Many changes have been afoot in the legal space with the Law Society of Upper Canada’s (LSUC) new rules on advertising and fee arrangements and more recently, approval of a cap on referral fees.
Full disclosure: we work with many law firms to market their services so have paid keen attention to these stories as they have unfolded throughout the Toronto Star’s investigation into the controversial advertising practices of some Ontario law firms, mostly in the personal injury field.
The LSUC’s amendments to its advertising and fee rules, which had been in the works since last summer, were agreed upon in principle by Convocation, the LSUC’s governing body and took effect in late February.
At the end of April, the LSUC’s governing board decisively set a referral fee cap at 15 per cent for the first $50,000 of legal fees and five per cent for each subsequent amount, to an absolute fee cap of $25,000.
Firstly, the original rules are fairly broad and vague which can make them easy – or tricky – to follow. With more specific and prescriptive guidelines, there is less room for interpretation and error. Secondly, let’s be honest: some of the law firm advertisements out there are downright dodgy with a certain spoof-like quality. These kinds of ads aren’t doing any favours for the reputation of the legal profession and certainly do not help the people who need these services. Thirdly, and most importantly, the new rules will help to level the marketing playing field, ensuring that individuals and companies can find lawyers that will best represent their interests rather than lawyers that are the best at advertising their services.
The LSUC’s Convocation - Professional Regulation Committee Report contains full details of their findings, concerns, proposed amendments to the current fee and advertising rules, and next steps. The existing rules remain largely unchanged, however the LSUC rules are now much more specific by providing examples of prohibited marketing practices.
For those who need a little refresher, the current rules state:
4.2-1 A lawyer may market legal services only if the marketing
- Is demonstrably true, accurate and verifiable;
- Is neither misleading, confusing, or deceptive, nor likely to mislead, confuse, or deceive; and
- Is in the best interests of the public and is consistent with a high standard of professionalism.
Examples of marketing that may contravene this rule include
- Stating an amount of money that the lawyer has recovered for a client or referring to the lawyer’s degree of success in past cases, unless such statement is accompanied by a further statement that past results are not necessarily indicative of future results and that the amount recovered and other litigation outcomes will vary according to the facts in individual cases;
- Suggesting qualitative superiority to other lawyers;
- Raising expectations unjustifiably;
- Suggesting or implying the lawyer is aggressive;
- Disparaging or demeaning other persons, groups, organizations or institutions;
- Taking advantage of a vulnerable person or group;
- Using testimonials or endorsements which contain emotional appeals.
Remember how we said that the rules are somewhat general and open to interpretation? To ensure that little can be left to any wild marketer’s imaginations, the LSUC has added the following:
Examples of marketing that do contravene this rule include
- Marketing services that the lawyer is not currently able to perform to the standard of a competent lawyer;
- Bait and switch marketing, that is marketing by which clients are attracted by offers of services, prices or terms different from those commonly provided to clients who respond to the marketing;
- Marketing that fails to clearly and prominently disclose a practice that the lawyer has of referring clients for a fee, or other consideration, to other licensees;
- Failing to expressly state that the marketed services will be provided by licensed lawyers, by licensed paralegals or both, as the case may be;
- Referring to awards, ranking and third party endorsements that are not bona fide or likely to be misleading, confusing, or deceptive.
- Awards, rankings and third party endorsements which contravene this rule include those that:
- Do not genuinely reflect the performance of the lawyer and the quality of services provided by the lawyer but appear to do so;
- Are not the result of a reasonable evaluative process;
- Are conferred in part as a result of the payment of a fee or other consideration rather than as a result of a legitimate evaluation of the performance and quality of the lawyer; or
- The lawyer could not have demonstrated, at the time of reference, were compliant with this rule.
The lawyer could not have demonstrated, at the time of reference, were compliant with this rule.
4.2-1.1 A lawyer marketing legal services shall specifically identify in all marketing materials that they are licensed as a lawyer.
4.2-1.2 The marketing of second opinion services is prohibited.
In addition to the cap on referral fees, the LSUC also approved related measures to increase the transparency of referral fee arrangements. The following new requirements took effect on April 28, 2017:
- The client, the referring lawyer or paralegal and the lawyer or paralegal accepting the referral must sign a standard referral agreement, as provided by the Law Society.
- The account to the client must clearly indicate the amount of the referral fee.
- The client must sign an acknowledgement for the referral payment at the time the payment is made.
- Lawyers and paralegals must record referral fees paid and received in their books and records and report on referral fee practices in the annual reports they submit to the Law Society.
- Up-front referral fees are prohibited.
- Paid referrals when the referring licensee has a conflict of interest will continue to be prohibited.
- Payment of referral fees to licensees whose licenses were suspended at the time of referral are prohibited.
Shortly after the LSUC’s new rules were announced, Liberal MPP Mike Colle (Eglinton-Lawrence) tabled a private member’s bill that calls for a ban on referral fees, makes all advertising by personal injury lawyers subject to pre-approval by the LSUC, requires contingency fee agreements to clearly state how the lawyers will get paid and caps contingency fees at 15 per cent of the settlements awarded to personal injury victims.
Acknowledging that private member’s bills rarely become law, Colle said his intention is to raise awareness of these practices that are negatively impacting accident victims and to pressure the government to take action.
While the new rules are a welcome and arguably a long overdue change, they won’t hold much water unless they are enforced and those who break them are penalized. Convocation deals strictly with policy and does not comment on enforcement.
In a press release from the LSUC, Chief Executive Officer Robert Lapper had this to say: “Lawyers and paralegals are expected to follow the Rules of Conduct. In the event that the Rules are not followed, the Law Society will vigorously investigate and take appropriate regulatory action.”
The LSUC is currently investigating about 90 cases of advertising and referral fee complaints involving lawyers from various firms across Ontario. Clearly a problem exists. To effectively deter rule-breaking behavior, the punishment must fit the crime. Serious wrongs are being committed when vulnerable people are being taken advantage of, hard-earned money is going to undeserving people, and public perception of an entire profession is being tarnished by jingles based on half-truths and outright lies. It is our hope that the LSUC will put as much thought and effort into enforcing the rules as it has into coming up with the recent amendments.
So what can your firm do to ensure that your marketing efforts are well within these new regulations? The first step is, of course, knowing them. We have included excerpts from the proposed amendments above and encourage you to take a look at the full report.
Aside from following the letter of the law, so to speak, here are our guidelines to help you follow the spirit of it too:
Let common sense and integrity be your guide. By virtue of being a lawyer, your intentions and motivations are quite simply to help people. Common sense dictates that misleading or deceitful advertising is simply not helpful nor does it uphold the values and integrity that people expect from their trusted legal advisors.
Just be who you really are. From your website to a billboard ad to a radio commercial, it’s important that everything you put out there is true and accurate or else you are committing a major disservice to the general public. And take it from us: truth and accuracy does not mean uninteresting and ineffective. We have worked with hundreds of lawyers over the years to help them uncover who they are, what they offer, and why that makes them the right choice for the right client. We pride ourselves on finding creative, compelling and truthful selling points for each and every firm that we work with.
Be a consumer too. Sure, it’s cliché and a little cheesy, but do unto others as you would have them do unto you. Put yourself in the shoes of the person who has been injured by someone else’s negligence and is suffering from intense physical and emotional pain. They may have limited resources and have never had to deal with an insurance company or the legal system. If that were you, would you want to be misled, misinformed, and misrepresented?