FTC Staff Comment Before the State Bar of California Concerning Proposed Rule Changes on Attorney Advertising and Solicitation

L'NITED ST A ITS OF AME RIC ....
FEDERAL TRADE COMMISSION
W....SHINGTON. DC. mw
..........
,Ii.,. " '.:. /" 	~!iHoRL~J
Jan ua ry 	1 5, 	1 98 "
~arry 	B. 	Sondheim, 	Chair
The 	Commission 	for 	the 	Revision
of 	the 	Rules 	of 	Professional 	Conduct
State 	Bar 	of 	California
Off~ce of 	Professional 	Stand~rds
555 	Franklin 	Street
San 	Francisco, 	California 	94102
Dear 	Mr. 	Sondheim:
The 	Federal 	Trade 	Commissionis 	Bureaus 	of 	Competition,
Consumer 	Protection 	and 	Economics 	are 	pleased 	to 	submit 	these
comments 	respecting 	proposed 	modifications 	of 	tte 	California
Rules 	of 	Professional 	Conduct. 	In 	this 	letter 	we 	focus 	only 	on
the 	proposed 	rules 	affectins 	advertising 	and 	solicitation, 	which
we 	understand 	the 	Commission 	for 	t~e_ Revision 	of 	the 	Rules 	of
Professio~al Conduct 	("Commission") 	will 	be 	discussing 	at 	its
January 	16, 	1987 	meeting.
The 	rules 	proposed 	by 	the 	Commission 	appear 	to 	permit 	more
attorney 	advertising, 	pa~ticularly advertisins 	through 	the 	mail,
than 	the 	curren~ Rules 	of 	Professional 	Conduct, 	a~~ 	should
therefore 	benefit 	consumers 	of 	legal 	services. 	We 	support 	this
relaxation 	of 	restrictions 	on 	aovertisir.g. 	The 	p:oposed 	rules,
however, 	woule 	prohibit 	telephone 	and 	in-person 	solicitation,
with 	very 	lim~ted exceptions. 	In 	adcition, 	the 	proposed 	rules
may 	be 	interpreted 	to 	prohib~t some 	advertising 	that 	is 	neither
:alse 	nor 	deceptive 	and 	whic~ consequer.tly 	presents 	little 	risk
of 	harm 	to 	consumers. 	To 	increase 	the 	availability 	of 	truth~ul,
nondeceptive 	information 	to 	consumers, 	we 	urge 	the 	Commission 	to
modify 	Proposed 	Rules 	2-101(3) 	and 	(C) 	to 	prohibit 	only
uninvitec, 	in-person 	solicitation 	of 	persons 	who, 	because 	of
their 	particular 	circumstances, 	are 	vulnerable 	to 	undue
influence. 	We 	also 	urge 	the 	Com~ission to 	modify 	Rule 	2-
lOl(D) (5) 	and 	Standards 	1-3 	so 	ttat 	they 	~:ll 	not 	prohibit
trut~ful, nondeceptive 	advertising.
Truthful, 	nondeceptive 	adve:~isin~ communicates 	inforpation
about 	the 	individuals 	or 	firms 	t~at o::er 	services 	th2~ cc~su~ers
may 	wish 	to 	p~rchase. 	Such 	information 	facilitates 	p~:ct~sin~
1 :~is 	letter 	represents 	the 	vi~~s 	0: 	:~e 	~~reaus, 	enc 	not
nc=essarily 	t~o~e 	0 	~~e 	Ccmreissi-~. 	Th~ 	Ccrnmissi:~.
h;:::-'ever, 	hc.s 	al:.: .. or 	ZL 	submission 	of 	t~je:e comments.
.-

Harry 	B. 	Sondheim 	-2-
decisions 	that 	re:lect 	true 	consumer 	preferences 	and 	promotes 	the
efficient 	delivery 	of 	services. 	Empirical 	evidence 	suggests 	that
removing 	restrictions 	on 	the 	dissemination 	of 	truthful
information 	about 	la~yers and 	legal 	services 	will 	tend 	to 	enhance
com~etition and 	lower 	prices. 2 Although 	sone 	concern 	has 	been
voiced 	that 	advertising 	may 	lead 	to 	lower 	quality 	legal 	services,
the 	empirical 	evidence 	suggests 	that 	the 	quality 	of 	services
provided 	by 	firms 	t~at advertise 	is 	at 	least 	as 	h~gh as, 	if 	not
higher 	than, 	that 	of 	firms 	that 	do 	not 	advertise.
