth Bloom’s decision in Rubenstein v. Florida Bar (discussed in my blog post of December 10). In addition, the Bar had commissioned a survey by Frank N. Magid & Associates to survey whether the public was misled by advertising reporting past results. This Magid survey did not support this hypothesis.
For more on these recent developments, see the Florida Bar News, January 1.
From my perspective, most interesting are the statements of Bar President Bill Coleman in the Florida Bar News which suggest that the Bar is re-examining its policy of requiring advance filings with the Bar of all billboard, radio, television and direct mail ads.
Let’s see what 2015 brings in this ongoing debate.
Attorney Robert Rubenstein has sued the Florida Bar over its new and improved 2013 attorney advertising rules. Following the issuance of the new regulations, Rubenstein developed an advertising campaign that included information regarding past recoveries for clients. Consistent with the Florida Bar’s procedures, these ads were submitted for review, and the Florida Bar issued opinion letters which reported that the past performance advertisements complied with the revised Rules.
View an example of the advertisements in question at https://www.youtube.com/watch?v=MFjHTQF4dkQ
By early 2014, the Florida Bar issued new guidelines regarding advertising past results, and then the Bar notified Rubenstein that it was withdrawing its opinion letter on compliance. By March 2014, Rubenstein sued the Florida Bar on first amendment grounds.
In the instant case, heard by Federal Judge Beth Bloom, the Florida Bar challenged jurisdiction on the basis of standing and ripeness. Judge Bloom disagreed and denied the Florida Bar’s motion.”Plaintiffs have clearly demonstrated a very real threat of prosecution for engaging in their advertisement of past results.” The slip opinion is available at 2014 WL 6610972.