Courts Amend Advertising Rule 7.1 in Wake of “Alexander v. Cahill”

By Roy Simon

[Originally published in NYPRR July 2011]

In the New York State Register for May 18, 2011, the Courts announced that they had amended Rule 7.1 of the New York Rules of Professional Conduct, effective April 15, 2011. This announcement capped nearly six years of intense debate and litigation in New York about the limits on advertising and solicitation by lawyers in New York State. This article discusses the twists and turns of that debate and then comments on the content and meaning of the amendments.

(In Part I of my article (NYPRR June 2011) on the ABA’s study of law firm rankings and ratings, I said that I would take up Part II of that article this month. After I submitted that article, the Courts published the amendments to the advertising rules, which I consider to be a more important story. I will resume my article on the ABA and law firm rankings and ratings at some point in the near future.)

Background: The Debate Over Lawyer Advertising and Solicitation

Every moment in history has its own history, so we could start our story at any point — but, for this article, a fitting place to start is Oct. 15, 2003, when the ferry Andrew J. Barberi slammed into a concrete pier on Staten Island, killing 11 people and injuring 70 others. The accident occurred at 3:20 p.m. Rescue and recovery work went on for many hours. As often noted by the late Bob Saltzman, who was Deputy Chief Counsel of the Grievance Committee for the 2nd, 11th and 13th Judicial Districts at the time of the accident, injury lawyers were busy placing ads while the rescue teams were still pulling bodies from the mangled wreckage. The deadline for submitting advertising copy to the local newspaper, the Staten Island Advance, was 5:00 p.m. The next morning, advertisements by a local law firm offering to represent victims of the crash and their survivors appeared in the Advance. The ads said:

FERRY BOAT ACCIDENT VICTIMS

Our thoughts and prayers go out to those injured in the S.I. Ferry Boat accident of October 15, 2003.

Our Law firm has a proven track record handling Ferry Boat, Cruise Ship and Maritime accident cases involving wrongful death and serious personal injuries. If we can be of assistance to you, please call us for a free consultation. If required, we will come to your home or hospital

The law firm then listed its toll-free phone number, web site, and email address.

New York Times Article Criticizes Ferry Ads

The ads caught the attention of the New York Times, which ran an unflattering front page story about lawyer solicitation on the heels of a mass disaster — see Susan Saulny, Lawyers’ Ads Seeking Clients in Ferry Crash, N.Y. Times, Nov. 4, 2003 — but many potential clients nevertheless contacted the firm that placed the ads — see Linda Richardson, Hometown Lawyer for Victims of Ferry Crash, N.Y. Times, Dec. 10, 2003.

The ads also attracted the attention of the New York State Bar Association’s Committee on Mass Disaster Response, which Bob Saltzman chaired from 2002–09. The Mass Disaster Response Committee found the spate of ads aimed at ferry victims “troubling,” and urged the State Bar to give “strong consideration” to a rule like Rule 4-7.4 of the Florida Rules of Professional Conduct, which prohibits targeted written communication to accident victims or their survivors for 30 days after an accident. In the 1990s, that rule survived a First Amendment challenge (by a 5-4 vote) in Florida Bar v. Went For It Inc., 515 U.S. 618 (1995).

The outcry against the ferry crash newspapers ads was not the only catalyst for reviewing New York’s rules on advertising and solicitation, but it was an important one because it rekindled outrage and revulsion in many segments of the bar against tasteless and overly aggressive lawyer advertising and solicitation. In 2005, less than two years after the ferry crash, the New York State Bar Association’s new president created a Task Force on Lawyer Advertising to look into the many issues surrounding lawyer advertising and solicitation in New York. At about the same time, the Courts appointed their own committee to consider changes to the lawyer advertising rules.

Early in 2006, the State Bar House of Delegates approved proposed amendments that significantly clamped down on advertising and solicitation. Those proposals included a new provision imposing a 15-day “blackout period” on targeted mail following an accident. For details about the State Bar proposals, see Overhaul of Lawyer Advertising Rules in New York State Is Nearing Completion, 22 Law. Man. Prof. Conduct 63 (Feb. 8, 2006). But the State Bar proposals were not tough enough for the Courts, which issued their own set of proposals in June 2006. The proposals drafted by the Courts included many new regulations and recordkeeping requirements and a 29-day blackout period. After about five months of public comment, the Courts approved a stringent set of new and amended rules governing advertising and solicitation by New York lawyers (and by out-of-state lawyers who targeted New York residents).

The ‘Heavy Hitters’ (Alexander & Catalano) Challenge the Rules

The new and amended rules took effect on Feb. 1, 2007. On the same day, the Syracuse-based personal injury law firm of Alexander & Catalano (joined by managing partner James Alexander and Public Citizen, Inc. as co-plaintiffs) — which had advertised itself as the “Heavy Hitters” — filed a lawsuit in the northern District of New York challenging the new rules. Of particular importance to this article was plaintiffs’ First Amendment attack on the following provisions:

(1) include an endorsement of, or testimonial about, a lawyer or law firm from a client with respect to a matter still pending; …

(3) include the portrayal of a judge, the portrayal of a fictitious law firm, the use of a fictitious name to refer to lawyers not associated together in a law firm, or otherwise imply that lawyers are associated in a law firm if that is not the case; …

(5) rely on techniques to obtain attention that demonstrate a clear and intentional lack of relevance to the selection of counsel, including the portrayal of lawyers exhibiting characteristics clearly unrelated to legal competence; …

(7) utilize a nickname, moniker, motto or trade name that implies an ability to obtain results in a matter.