Truthful, 	nondeceptiv€ 	telephone 	and 	in-person 	solicitation
may 	also 	provide 	useful 	information 	to 	consumers 	about 	the
availability 	of 	legal 	services. 	On 	the 	other 	hane, 	both
telephone 	and 	in-person 	solicitation 	may 	have 	some 	potential 	for
abuse 	if 	a 	lawyer 	contacts 	an 	injured 	or 	emotionally 	upset
consumer. 	In 	most 	other 	circumstances, 	however, 	such 	adverse
effects 	are 	unlikely. 	Therefore, 	a 	comprehensive 	ban 	on
solicit?tion 	is 	unnecessary 	and 	may 	harm 	consumers 	by 	depriving
them 	of' useful 	information.
solicitation
Proposed 	Rules 	2-101(3) 	end 	(C) 	would 	prohibit 	telephone 	and
in-person 	solicitation 	except 	of 	family 	members 	and 	people 	with
whom 	the 	lawyer 	has 	had 	a' prior 	professional 	relationship. 	Thes~
rules· are 	undesirable 	because 	they 	would 	preclude 	truthful,
nonceceptive 	communications 	in 	circumstances 	that 	?ose 	little 	or
no 	risk 	of 	undue 	influence.
Truthful, 	nondeceptive 	in-person 	solicitation 	may 	provide
infprmation 	to 	consumers 	that 	will 	help 	them 	select 	a 	lawyer. 	As
the 	Supreme 	Court 	observed 	in 	Ohralik 	v. 	Ohio 	State 	Bar
Association, 	436 	u.s. 	447, 	457 	(1978), 	in-person 	contacts 	can
2
3
C:evelanG 	Regional 	Office 	and 	Bureau 	of 	Economics, 	FederalI
Trade 	Commission, 	Improving 	Consumer 	Access 	to 	Legal
Services: 	The 	Case 	for 	Remo~ing Restrictions 	on 	Truthful
Advertising 	(1984). 	See 	also 	Bureau 	of 	Economics, 	Federal
Trade 	Commission, 	Effects 	of 	Restrictions 	on 	Advertising 	and
Commercial 	Practice 	in 	the 	Professions: 	The 	Case 	of
Optometry 	(1980); 	Benham 	and 	Benham, 	Regulating 	Throuch 	:~e
Professions: 	A Perspective 	o~ 	I~:orrnation Contrel, 	10 	J. 	~.
& Scon . 	.;21 	(197S); 	Benham, 	'l'he 	:::ffects 	of 	Adv-::rtisinq 	':":1 	'. :~e
P:-ice 	of 	Eveglasse~, 15 	J. 	L. 	& Econ. 	337 	(2.97:). 	d
M~ris 	and 	~cChesney, A~ver~isinq and 	the 	~rice 	2~~ 	Quality 	of
Legal 	Servi-:es: 	':":;e 	C2se 	for 	Lecal 	C:ir.lc:, 	19i0 	;.::. 	8.
F 0 un c. 	::.::: ::: e 2 r c: :-, 	:. 	l 7 9 	(l ~ 79) •

Harry 	B. 	Sondheim 	-3-
convey 	information 	about 	the 	availability 	and 	ter~s of 	a 	lawyer's
or 	law 	firm's 	legal 	services 	and 	serve 	the 	same 	function 	in 	this
respect 	as 	print 	advertisements.
