The inquirer has been approached by a large non-profit educational institution with the following proposal. The institution maintains an office to assist faculty and staff to purchase residential real estate and provides financial assistance to these buyers. The institution acquires a 2nd or 3rd lien on the real estate to protect their financial interest. The institution desires to develop a list of "preferred" attorneys to which faculty and staff in need of representation at real estate closings can be referred. Links from the institution's web site would link to a "preferred" providers web site. Faculty and staff would not be required to retain counsel or to use those on the list of "preferred" counsel. In exchange for being on the "preferred" list, the institution would expect its preferred attorneys to purchase "booth space" at housing "fairs" sponsored by the institution. As the "preferred" attorney is a new program for the institution, the inquirer doesn't believe the institution has a specific number of fairs in mind. In addition, although the inquirer doesn't know what the actual cost would be, he advises that his impression is that the fee for the booth space would be not dissimilar to what vendors would be charged for a career fair. The inquirer also indicates that he believes it is the institution's intent to defray all or some of the costs associated with running the "preferred" attorney program through the fees collected at the job fairs.
The inquirer has the following questions:
1) Would it be proper for clients to waive any potential conflict with the
institution regarding the lien being placed on the property in light of the "preferred" attorney's marketing relationship with non-profit institution?
2) Would it be proper for the inquirer to purchase booth space as a condition of "preferred" attorney status?
Several Pennsylvania Rules of Professional Conduct (the "Rules") are implicated in this inquiry.
Rule 1.0. Terminology, defines informed consent as follows:
(e) ''Informed consent'' denotes the consent by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.
Rule 1.7. Conflict of Interest: Current Clients, provides in part that,
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent.
Rule 7.1. Communications Concerning a Lawyer's Service, provides in part that:
A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.
(1) This Rule governs all communications about a lawyer's services, including advertising permitted by Rule 7.2. Whatever means are used to make known a lawyer's services, statements about them must be truthful.
(2) Truthful statements that are misleading are also prohibited by this Rule. A truthful statement is misleading if it omits a fact necessary to make the lawyer's communication considered as a whole not materially misleading. A truthful statement is also misleading if there is a substantial likelihood that it will lead a reasonable person to formulate a specific conclusion about the lawyer or the lawyer’s services for which there is no reasonable factual foundation.
Rule 7.2. Advertising, provides in part that:
(c) A lawyer shall not give anything of value to a person for recommending the lawyer’s services, except that a lawyer may pay:
(2) the usual charges of a lawyer referral service or other legal service organization;
Rule 7.7. Lawyer Referral Service, provides in part that:
(b) A ''lawyer referral service'' is any person, group of persons, association, organization or entity that receives a fee or charge for referring or causing the direct or indirect referral of a potential client to a lawyer drawn from a specific group or panel of lawyers.
Turning to the inquirer's first question, the first issue is whether the referral generated by being on the "preferred" panel constitutes a conflict of interest in view of the fact that the referral is coming through the auspices of the institution which is going to have a lien against the property that the buyers are obtaining but with which the inquirer also has a marketing relationship. The standard of what constitutes a conflict under Rule 1.7 is further clarified by its Comment  which provides in part that, "…The mere possibility of subsequent harm does not itself require disclosure and consent. The critical questions are the likelihood that a difference in interests will eventuate and, if it does, whether it will materially interfere with the lawyer's independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client. [emphasis added]. While the Committee is not prepared to conclude that the circumstances described by the inquirer automatically constitute a conflict under Rule 1.7a2, it does hold that if the inquirer has a subjective belief that the circumstances pose a conflict that in fact a waiver with informed consent (see Rule 1.0(e)) is required in accord with the provisions of Rule 1.7b (1) through (4). In this situation, since there is no attorney client relationship with the non-profit, the disclosures and waiver must be made to and by only the home purchasers.
On the issue of the required purchasing of space at the non-profit's law fairs, the Committee believes that since the referral website constitutes a referral service under Rule 7.7b, that provided all attorneys on the preferred panel are treated uniformly as regards this financial commitment, that this would constitute a usual charge of a lawyer referral service, payment of which is specifically permitted under Rule 7.2(c)(2).
Finally, the Committee turns to an issue that was not presented by the inquirer. Some concern was noted that use of the term "preferred" somehow implied that the client would secure better treatment or some concessions from the attorney who was "preferred" and thus could pose a situation where a truthful statement could nevertheless still be misleading in violation of Rule 7.1, (further explained by Comment  to the Rule), because on the whole it omits information necessary to make it not misleading. The Committee finds that providing the inquirer makes disclosure as to what is meant by a "preferred lawyer" and how a lawyer gets on the list that the term could be used. Such disclosure could be accomplished by having such an explanation included on the “preferred” lawyer website. The Committee also cautions that since websites are advertising under the Rules, that the inquirer should review the website to insure that there is nothing on it that would constitute any other violation of the advertising Rules (7.1 through 7.7) as regards his participation thereon.
CAVEAT: The foregoing opinion is advisory only and is based upon the facts set forth above. The opinion is not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. It carries only such weight as an appropriate reviewing authority may choose to give it.