(g) A lawyer or law firm shall not utilize:

(1) a pop-up or pop-under advertisement in connection with computer-accessed communications, other than on the lawyer or law firm’s own web site or other internet presence …

Alexander & Catalano filed the suit because the new rules prohibited some of its high-profile TV advertising. According to the Second Circuit (citation below):

Prior to the adoption of New York’s new attorney advertising rules, the firm’s commercials featured jingles and special effects, including wisps of smoke and blue electrical currents surrounding the firm’s name. Firm advertisements also featured dramatizations, comical scenes, and special effects for instance, depicting Alexander and his partner as giants towering above local buildings, running to a client’s house so quickly they appear as blurs, and providing legal assistance to space aliens. Another advertisement depicted a judge in the courtroom and stated that the judge is there “to make sure [the trial] is fair.” The firm’s ads also frequently included the firm’s slogan, “heavy hitters,” and phrases like “think big” and “we’ll give you a big helping hand.” …

In Alexander v. Cahill, 2007 WL 2120024 (N.D.N.Y. 2007) (Fredrick Scullin, J.), the court upheld the 30-day blackout period on targeted advertising but declared nearly all of the quoted provisions unconstitutional and enjoined their enforcement. On appeal, the Second Circuit affirmed most of Judge Scullin’s opinion. See, Alexander v. Cahill, 598 F.3d 79 (2d Cir. 2010) (Guido Calabresi, J.). Citing the landmark First Amendment case of Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 566 (1980), the Second Circuit explained the Supreme Court’s four-part inquiry for determining whether regulations of commercial speech are consistent with the First Amendment:

[1] whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. next, we ask [2] whether the asserted governmental interest is substantial. if both inquiries yield positive answers, we must determine [3] whether the regulation directly advances the governmental interest asserted, and [4] whether it is not more extensive than is necessary to serve that interest.

Applying that test, Judge Calabresi found that the speech restrained by the rules was protected by the First Amendment. With one exception (addressed later), the speech that New York’s content-based restrictions sought to regulate — though “irrelevant, unverifiable, and non-informational” — was not “inherently false, deceptive, or misleading,” the court said. Indeed, the Courts’ own press release had described its proposed rules as protecting consumers against “potentially misleading ads,” which was “insufficient to place these restrictions beyond the scope of First Amendment scrutiny.” The Second Circuit also found that the state had a “substantial interest” in regulating this speech — “prohibiting attorney advertisements from containing deceptive or misleading content” and “protecting the legal profession’s image and reputation.” Therefore, the court moved on to assess the next two elements of the Central Hudson test, namely, whether the challenged rules “materially advanced” these interests and, if so, whether the rules were “narrowly tailored.” To evaluate those elements, the Second Circuit relied heavily on the Report that had been issued by the State Bar’s Task Force on Lawyer Advertising (“Task Force Report”).

In the end, the Second Circuit affirmed the District Court’s invalidation of subparagraphs (c)(1), (c)(5), (c)(7), and (g) (1) in their entirety, as well as the language in (c)(3) prohibiting the portrayal of a judge. However, after accepting the Defendants’ limiting interpretation, the Second Circuit reversed the District Court’s invalidation of the language in (c)(3) that prohibited an advertisement mentioning a fictitious law firm or a fictitious law firm name.

The Defendants filed a petition for certiorari seeking to overturn the Second Circuit’s opinion, but the Supreme Court denied the petition, putting the litigation to rest — see 131 S. Ct. 820 (2010).

The State Bar’s Recommendations After Alexander

In his opinion for the Second Circuit in Alexander, Judge Calabresi said at one point that the court’s invalidation of a rule for failing to meet the “narrowly tailored” prong of Central Hudson did not foreclose a similar regulation from being enacted validly in the future. The invalidation simply returns the matter to the applicable legislating body and “forces [that body] to take a ‘second look’ with the eyes of the people on it.” in the months following the Supreme Court’s denial of certiorari in Alexander v. Cahill, the New York’s Courts took a “second look” at the provisions that had been invalidated. To assist in that effort, the State Bar’s Committee on Standards of Attorney Conduct (COSAC) and the State Bar’s Task Force on Lawyer Advertising (which had been essentially dormant since 2006) worked separately to decide whether those rules could or should be salvaged. COSAC and the Task Force independently reached similar conclusions and, after briefly consulting with each other, issued a Joint Report setting forth their recommendations. The State Bar’s House of Delegates approved the Joint Report at its April 2, 2011 meeting. On April 5, 2011, State Bar President Stephen younger transmitted the Joint Report to the Courts. The opening paragraph of President younger’s transmission letter said:

I am pleased to enclose a report prepared jointly by our Association’s Committee on Standards of Attorney Conduct and Task Force on Lawyer Advertising, recommending amendments to Rule 7.1 of the New York Rules of Professional Conduct. These amendments are intended to align the rule with the Second Circuit’s 2010 decision in Alexander v. Cahill.

In brief, the Joint Report recommended that the Courts strike Rules 7.1(c)(1), (c)(5) and (c)(7), as well as Rule 7.1(g) (1), because those provisions “cannot be replaced with narrower provisions that are likely to withstand constitutional scrutiny other than by repeating, with respect to each prohibition, the overall prohibition on misleading advertisements.” Since COSAC and the Task Force thought that approach “would be confusing and create problems of its own,” the Joint Report recommended that these provisions be deleted and replaced with the term “[Reserved],” consistent with the convention elsewhere in the Rules where there are gaps in numbering. With respect to Rule 7.1(c)(3)’s ban on fictitious law firms, however, the Joint Report recommended revising it to “incorporate the Second Circuit’s limiting interpretation of the prohibition on portrayal of a fictitious law firm and to collect various ways in which the portrayal of a sitting judge would be improper.”