We 	recognize 	that 	abu:es 	may 	result 	from 	in-person
solicitation 	by 	lawyers. 	~~jured or 	emotionally 	distressed
people 	may 	~e 	vulnerable 	to 	the 	exercise 	of 	undue 	influence 	when
face 	to 	face 	with 	a 	lawyer, 	as 	the 	Supreme 	Court 	:ound 	in
Ohra1ik, 	426 	u.s. 	at 	465. 	We 	do 	not 	believe, 	ho~ever, 	that 	this
is 	a 	justification 	for 	a 	broad 	prohibition 	on 	i~-person
solicitation. 	The 	Federal 	Trade 	Commission 	considered 	the
cor.cerns 	that 	underlie 	the 	Ohralik 	opinion 	when 	it 	decided
American 	j'~edical Association, 	94 	F.T.C. 	701 	(1979), 	aft'd, 	638
F.2d 	443 	(2d 	Cir. 	1980), 	aff'd 	memo 	by 	an 	egually 	divided 	court,
455 	u.s. 	676 	(1982). 	After 	weighing 	the 	possible 	~arms and
benefits 	to 	consumers, 	the 	FTC 	ordered 	~~ 	to 	cease 	and 	desist
from 	banning 	solicitation, 	but 	permitted 	AMA 	to 	proscribe
uninvited~ 	in-person 	solicitation 	of 	persons 	who, 	because 	of
their 	pa~ticular circumstances, 	are 	vulnerable 	to 	undue 	influence
( " the 	AMA 	s tan dar d ") .
In-person 	solicitation 	does 	not 	necessarily 	involve 	the
exercise 	of 	undue 	influence. 	Lawyers 	encounter 	potential 	clients
at 	meetings 	of 	political 	and 	business 	organizations 	and 	at 	social
events. 	Indeec, 	lawyers 	traditionally 	~ave 	built 	their 	law
practices 	through 	such 	contacts. 	If 	a 	lawyer 	discusses 	his 	or
her 	legal 	se~vices with 	a 	potential 	client 	under 	such
circumstances, 	no 	undue 	influence 	is 	li~ely to 	be 	involved. 	In
s~ch 	a 	situation, 	the 	potential 	client 	need 	not 	respond
immeci~tely and 	can 	subsequently 	se:ect 	a 	lawyer 	should 	a 	need
for 	~esal 	services 	arise.
T€~~?hone solicitation 	similarly 	can 	convey 	useful
infor~2~ion to 	consumers, 	and 	it 	presents 	no 	g~eater 	risk 	of 	the
exercise 	of 	und~e 	influence 	than 	=oes 	in-perso~ solicitation. 	In
m~st circumstances, 	telephone 	solicitation 	appears 	unlikely 	to
r~su~t in 	co~sumer harm. 	Consumers 	are 	accustomed 	to 	telephone
marketing. 	T~ey 	receive 	calls 	from 	persons 	offering 	the 	sale 	of
various 	goo;s 	and 	services, 	conducting 	surveys 	about 	the 	products
and 	services 	consumers 	use, 	seeking 	contributions 	to 	charities,
and 	requesting 	support 	for 	political 	candidates. 	Consumers, can
easily 	terminate 	offers 	of 	legal 	services 	communicated 	by
telepho~e. 	Telephone 	solicitation 	is 	in 	some 	respects 	similar 	to
in-person 	solicitation; 	a 	lawyer 	might 	be 	able 	to 	persuade 	a
vulnera~le 	person 	to 	hire 	the 	lawyer. 	But 	there 	are 	also
dissimilarities 	between 	the 	two 	forms 	of 	solicitation. 	A
tele?ho~e 	solicitor 	may 	be 	less 	able 	:0 	exercise 	influence 	than

Harry 	D. 	Sondheim 	-4-
an 	in-person 	solicitor, 	and 	it 	may 	be 	easier 	for 	the 	recipient 	of
a 	telephone 	solicitation 	to 	terminate 	a 	conversation 	than 	it 	is
for 	a 	potential 	client 	who 	is 	solicited 	in 	person. 	Certainly,
false 	a~d 	deceptive 	telephone 	solicitation 	may 	ap?ropriately 	be
prohibited. 	Although 	the 	N1A 	standard 	may 	be 	appropriate, 	we 	are
not 	yet 	ready 	to 	conclude 	that 	it 	should 	be 	appli~d to 	telephone
solicitation. 	But 	the 	broad 	ban 	on 	telephone 	solicitation
contained 	in 	Proposed 	Rules 	2-101(B) 	and 	(C) 	is 	c~necessarily
restrictive.
