Can a South Carolina lawyer hand out fee-discount coupons to homebuyers through real estate agents and mortgage loan originators?

Plain-English summary

A lawyer proposed to issue fee-discount coupons for residential real estate loan closings and to provide those coupons to mortgage loan originators and real estate agents, who would in turn give the coupons to homebuyers at the moment the buyers were asked to choose a closing lawyer. The lawyer asked whether using a third party to deliver the coupons to people known to have a legal need would violate Rule 7.3.

The committee concluded that it would. It treated personal delivery of the coupons as in-person solicitation barred by Rule 7.3(a), reasoning that although the agent or loan originator, not the lawyer, has the in-person contact, a lawyer cannot do indirectly what the lawyer is prohibited from doing directly. It cited Rule 5.3(c) (a lawyer's responsibility for a nonlawyer's conduct the lawyer orders or ratifies) and Rule 8.4(a) (violating the rules through the acts of another). The committee distinguished its earlier "Welcome Wagon" opinion, S.C. Bar Ethics Op. 96-27, in which coupons went to all new homeowners in case any might later need services; here, by contrast, the lawyer knew each recipient would need legal services in a particular matter, the closing. The committee added that unless a coupon carried all the language Rule 7.3(d) requires, which it found impractical on a coupon, the coupons would also violate Rule 7.3(d). Its conclusion was that it could not find a way for the lawyer to participate in the arrangement without violating the rules.

Currency note

The South Carolina Supreme Court has since limited this opinion. The opinion's own caution states: "In In re Anonymous Member of the South Carolina Bar, 386 S.C. 133, 140 687 S.E.2d 41, 45 (2009), the Court held that this opinion (07-09) did not present a correct interpretation of Rule 7.3(a)." Treat this page as historical context, not current guidance. Verify against the current Rules of Professional Conduct and South Carolina case law before relying on any rule or conclusion mentioned here.

Common questions

Q: Could a South Carolina lawyer give homebuyers fee-discount coupons through real estate agents or loan originators?

A: The committee concluded no. It treated personal delivery of the coupons as in-person solicitation barred by Rule 7.3(a), reasoning that a lawyer cannot do indirectly through a nonlawyer what the lawyer is prohibited from doing directly, citing Rules 5.3(c) and 8.4(a). The Supreme Court later rejected this reading of Rule 7.3(a).

Q: How did the committee distinguish its earlier "Welcome Wagon" coupon opinion (96-27)?

A: It said 96-27 involved coupons given to all new homeowners in case any might later need services, whereas here the lawyer knew each recipient would need legal services in a particular matter, the real estate closing.

Q: Did the coupons raise a written-solicitation problem as well?

A: Yes. The committee added that unless a coupon contained all the language Rule 7.3(d) requires, which it found impractical on a coupon, the coupons would also violate Rule 7.3(d).

Background and rules framework

The opinion applied South Carolina Rule 7.3(a) (the then-current bar on in-person, live-telephone, or real-time electronic solicitation for pecuniary gain), Rule 7.3(d) (written-solicitation requirements), Rule 5.3(c) (a lawyer's responsibility for a nonlawyer's conduct the lawyer orders or ratifies), and Rule 8.4(a) (violating the rules through the acts of another), along with Rules 7.1 and 7.2 on communications and advertising. These correspond to the like-numbered Model Rules. The South Carolina Supreme Court's later decision in In re Anonymous Member of the South Carolina Bar, 386 S.C. 133, 687 S.E.2d 41 (2009), held that the opinion did not correctly interpret Rule 7.3(a).