Now that I have sketched out both the Second Circuit’s opinion in Alexander and the Joint Report’s recommendations for aligning the advertising rules with Alexander, I will address each provision of the amended rules separately and provide details of (a) the analysis in the District Court and the Second Circuit, (b) the recommendations in the Joint Report, and (c) the amended rules as adopted by the Courts effective April 15, 2011. my own commentary is interspersed with my description of the rules as finally adopted by the Courts.

Subparagraph (c)(1): Testimonials Regarding Pending Matters

Subparagraph (c)(1) flatly prohibited advertisements that included “an endorsement of, or testimonial about, a lawyer or law firm from a client with respect to a matter that is still pending.”

Alexander v. Cahill. The District Court struck down this provision on First Amendment grounds, and the Second Circuit affirmed. The Second Circuit noted that the Task Force Report had suggested “strengthening the rules governing testimonials to prohibit the use of an actor or spokesperson who is not a member or employee of the advertising lawyer or law firm absent disclosure thereof.” (Emphasis by the court.) Thus, the Task Force Report contradicted Defendants’ assertion that prohibiting testimonials from current clients would materially advance an interest in preventing misleading advertising. Nor did consensus or common sense support the conclusion that client testimonials are inherently misleading. Thus, (c)(1) could not survive First Amendment scrutiny.

The Joint Report. The Joint Report submitted to the Courts by COSAC and the State Bar’s Task Force on Lawyer Advertising in March 2011 noted that under the Second Circuit’s reasoning, a prohibition against client testimonials “could withstand constitutional scrutiny only to the extent that it prohibits client testimonials that are actually, rather than potentially, misleading.” Because Rule 7.1(a)(1) already prohibits advertisements that contain statements that are “false, deceptive, or misleading,” any narrower prohibition of client testimonials would merely be duplicative of this general prohibition. The Joint Report therefore recommended abandoning Rule 7.1(c)(1) entirely and replacing it with the word “[Reserved]” so that the remaining numbers in Rule 7.1 would not change.

Amended rules. The Courts acted consistently with the recommendation in the Joint Report that Rule 7.1(c)(1) be entirely eliminated. (I cannot say that the Courts “accepted” the recommendation, because the Courts may have reached the same conclusion independently.) However, instead of marking the empty space “[Reserved],” the Courts decided to erase it without a trace (so to speak), renumbering former Rule 7.1(c)(2) as new Rule 7.1(c)(1).

Renumbering the rules is a mistake, in my opinion, for two reasons. First, practitioners with different versions of the Rules of Professional Conduct will have trouble communicating with each other — some will refer to (c)(2) meaning old (c)(2); others will refer to (c)(2) meaning old (c)(3), which has now been bumped up to (c)(2); and still others will refer to (c)(2) meaning new (c)(1), which was old (c)(2). (Is that confusing? Yes, it is confusing.) Second, research on Rule 7.1(c) will be difficult, because lawyers will have to determine whether a court was construing the original rules or the amended ones, and all references to Rule 7.1(c) between April 1, 2009 and April 15, 2011 will be wrong. Nevertheless, substance is more important than form, and by deleting former Rule 7.1(c)(1), the Courts got the substance right. That is a big advance for New York.

As a corollary to deleting Rule 7.1(c)(1), the Courts eliminated the cross-reference to (c)(1) that had appeared in Rule 7.1(d)(3). However, the Courts did not completely eliminate the regulation of testimonials. The Courts kept the language of former Rule 7.1(c)(2) — now renumbered Rule 7.1(c)(1) — which provides that an advertisement shall not “include a paid endorsement of, or testimonial about, a lawyer or law firm without disclosing that the person is being compensated therefore.” in addition, on their own volition (i.e., without any recommendation in the Joint Report), the Courts adopted a new Rule 7.1(e)(4) that grants permission to publish advertisements that include “testimonials or endorsements of clients, and of former clients” per Rule 7.1(d) (3), provided that “in the case of a testimonial or endorsement from a client with respect to a matter still pending, the client gives informed consent confirmed in writing.”

On its face, Rule 7.1(e)(4) is odd. It implies that if a matter is no longer pending, then a lawyer may publish a client’s testimonial without the client’s consent. Under newly numbered Rule 7.1(c)(1), the lawyer must disclose if the client was compensated for the testimonial, but the lawyer need not obtain informed consent to publish a testimonial regarding a concluded matter. Taking Rule 7.1(e)(4) literally, if a client has some open matters and some closed matters with a firm, the firm may use a testimonial from a current client without that client’s informed consent as long as the testimonial concerns a “matter” that is no longer pending.

That anomaly may be moderated by Rule 7.1(b)(2), which permits a lawyer advertisement to included “names of clients regularly represented, provided that the client has given prior written consent” (emphasis added) — but Rule 7.1(b)(2) applies only to clients “regularly represented,” not to all clients. Will clients who give testimonials — either voluntarily or at a lawyer’s request — understand that the lawyer will be free to use that testimonial without the client’s informed consent once the matter is over as long as the client is merely an occasional client rather than a “regularly represented” client? And what if a former client sends a lawyer a personal “thank you” letter (e.g., “I could not have expected a more caring or more competent lawyer, and the result was far beyond expectations”)? May the lawyer use that private letter without consent? if the client expressly tells the lawyer not to use the letter in any advertising, must the lawyer obey that instruction? Those questions remain open.

Rule 7.1(c)(3): Portraying Judges

Subparagraph (c)(3) imposed a blanket prohibition on “the portrayal of a judge …” in a lawyer advertisement.