Accordingly, 	as 	to 	in-person 	solicitation, 	-e 	urge 	that 	the
Commission 	prohibit 	only 	uninvited, 	in-person 	solicitation 	of
persons 	who, 	because 	of 	their 	particular 	circumstances, 	are
vulnerable 	to 	undue 	influence. 	false 	or 	deceotive 	solicitation
shoul~ also 	be 	prohibited. 	In 	acdition, 	a 	ba~ 	on 	solicitation 	of
a 	person 	who 	has 	made 	known 	to 	the 	lawyer 	a 	desire 	not 	to 	receive
communicutions 	from 	the 	lawyer 	would 	be 	appropriate. 	Such 	rules
would 	pr6tect 	consumers 	while, 	at 	the 	same 	time, 	allowing 	them 	to
receive" information 	about 	available 	legal 	services.
Proposed 	Rule 	2-101(D) (5) 	provides 	that 	soli~itation shall
not 	be 	"transmitted 	in 	any 	manner 	which 	involves 	intrusion,
coercion, 	duress, 	compulsion, 	intimidation, 	threats 	or 	vexatious
or 	harassing 	conduct." 	Prohibiting 	solicitation 	that 	involves
coercion, 	curess, 	or 	the 	other 	evils 	enumerated 	in 	Proposed 	Rule
2-101{D) (5) 	may 	be 	appropriate, 	depending 	upon 	tte 	interpretation
of 	the 	rule's 	terms. 	For 	exa~ple, a 	phone 	call 	to 	a 	former
client 	at 	his 	or 	her 	horne 	offering 	legal 	services 	might 	be 	viewec
by 	some 	as 	an 	"intrusion"; 	more 	~han one 	call 	to 	a 	former 	client
coule 	be 	viewed 	by 	some 	as 	"harassing 	conduct." 	Licensing 	board~
and, private 	associations 	in 	other 	professions 	have 	employed 	such
interpretations 	anticorr.petitively, 	to 	ban 	solicitation 	under
circumstances 	that 	pose 	no 	danger 	of 	harm 	to 	consumers. 	~~~s, 	we
urge" ~hat 	the 	Commission 	interpret 	Rule 	2-101(D) (5) 	no 	more
res~rictively than 	the 	k~A 	standard.
Advertising
Propo~ej Rule 	2-101(D) (5) 	also 	prohibits 	advertisements 	that
are 	"transmitted 	in 	any 	manner 	which 	involves 	intrusion,
coercion, 	duress, 	compulsion, 	intimidation, 	threats 	or 	vexatious
or 	harassing 	conduct." 	Proposed 	Standard 	3 	woul~ 	in 	effedt
prohi~it the 	delivery 	of 	a 	"co~~unication" 	to 	a 	~tential 	client
"whc~ the 	member 	knows 	or 	should 	reasonably 	know 	is 	in 	such 	a
physical, 	emotional 	or 	mental 	state 	that 	he 	or 	she 	would 	not 	be
expected 	to 	exercise 	reasona81e 	judgment 	as 	to 	t~e 	retention 	of
counsel." 	"Communication" 	is 	~efined by 	Rule 	2-101(A) 	to 	include
advertisements 	directed 	to 	the 	genera: 	public. 	Virtually 	all

Harry 	B. 	Soncheim 	-5-
newspaper, 	television 	or 	other 	media 	advertising 	will 	be 	seen 	by
at 	least 	a 	few 	consumers 	who 	are 	not 	able 	to 	exercise 	"reasonable
judgment." 	But 	advertisements 	communicated 	by 	print 	or
electronic 	wecia 	to 	the 	general 	public 	present 	virtually 	no 	risk
of 	being 	intrusive, 	coercive, 	vexatious, 	or 	harassing.
Accordingly, 	Proposed 	P.ule 	2-101 (D) (5) 	and 	Standard 	3 	appear 	to
prohibit 	some 	acvertising 	that 	is 	truthful 	and 	nondeceptive
without 	providing 	any 	compensating 	benefits 	to 	consumers. 	We
urge 	the 	Commission 	to 	modify 	Proposed 	Rule 	2-101 (:» 	(5) 	and
Standard 	3 	so 	that 	they 	would 	not 	app17 	to 	media 	advertising.
