New Jersey Ethics Committee: Beware Marketers that “Lead” to Ethics Violations

Increasingly popular online “lead generation” services offering to connect attorneys with potential mass tort plaintiffs may expose counsel to ethics violations, the New Jersey Advisory Committee on Professional Conduct cautioned in two recent advisory opinions.

New Jersey attorneys are charged with the affirmative responsibility to “question whether the marketing company is improperly labeling its services,” the committee stated in a June 21, 2021 joint opinion with the Committee on Attorney Advertising.  On the same date, the Advisory Committee issued another joint opinion with the Committee on the Unauthorized Practice of Law offering further insight on the circumstances in which a permissible client lead becomes an improper for-profit referral.

Attorneys are prohibited from paying non-lawyers for client referrals, see N.J. Rules of Pro. Conduct R. 7.3(d), although the Committee on Attorney Advertising clarified in 2011 that paying for client “leads”—essentially, the contact information of people who may later choose to retain the attorney—is permitted.  Most states have similar rules precluding lawyers from paying for clients.

The Advisory Committee offered guidance on navigating the nuanced distinction between a good lead and a prohibited referral:

  • A high retention rate

    If the marketing company promises a strong likelihood that the purchased lead will result in a signed client—in the opinion’s example, an “86% retention rate”—that signals the marketing services are priced according to client value, and the attorney is in fact paying for a guaranteed client.

  • A high “price per lead”

    If the cost per individual is “significantly higher than the ordinary marketplace value of a lead,” that also suggests the attorney is paying for a guaranteed client.  In its example, the Advisory Committee noted an unnamed, out-of-state marketing company (which may be a Florida-based business, according to reports) that charges between $500 and $1,800 for the contact information of individuals with personal injury claims in popular mass-tort litigations.  That range is far beyond the normal value of a client “lead.”

  • Terms of engagement

    Any flat-fee service that “matches” a client with a lawyer who is certain to represent them is prohibited, even if the marketing company expressly states that it does not engage in the practice of law.  Similarly, websites that “direct Users to only one attorney based on the purchase of exclusive rights to geographical areas” are suspect, the Committee wrote in 2011.  Frequently, a prospective plaintiff contracts for legal services with the marketing company, which in turn refers the case to a lawyer, either on staff or outside counsel.  Lawyers who provide such services are assisting in the unauthorized practice of law, and any split fees would separately violate the New Jersey Rules of Professional Conduct.

The Advisory Committee warned that counsel must be “extremely cautious” in considering partnership with such marketing companies, because there is a “high risk” of violating the state’s ethics rules.  As the Committee predicted a decade ago, “pay per contact” will likely continue to expand in popularity, “due to its inherent reward for effective advertising.”  Lawyers should be aware of the risk that may closely accompany such “reward.”