Alexander v. Cahill. The District Court upheld all of (c)(3), but the Second Circuit reversed. The Second Circuit quoted the observation in the September 2005 Task Force Report that “a communication that states or implies that the lawyer has the ability to influence improperly a court” is “likely to be false, deceptive, or misleading.” The District Court treated this comment as persuasive evidence that a ban on portrayals of judges would materially advance the State’s interest in preventing misleading advertising, but the Second Circuit disagreed and held that the blanket ban on portraying judges in lawyer advertisements violated the First Amendment.

The Joint Report. In the Joint Report, COSAC and the Task Force expressed the belief that an amended Rule 7.1(c)(3) “could usefully pull together several ways in which the portrayal of a judge would be misleading.” For example, the advertisement might give the misleading impression of a relationship between a sitting judge and the advertising lawyer, or might suggest an ability to improperly influence the court. Moreover, if a lawyer used a judge’s image without the judge’s consent, that might be tortious. For that proposition, the Joint Report cited N.Y. Civil Rights Law §51, which provides a cause of action for any person “whose name, portrait, picture or voice is used within this state for advertising purposes” without written consent. Summing up these disparate threads, the Joint Report suggested that a revised rule might prohibit:

The portrayal of a sitting judge (i) in a manner so as to give the impression of a relationship between the judge and the advertising lawyer, (ii) in a manner so as to suggest an ability to improperly influence the court, or (iii) where tortious or otherwise prohibited by law or court rule.

Alternatively, the Joint Report suggested that “this part of the Rule could be stricken and these points could be covered in a new Comment, leaving the actual Rule silent on the subject.”

Amended rules. The Courts did not accept either recommendation in the Joint Report. Instead, the Courts moved the reference to judges into former Rule 7.1(c)(4) — now (c) (3) — so that the new provisions, in legislative style, reads as follows:

(3) (2) include the portrayal of a judge, the portrayal of a fictitious law firm, the use of a fictitious name to refer to lawyers not associated together in a law firm, or otherwise imply that lawyers are associated in a law firm if that is not the case;

(4) (3) use actors to portray a judge, the lawyer, members of the law firm, or clients, or utilize depictions of fictionalized events or scenes, without disclosure of same; or …

In other words, a lawyer advertisement may now include the portrayal of a judge, but if the lawyer uses an actor rather than an actual judge for this purpose, the lawyer must disclose that fact. This amendment is fine. it will avoid any implication that the advertising lawyer has a special relationship with a judge, because every time an advertisement portrays a judge, the advertisement will include a disclosure such as: “Judge is portrayed by an actor” or “An actor is playing the role of the judge.” That is a sensible disclaimer that does not dampen any protected speech.

Rule 7.1(c)(3): Fictitious Law Firms

Another part of subparagraph (c)(3) prohibited advertisements that “include the portrayal of a fictitious law firm, the use of a fictitious name to refer to lawyers not associated together in a law firm, or otherwise imply that lawyers are associated in a law firm if that is not the case.”

Alexander v. Cahill. Although the Plaintiffs had not challenged the “fictitious” clauses in (c)(3), the District Court invalidated (c)(3) in its entirety. The Second Circuit reversed. Speaking for the Court, Judge Calabresi impliedly recognized that constitutional problems could arise if the State enforced the literal language of (c)(3) by prohibiting dramatizations in which an advertising law firm portrayed itself arguing against a fictitious opposing counsel. But Judge Calabresi said the court did not need to decide that issue because, at oral argument, the Attorney General (representing the Defendants) had asked the court to construe the word “fictitious” as applying only to situations in which lawyers from different firms give the misleading impression that they are from the same firm. (The Second Circuit gave the example of “The Dream Team.”) Under the Attorney General’s limiting interpretation, subparagraph (c)(3) prohibited fictitious law firms and fictitious firm names if they were actually misleading as to the existence or membership of a firm. Since misleading advertising is not entitled to First Amendment protection, the Second Circuit accepted the Attorney General’s narrowing interpretation and reversed the District Court’s invalidation of (c)(3)’s prohibition on advertisements referring to fictitious firms.

The Joint Report. The Joint Report from COSAC and the Task Force noted the Second Circuit had reinstated the portion of (c)(3) prohibiting the portrayal of a fictitious law firm “subject to a limiting interpretation that the prohibition is of such a portrayal that is actually misleading as to the existence or membership of a firm.” The Joint Report therefore recommended that Rule 7.1(c)(3) be amended to adopt the Second Circuit’s construction explicitly. Specifically, the Joint Report recommended that the Courts amend (c)(3) to prohibit advertisements that “imply, as by the portrayal of a fictitious law firm or the use of a fictitious name, that lawyers are associated together in a law firm if that is not the case.”

Amended rules. The Courts did not accept the recommendation in the Joint Report. Rather, the Courts left the “fictitious” provisions of (c)(3) untouched. I think that leaving (c)(3) in its original form will cause some confusion because most attorneys who advertise will follow the literal language of the rule — as they should — and very few attorneys will drill down to locate the limiting interpretation in the Second Circuit’s opinion. The literal reading will chill some protected speech.

For example, suppose a personal injury lawyer wants to portray a fictional insurance defense firm named “Sweet Talk & Lowball” or “Cheap, Cheaper & Cheapest.” These names may be tacky — I don’t expect anyone to weep if we never see commercials featuring those fictitious law firms as punching bags — but in context, the names are probably not misleading. However, the apparent blanket ban on portraying a fictional law firm may discourage the p.i. lawyer from using those names in an advertisement, so a bit of protected speech (and a bit of entertainment) may be chilled. That is a slight negative and a bad precedent.