Citations and references

Rules of Professional Conduct:

• MR 7.3 / SC Rule 7.3(a), 7.3(d) (solicitation of clients)
• MR 5.3 / SC Rule 5.3(c) (responsibility for nonlawyer conduct)
• MR 8.4 / SC Rule 8.4(a) (misconduct through the acts of another)
• MR 7.1, MR 7.2 / SC Rule 7.1, 7.2 (communications; advertising)

Cases:

• In re Anonymous Member of the South Carolina Bar, 386 S.C. 133, 687 S.E.2d 41 (2009), holding this opinion did not correctly interpret Rule 7.3(a)

Other opinions cited:

• S.C. Bar Ethics Op. 96-27 (the "Welcome Wagon" coupon opinion)

See also

• ABA Formal Op. 501: Responsibility for Another's Solicitation
• SC Bar Ethics Op. 09-14: Mailings to a Geographic Area
• SC Bar Ethics Op. 01-03: Paying for Internet Client Leads

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-07-09-1/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ETHICS ADVISORY OPINION

07-09

CAUTION: In In re Anonymous Member of the South Carolina Bar, 386 S.C. 133, 140 687 S.E.2d 41, 45 (2009), the Court held that this opinion (07-09) did not present a correct interpretation of Rule 7.3(a).

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER'S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

SC Rules of Professional Conduct: 5.3(c), 7.1, 7.2, 7.3(a), 7.3(d), 8.4(a)

Facts:

Lawyer proposes to issue coupons for fee discounts to prospective clients for residential real estate loan closings. Lawyer will provide the coupons to mortgage loan originators and real estate agents. The mortgage loan originators and real estate agents will give homebuyers the coupons at the time that the homebuyers are asked to choose a lawyer to close the real estate transactions.

Questions Presented:

Would the lawyer violate Rule 7.3 by using a third party (real estate agent or mortgage originator) to solicit potential clients who are known to have a legal issue by use of the discount coupon?

Summary:

CAUTION: In In re Anonymous Member of the South Carolina Bar, 386 S.C. 133, 140 687 S.E.2d 41, 45 (2009), the Court held that this opinion (07-09), did not present a correct interpretation of Rule 7.3(a).

Yes. Personal delivery of the coupons violates the Rule 7.3(a) prohibition against in-person solicitation. Although the agent or loan originator, not the lawyer, has in-person contact with the prospective client under these facts, a lawyer cannot do indirectly what she is prohibited from doing directly. Also, the coupons likely violate the written solicitation requirements of Rule 7.3(d).

Opinion:

Rule 7.3 of the South Carolina Rules of Professional Conduct states:

A lawyer shall not by in person, live telephone or real time electronic contact solicit professional employment from a prospective client when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain, unless the person contacted:

is a lawyer; or

has a family, close personal, or prior professional relationship with the lawyer.

In this case, the prospective clients do not appear to satisfy either exception (subparts 1 and 2); therefore, direct contact by the lawyer is prohibited. Because the lawyer is prohibited from making direct contact herself, she is also prohibited from using another person to make direct contact. See Rule 5.3(c) (holding a lawyer responsible for the acts of a nonlawyer where the lawyer either orders or ratifies the conduct) and 8.4(a) (prohibiting violating the Rules of Professional Conduct "through the acts of another" or "assist[ing] or induc[ing] another to do so").

This Committee considered a similar situation in S.C. Bar Ethics Op. 96-27, the "Welcome Wagon" opinion. In that situation, the lawyer was submitting coupons as advertisements in a "welcome package" given to new homeowners or incoming residents in the neighborhood. The lawyer's coupon was one of many coupons for local businesses included in the package. The hostess personally delivered the coupon packages to the new neighbors upon their move-in to the neighborhood. The Committee advised, "A discount coupon or an offer of a special discounted fee for a new client, while perhaps undignified, may not be a substantive violation of the Rules of Professional Conduct, so long as it is not false or misleading. (Rule 7.1)" S.C. Bar Ethics Op. 96-27. The difference in this case is that the lawyer here knows that each prospective client will be in need of legal services in a particular matter, whereas the lawyer in 96-27 was giving a coupon to all new homeowners in case any of them might need legal services in the future.

Rule 7.3(d) also requires extensive specific language to be contained in "[e]very writing directed to someone known to be in need of legal services on a particular matter." Unless the coupon contains all the language required by subparts 1 through 3 of Rule 7.3(d), which does not seem practicable on a coupon, the coupons will violate this rule.

Conclusion:

While this Committee is extremely sensitive to the practices of residential real estate closings in our state, we are hard-pressed to find a manner in which the inquiring lawyer could participate in the activity without violating the Rules of Professional Conduct.