Prooosed 	Standarc 	1 	would 	establish 	a 	oresum~tion 	that
communications 	containing 	guarantees, 	warra;ties 	or 	predictions
of 	the 	result 	of 	a 	legal 	action 	are 	in 	violation 	of 	Proposed 	Rule
2-101. 	Legal 	advice 	often 	involves 	a 	preoiction, 	based 	on
precedent, 	oS 	to 	the 	likely 	outcome 	of 	a 	legal 	action. 	7he
effect 	of .Stanoard 	l 	would 	be 	to 	ban 	the 	use 	of 	legal 	acvice 	in
truthful, 	nondeceptive 	advertising, 	including 	newsletters 	to
clients 	and 	newspaper 	adve~tising to.~he general 	public. 	For
example, 	a 	l~wyer 	might 	advertise 	in 	u 	newspaper 	that 	Tax 	Court
precedent 	allows 	particular 	treatment 	of 	a 	type 	of 	income, 	and
suggest 	that 	consumers 	COffie 	to 	the 	firm 	for 	further 	tax 	advice.
Such 	3n 	advertisement 	could 	be 	interpreted 	as 	a 	prediction 	of 	the
outcome 	of 	a 	tax 	matter. 	~he 	Suoreme 	Court 	held 	in 	Zauderer 	v.
Office 	of 	Discinlinary 	Counsel 	of 	the 	Suoreme 	Court 	of 	Ohio, 	105
S. 	Ct.' 2265, 	2276-77 	(1985), 	on 	constitutional 	srounas, 	that
states 	may 	not 	prohibit 	advertisements 	containing 	legal 	advice
that 	are 	not 	false 	or 	deceptive. 	Prohibiting 	such 	aevertising
would 	be 	harmful 	to 	consumers 	because 	it 	would 	ceprive 	them 	of
information 	that 	could 	be 	useful 	in 	selecting 	an 	attorney. 	We
suggest 	that 	Standard 	1 	be 	modified 	to 	apply 	only 	to 	guarantees
or 	warranties 	of 	results 	of 	legal 	actions.
Proposed 	Stanaard 	2, 	by 	similarly 	establishing 	a 	presumption
of 	vi6lation, 	would 	in 	effect 	reauire 	that 	communications
containing 	a 	te£timonial 	or 	endorsement 	must 	include 	a 	disclaimer
that 	the 	testimonial 	or 	endorsement 	is 	not 	a 	guarantee, 	warranty
or 	prediction 	of 	the 	outcome 	of 	a 	legal 	matter. 	The 	imposition
0: 	a 	discla~rner 	requirement 	might 	discourage 	these 	forms 	of
advertising 	unnecessarily 	by 	increasing 	their 	cost. 	Such 	a
burden 	on 	advertising 	appears 	unnecessary, 	for 	many 	testimonials
anc 	endorsements 	i~ply no 	guarantee 	or 	warranty 	to 	consumers.
For 	example, 	a 	former 	client 	might 	indicate 	that 	an 	attorney
responded 	promptly 	to 	all 	the 	client's 	inquiries 	and 	explained
the 	case 	in 	a 	way 	the 	client 	could 	understa~d. 	Such 	statements
create 	no 	expe~tation about 	the 	outcome 	of 	a 	case. 	We 	s~~gest
ttat 	Standard 	2 	be 	written 	to 	apply 	o~ly 	~o 	communic~tions that
co~tain testimonials 	or 	enco~sements that 	imply 	c 	warranty 	or
sua~antee with 	respect 	to 	the 	c~tcome of 	~ 	legal 	~atter.

Harry 	B. 	Soncheim
Conclusion
-6-
~he 	Commission's 	proposed 	rules 	will 	permit 	more 	advertisi~g
than 	do 	the 	current 	Rules 	of 	Professional 	Conduct, 	and 	we 	applauG
the 	Commission's 	reforms 	in 	this 	respect. 	We 	urge, 	however, 	that
the 	proposed 	new 	rules 	be 	modified 	to 	prohibit 	truthful,
nondeceptive 	in-person 	solicitation 	only 	of 	persons 	who, 	because
of 	their 	particular 	circumstances, 	are 	vulnerable 	to 	undue
influence. 	We 	further 	urge 	that 	the 	Commission 	modify 	Rule 	2-
101 (D) (5) 	and 	Standards 	1-3 	so 	as 	not 	to 	prohibi t 	truthful,
nondeceptive 	ar.vertising, 	and 	interpret 	them 	consistently 	with
the 	undue 	influence 	standard.
Sincerely,
q/~1cL~
~~f:~I~uf1 erman
Dlrector
-Bureau 	of 	Cc~?etition
o • ___