If the lawyer instead goes ahead with the plan to portray those fictional firms, I do not think the disciplinary authorities will bring charges under (c)(3). Rather, I think the Courts will adopt the same limiting construction offered by the Attorney General on their behalf and adopted by the Second Circuit. That is a positive.

On the whole, I think the Courts would have been wiser to amend (c)(3) to make the Second Circuit’s limiting interpretation explicit, as the Joint Report recommended. To the maximum extent possible, rules ought to say what they mean, and when we identify ambiguities — especially ambiguities that impinge on protected speech — we should correct them. But as long as the Courts interpret the term “fictitious” in the narrow fashion offered by the Attorney General and accepted by the Second Circuit, the Courts’ failure to accept the Joint Report’s clarifying recommendation is unlikely to cause any palpable harm.

Rule 7.1(c)(5): Irrelevant Advertising Techniques

Subparagraph (c)(5) prohibited advertisements that “rely on techniques to obtain attention that demonstrate a clear and intentional lack of relevance to the selection of counsel, including the portrayal of lawyers exhibiting characteristics clearly unrelated to legal competence.”

Alexander v. Cahill. The Second Circuit said that the Defendants were conflating “irrelevant components of advertising with misleading advertising.” (Emphasis by the court.) Moreover, “the sorts of gimmicks that this rule appears designed to reach — such as Alexander & Catalano’s wisps of smoke, blue electrical currents, and special effects — do not actually seem likely to mislead.” indeed, some of the gimmicks, while seemingly irrelevant, may actually serve “important communicative functions” by attracting attention. Plaintiffs asserted that they used attention-getting techniques to “communicate ideas in an easy-to-understand form, to attract viewer interest, to give emphasis, and to make information more memorable.” Defendants provided no contrary evidence, and no evidence that consumers had in fact been misled by these or similar advertisements. The court therefore agreed with the District Court that the prohibition in (c) (5) violated the First Amendment.

The Joint Report. The Joint Report noted the Second Circuit’s twin holdings that Rule 7.1(c)(5)’s prohibition on advertising techniques that are irrelevant to the practice of law (a) did not “materially advance” any interest in preventing misleading advertising because such techniques “do not actually seem likely to mislead,” and (b) were not “narrowly tailored” because they addressed content that was merely potentially misleading. COSAC and the Task Force therefore concluded that the prohibition “cannot reasonably be narrowed in a way that would address any conduct other than conduct already addressed by Rule 7.1(a)(1)’s prohibition against false, deceptive, or misleading advertising.” Consequently, the Joint Report recommended striking Rule 7.1(c) (5) entirely.

Amended rules. The amended rules are consistent with the recommendation in the Joint Report. They do not contain any vestige of the prohibition in former Rule 7.1(c)(5). I view this as a positive development. Consumers understand that advertising (especially on television) is part information and part entertainment. if potential clients don’t pay attention to lawyer advertisements or can’t remember them, then advertising will not advance the dual purposes in Comment [2] to Rule 7.1: “it educates potential clients regarding their need for legal advice and assists them in obtaining a lawyer appropriate for those needs” and “it enables lawyers to attract clients.” Regarding the purpose of attracting, Comment [4] says:

[4] To be effective, advertising must attract the attention of viewers, readers or recipients and convey its content in ways that will be understandable and helpful to them. Lawyers may therefore use advertising techniques intended to attract attention, such as music, sound effects, graphics and the like, so long as those techniques do not render the advertisement false, deceptive or misleading. Lawyer advertising may use actors or fictionalized events or scenes for this purpose, provided appropriate disclosure of their use is made…

Striking the blanket ban in former (c)(5) was the right decision by the Courts.

Rule 7.1(c)(7): Nicknames, Monikers, Mottos, or Trade Names

Subparagraph (c)(7) prohibited advertisements that “utilize a nickname, moniker, motto or trade name that implies an ability to obtain results in a matter.”

Alexander v. Cahill. The District Court struck down (c)(7) on First Amendment grounds, and the Second Circuit affirmed. The Second Circuit recognized some merit in the Defendants’ position. For example, Judge Calabresi acknowledged the “compelling, commonsense argument that, given the uncertainties of litigation, names that imply an ability to obtain results are usually misleading.” The Task Force Report had therefore observed that such practices as “the use of dollar signs, the terms ‘most cash’ or ‘maximum dollars,’ or like terms that suggest the outcome of the legal matter” are “likely to be false, deceptive or misleading.” Subparagraph (c)(7) as adopted, however, went further and prohibited nicknames, monikers, and mottos (including Alexander & Catalano’s own “Heavy Hitters” motto) even when they were not “actually misleading.” The court therefore held that the prohibition in (c)(7) violated the First Amendment.

The Joint Report. The Joint Report observed that the Second Circuit had held that, although the use of nicknames, mottos, or trade names that imply an ability to obtain results is “usually misleading,” subparagraph (c)(7)’s prohibition against using such names was nonetheless unconstitutional because it prohibited such descriptors “even when they are not actually misleading.” Because the Second Circuit’s reasoning appeared to support a prohibition against trade names that are actually misleading, any conduct that would be prohibited by a reasonably narrowed prohibition would also already be prohibited by Rule 7.1(a)’s general prohibition of false, deceptive, or misleading advertising. Moreover, existing Rules 7.1(d) and (e) specifically regulate advertisements that contain “statements that are reasonably likely to create an expectation about results the lawyer can achieve.” Under Rules 7.1(d) and (e), such statements must be capable of being “factually supported” and must be accompanied by a specified disclaimer. COSAC and the Task Force saw no reason that these safeguards would not also apply to nicknames, monikers, mottos and trade names (to the extent trade names could be used at all under Rule 7.5(b), which generally prohibits lawyers from using trade names).

Amended rules.The amended rules are consistent with the recommendation in the Joint Report. They do not contain any trace of the prohibition in former Rule 7.1(c)(7). This is also a positive development, in my view. Existing Rule 7.5 (which the Courts did not amend) is sufficient to deal with the subject of law firm names. As for matters of good taste, let the market decide.

Rule 7.1(d)(3): Testimonials

Rule 7.1(d)(3) permitted lawyer advertisements to include “testimonials or endorsements of clients, where not prohibited by paragraph (c)(1), and of former clients.” (Emphasis added.)

Alexander v. Cahill. Rule 7.1(d)(3) was not challenged by the Plaintiffs and was not mentioned in the District Court or Second Circuit opinions in Alexander v. Cahill, but by striking down (c)(1)’s prohibition on testimonials regarding pending matters, the judicial opinions rendered the reference to (c)(1) nugatory.

Joint Report. Since the Joint Report recommended striking Rule 7.1(c)(1), it also recommended striking the cross-reference to (c)(1) in Rule 7.1(d)(3).

Amended rules. The amended rules are consistent with the Joint Report. In Rule 7.1(d)(3), the Courts have stricken the language “where not prohibited by paragraph (c)(1).”

Rule 7.1(g)(1): Pop-Up and Pop-Under Advertisements

Subparagraph (g)(1) prohibited “a pop-up or pop-under advertisement in connection with computer-accessed communications, other than on the lawyer or law firm’s own web site or other internet presence.”

Alexander v. Cahill. The District Court struck down (g)(1) and the Second Circuit did not address it. It was not a hotly contested provision. In their summary judgment papers before the District Court, the Defendants had mentioned (g) (1) only in a footnote. At oral argument, they asserted that a categorical ban on pop-up and pop-under advertisements was necessary because “their fleeting nature is such that the State could not enforce lesser restrictions,” but Judge Scullin rejected that argument out of hand as “contrary to common sense.” He found “no evidence that the regulation, observation, or retention of pop-up and pop-under advertisements is any more difficult than the regulation, observation, or retention of advertisements on television, radio, or websites.” He struck down (g)(1) as unconstitutional, and the Defendants did not challenge that holding in the Second Circuit. The Second Circuit therefore had no reason to address (g)(1) at all.

Joint Report. The Joint Report noted that the District Court had rejected the arguments that “a categorical ban on pop-up and pop-under advertisements was necessary because of their fleeting nature.” The Joint Report also noted that the prohibition in (g)(1) went “beyond regulating potentially misleading advertisements to prohibit bland, entirely truthful advertisements.” Although the Second Circuit did not address this provision on appeal, the Second Circuit’s reasoning regarding other provisions would appear to support only a prohibition against pop-up or pop-under advertisements that are “actually misleading,” rather than such advertisements that are truthful or merely potentially misleading. As a result, COSAC and the Task Force believed that the prohibition in (g)(1) could not reasonably be narrowed in a way that would address conduct other than conduct already prohibited by Rule 7.1(a)(1)’s prohibition against false, deceptive, or misleading advertising. Thus, the Joint Report recommended striking (g)(1). (The Joint Report also noted that an advertising law firm or lawyer must maintain pop-up or pop-under advertisements for at least three years.)

Amended rules. The amended rules are consistent with the recommendation in the Joint Report. Rule 7.1(g) now says simply: “A lawyer or law firm shall not utilize meta-tags or other hidden computer codes that, if displayed, would violate these Rules.” The rule has no subparagraphs, and the prohibition in former (g)(1) is no longer in the rules. This is a welcome change.

Conclusion: Relations Between the Bench & Bar Are Improving

In my estimation, the amendments to the advertising rules indicate that the relationship between the Courts and the New York State Bar Association is improving. I have heard that the Courts were grateful for the Joint Report submitted by the State Bar and considered the Report to be a valuable addition to their discussions about bringing the rules into line with Alexander v. Cahill.

The proof is in the ultimate product. The amended version of Rule 7.1 as finally adopted by the Courts is consistent with most of the recommendations in the Joint Report. The Courts completely eliminated the prohibitions in former Rules 7.1(c) (1), (c)(5), and (g)(1), as well as the obsolete cross-reference to (c)(1) in Rule 7.1(d)(3), just as the Joint Report suggested. The Courts also eliminated the ban in former (c)(3) on portrayals of judges, replacing it with a simple and sensible requirement in new Rule 7.1(c)(3) (formerly (c)(4)) that an advertisement disclose whenever a judge is portrayed by an actor.

The Courts did not agree with all of the recommendations in the Joint Report. The Courts rejected the Joint Report’s recommendation that (c)(3) provide guidance on when the portrayal of a judge in an advertisement would be misleading, but perhaps that signals a reduced concern on the part of the Courts about advertisements depicting judges. in any event, I believe the Courts will interpret (c)(3) consistently with the Joint Report’s recommendation. The Courts also rejected the Joint Report’s recommendation that the prohibition on the use of “fictitious” law firms and law firm names be clarified to express the limiting construction that saved the rule in the Second Circuit, but I believe that the Courts will enforce Rule 7.1(c)(3) as if it contained that clarifying language. The Courts also added a new provision of their own devising, Rule 7.1(e)(4), requiring a lawyer to obtain informed consent, confirmed in writing, whenever an advertisement contains a “testimonial or endorsement from a client with respect to a matter still pending.” That provision has some regulatory gaps, but it is a fair demand to impose on lawyers who advertise client praise for their work.

Together with the Courts’ April 2011 adoption of an in-house counsel registration rule that had been proposed by the State Bar, the amended advertising rules bode well for closer and more productive cooperation between the New York State Bar Association and the Courts in the future. That will be a beneficial development for the Courts, the legal profession, and the people of New York.

Professor Roy Simon is the author of Simon’s New York Rules of Professional Conduct Annotated. The brand new 2015 edition analyzes more than 100 new cases, ethics opinions, and other developments critical to New York practice. It’s the legal ethics bible for all New York-area lawyers. To purchase, click here.

In addition, Professor Simon advises lawyers and law firms on questions of professional conduct and serves as an expert witness in cases raising issues of lawyer conduct. You may reach Professor Simon at 516-463-5289 or Roy.Simon@hofstra.edu.

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City Bar Issues Opinion on Litigation Financing

The City Bar has issued Formal Opinion 2011-2 on Third Party Litigation Financing. The opinion concludes that it is not unethical per se “for a lawyer to represent a client who enters into a non-recourse litigation financing arrangement with a third party lender.” However, the opinion discusses the following issues facing lawyers:

Legality of the Funding Agreement. Under Rule 1.2(d) of the Rules of Professional Conduct, an agreement is not enforceable if it violates a law, including the laws of champerty and usury. If the lawyer concludes that the funding agreement is unenforceable under applicable law, he should so advise the client and refrain from facilitating the transaction.

Attorney as Advisor. The lawyer may be asked to recommend a source of litigation funding or to review and negotiate the terms of the funding agreement. Rule 2.1 requires that the lawyer provide candid advice to his client on whether the agreement is in his best interest. Candid advice includes the following: comparisons of alternative sources of financing, including costs; whether the terms offered by this lender are reasonable; whether the client would be able to cover his expenses without the funding or be forced to settle. The lawyer should not permit his assistance to be construed as an endorsement of the financing source.

Conflicts of Interest. A lawyer may not accept a referral fee from the lending source if the fee will impair the lawyer’s judgment whether the funding is in the client’s best interest or whether the fee would compromise the lawyer’s obligation to offer candid advice. A conflict may also arise if the lawyer himself, or a company in which the lawyer has an ownership interest, extends financing to a client the lawyer represents in litigation.

Privilege & Confidentiality. Nonrecourse financing may result in waiver of the attorney-client privilege. A financing source may insist on documents and information to enable it to assess the value of the borrower’s claims. The lender may also expect the lawyer to advise it of developments in the case. The lawyer may not disclose privileged information without the client’s written consent. Also, the lawyer should not disclose any more information than necessary.

Control over the Proceeding. The lending source may seek to direct or influence the litigation. It may seek to avoid advancing money for a particular strategy, or a settlement that it considers an inadequate return on its investment. Without the client’s consent, the lawyer may not permit the lender to determine the course or strategy of the litigation, including decisions about whether to settle or what amount to settle for.

[Editor’s Note: On May 18, 2011, the Courts announced that they had amended Rule 7.1 of the Rules of Professional Conduct, effective April 15. The Rule is entitled “Advertising” and governs the use or dissemination of advertisements by New York lawyers. The amendments were designed by the Courts to respond to claims that portions of the Rule adopted on April 1, 2009 were unconstitutional. We reproduce the changes to the Rule below, showing all deletions.]

RULE 7.1: ADVERTISING
[as amended effective April 15, 2011]

(a) A lawyer or law firm shall not use or disseminate or participate in the use or dissemination of any advertisement that:

(1) contains statements or claims that are false, deceptive or misleading; or

(2) violates a Rule.

(b) Subject to the provisions of paragraph (a), an advertisement may include information as to:

(1) legal and nonlegal education; degrees and other scholastic distinctions; dates of admission to any bar; areas of the law in which the lawyer or law firm practices, as authorized by these Rules; public offices and teaching positions held; publications of law-related matters authored by the lawyer; memberships in bar associations or other professional societies or organizations, including offices and committee assignments therein; foreign language fluency; and bona fide professional ratings;

(2) names of clients regularly represented, provided that the client has given prior written consent;

(3) bank references; credit arrangements accepted; prepaid or group legal services programs in which the lawyer or law firm participates; nonlegal services provided by the lawyer or law firm or by an entity owned and controlled by the lawyer or law firm; the existence of contractual relationships between the lawyer or law firm and a nonlegal professional or nonlegal professional service firm, to the extent permitted by Rule 5.8, and the nature and extent of services available through those contractual relationships; and

(4) legal fees for initial consultation; contingent fee rates in civil matters, when accompanied by a statement disclosing the information required by paragraph (p); range of fees for legal and nonlegal services, provided that there be available to the public free of charge a written statement clearly describing the scope of each advertised service, hourly rates, and fixed fees for specified legal and nonlegal services.

(1) include an endorsement of, or testimonial about, a lawyer or law firm from a client with respect to a matter still pending;

(2) include a paid endorsement of, or testimonial about, a lawyer or law firm without disclosing that the person is being compensated therefor;

(3 2) include the portrayal of a judge the portrayal of a fictitious law firm, the use of a fictitious name to refer to lawyers not associated together in a law firm, or otherwise imply that lawyers are associated in a law firm if that is not the case;

(4 3) use actors to portray a judge, the lawyer, members of the law firm, or clients, or utilize depictions of fictionalized events or scenes, without disclosure of same; or

(5 4) rely on techniques to obtain attention that demonstrate a clear and intentional lack of relevance to the selection of counsel, including the portrayal of lawyers exhibiting characteristics clearly unrelated to legal competence;

(6) be made to resemble legal documents; or.

(7) utilize a nickname, moniker, motto or trade name that implies an ability to obtain results in a matter.

(d) An advertisement that complies with paragraph (e) may contain the following:

(1) statements that are reasonably likely to create an expectation about results the lawyer can achieve;

(2) statements that compare the lawyer’s services with the services of other lawyers;

(3) testimonials or endorsements of clients, were not prohibited by paragraph (c)(1), and of former clients; or

(4) statements describing or characterizing the quality of the lawyer’s or law firm’s services.

(e) it is permissible to provide the information set forth in paragraph (d) provided:

(1) its dissemination does not violate paragraph (a);

(2) it can be factually supported by the lawyer or law firm as of the date on which the advertisement is published or disseminated; and

(3) it is accompanied by the following disclaimer: “Prior results do not guarantee a similar outcome”; and

(4) in the case of a testimonial or endorsement from a client with respect to a matter still pending, the client gives informed consent confirmed in writing.

(f) Every advertisement other than those appearing in a radio, television or billboard advertisement, in a directory, newspaper, magazine or other periodical (and any web sites related thereto), or made in person pursuant to Rule 7.3(a)

(1) , shall be labeled “Attorney Advertising” on the first page, or on the home page in the case of a web site. If the communication is in the form of a self-mailing brochure or postcard, the words “Attorney Advertising” shall appear therein. In the case of electronic mail, the subject line shall contain the notation “ATTORNEY ADVERTISING.”

(g) A lawyer or law firm shall not utilize: (1) a pop-up or pop-under advertisement in connection with computer-accessed communications, other than on the lawyer or law firm’s own web site or other internet presence; or (2) metatags or other hidden computer codes that, if displayed, would violate these Rules.

(h) All advertisements shall include the name, principal law office address and telephone number of the lawyer or law firm whose services are being offered.

(i) Any words or statements required by this Rule to appear in an advertisement must be clearly legible and capable of being read by the average person, if written, and intelligible if spoken aloud. In the case of a web site, the required words or statements shall appear on the home page.

(j) A lawyer or law firm advertising any fixed fee for specified legal services shall, at the time of fee publication, have available to the public a written statement clearly describing the scope of each advertised service, which statement shall be available to the client at the time of retainer for any such service. Such legal services shall include all those services that are recognized as reasonable and necessary under local custom in the area of practice in the community where the services are performed.

(k) All advertisements shall be pre-approved by the lawyer or law firm, and a copy shall be retained for a period of not less than three years following its initial dissemination. Any advertisement contained in a computer-accessed communication shall be retained for a period of not less than one year. A copy of the contents of any web site covered by this Rule shall be preserved upon the initial publication of the web site, any major web site redesign, or a meaningful and extensive content change, but in no event less frequently than once every 90 days.

(l) If a lawyer or law firm advertises a range of fees or an hourly rate for services, the lawyer or law firm shall not charge more than the fee advertised for such services. if a lawyer or law firm advertises a fixed fee for specified legal services, or performs services described in a fee schedule, the lawyer or law firm shall not charge more than the fixed fee for such stated legal service as set forth in the advertisement or fee schedule, unless the client agrees in writing that the services performed or to be performed were not legal services referred to or implied in the advertisement or in the fee schedule and, further, that a different fee arrangement shall apply to the transaction.

(m) Unless otherwise specified in the advertisement, if a lawyer publishes any fee information authorized under this Rule in a publication that is published more frequently than once per month, the lawyer shall be bound by any representation made therein for a period of not less than 30 days after such publication. if a lawyer publishes any fee information authorized under this Rule in a publication that is published once per month or less frequently, the lawyer shall be bound by any representation made therein until the publication of the succeeding issue. if a lawyer publishes any fee information authorized under this Rule in a publication that has no fixed date for publication of a succeeding issue, the lawyer shall be bound by any representation made therein for a reasonable period of time after publication, but in no event less than 90 days.

(n) Unless otherwise specified, if a lawyer broadcasts any fee information authorized under this Rule, the lawyer shall be bound by any representation made therein for a period of not less than 30 days after such broadcast.

(o) A lawyer shall not compensate or give anything of value to representatives of the press, radio, television or other communication medium in anticipation of or in return for professional publicity in a news item.

(p) All advertisements that contain information about the fees charged by the lawyer or law firm, including those indicating that in the absence of a recovery no fee will be charged, shall comply with the provisions of Judiciary Law §488(3).

(q)A lawyer may accept employment that results from participation in activities designed to educate the public to recognize legal problems, to make intelligent selection of counsel or to utilize available legal services.

(r) Without affecting the right to accept employment, a lawyer may speak publicly or write for publication on legal topics so long as the lawyer does not undertake to give individual advice.

DISCLAIMER: This article provides general coverage of its subject area and is presented to the reader for informational purposes only with the understanding that the laws governing legal ethics and professional responsibility are always changing. The information in this article is not a substitute for legal advice and may not be suitable in a particular situation. Consult your attorney for legal advice. New York Legal Ethics Reporter provides this article with the understanding that neither New York Legal Ethics Reporter LLC, nor Frankfurt Kurnit Klein & Selz, nor Hofstra University, nor their representatives, nor any of the authors are engaged herein in rendering legal advice. New York Legal Ethics Reporter LLC, Frankfurt Kurnit Klein & Selz, Hofstra University, their representatives, and the authors shall not be liable for any damages resulting from any error, inaccuracy, or omission.

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