A Massive Ethics Complaint
Lawyer says peers paid for referrals through Web site
By DOUGLAS S. MALAN
You’re a lawyer. You receive a telephone call from a for-profit company offering to feed you clients who visit the company’s web site seeking legal help. In exchange, you pay a fee for every consumer who contacts you.
The company markets itself as a lawyer advertising site and claims the fee is used to cover operational costs and support services. But disciplinary officials, in Connecticut at least, think the agreement might be an example of paying for referrals, which is a felony offense in the state.
The question of what constitutes ethical and legal Internet advertising of attorney services is back in the spotlight after local grievance panels recently found probable cause against two Connecticut attorneys who entered into business agreements with a Chicago-based company.
A probable cause finding simply means that the grievance complaints are ripe for further review.
“I’ve been told by a lot of lawyers that they get calls every day from marketing companies trying to sell them [client] leads,” said Mark Dubois, Connecticut’s chief disciplinary counsel. “I’d be surprised if a lot of people didn’t take them up on it.”
The ethics complaint landed in Dubois’ lap after Norwich bankruptcy attorney Zenas Zelotes called on the carpet more than 500 lawyers in 47 states in his nationwide complaint against TotalAttorneys and its founder, Illinois attorney Kevin Chern, who is a member of the National Association of Consumer Bankruptcy Attorneys and a former managing partner of Macey & Chern in Chicago (now Macey & Aleman), which he helped grow into one of the largest consumer bankruptcy law firms. He is considered a knowledgeable business development resource who has contributed to legal blogs and articles, including some affiliated with the Law Tribune’s parent company IncisiveMedia.
Five Connecticut attorneys were named in the complaint, which was filed about three weeks after Zelotes was contacted by a TotalAttorneys marketing representative.
Zelotes’ 303-page ethics complaint, which was also forwarded to the U.S. Department of Justice, states that attorneys pay $65 to TotalAttorneys Inc. for every person that contacts them through one of the company’s Web sites. The site in question is a bankruptcy law site, www.clearbankruptcy.com. Zelotes argued that this arrangement constitutes paying for referrals in violation of ethics rules, state laws and federal bankruptcy laws.
Zelotes said his motivation for filing the complaint is business-related and that Chern’s “pay to play” Web site is taking business away from lawyers who don’t participate.
“I felt something significant had to be done,” Zelotes said. Filing the complaint “is the right thing to do, and someone has to do it.”
Administrative Costs
In response, TotalAttorneys Inc. argues that the fee paid to them merely covers administrative costs, including running a telephone call center in Chicago that fields consumers’ calls and a software program that tracks and manages consumer contacts generated through the Web site. The company says the entire operation is what’s known as co-op advertising -- every participating lawyer chips in for the cost. Lawyers are contacted by consumers based on location; for example, a Newington consumer is connected to a Newington attorney, if one exists in the network.
Zelotes also claimed that Chern operates about a dozen similar Web sites for different practice areas. In his complaint, Zelotes called for appropriate discipline against attorneys who participated in the TotalAttorneys network, disbarment for Chern, and the repayment of fees paid by lawyers in the network.
By firing a salvo at his fellow bar members, Zelotes is now turning to a disciplinary process that slapped his hand in 2005 for committing errors while representing a client in a bankruptcy case. He was ordered to attend continuing legal education courses after he overcharged a client by $225, which he repaid to the client.
Last Thursday, Zelotes also filed a complaint against Chern with the Connecticut State’s Attorney’s Office, alleging a violation of Connecticut General Statutes Sec. 51-87 that prohibits accepting fees for referrals.
“Mr. Chern has been substantially and unjustly enriched on account of his serial criminal misconduct,” Zelotes stated in the complaint, noting that Chern has collected “thousands” of referral fees just from Connecticut attorneys.
Meanwhile, Chern’s camp filed a voluminous memorandum of law that outlines why Chern’s business model is legal, not the least of which is that all of Chern’s web sites are described as advertising sites rather than referral sites.
Further, Chern argued in his memorandum of law, no referral services are provided because “the call center does not engage in any screening or evaluation of the members of the public, or their potential legal concerns.” Instead, Chern said, connections are made solely based on location of lawyer and potential client.
Chern “has gone to substantial lengths to model his companies and to direct the conduct of his employees to conform to the letter and spirit of the Rules of Professional Conduct and all applicable laws,” one of Chern’s lawyers, Mary Robinson, stated in a letter to the Illinois Attorney Registration and Disciplinary Commission.
In an interview with the Law Tribune, Robinson said rapid developments in Internet marketing are outpacing many lawyers’ abilities to understand them, which gives rise to grievance complaints from lawyers protective of their turf.
“It’s hard for lawyers to understand new,” said Robinson, a lawyer since 1974 and Illinois’ former disciplinary chief. “We’re looking at new times in how legal services are delivered.”
Connecticut Test Case
Many jurisdictions are awaiting a decision by the Illinois commission before moving ahead with their local complaints. But Connecticut is moving forward.
“What I heard from Chern’s people is that we’re the first to find probable cause, so we’re the test case,” Dubois said.
That means at least two Connecticut attorneys are under fire right now.
Old Saybrook attorney Steven M. Lesko was the first to have a finding of probable cause against him. Though he declined to discuss the matter on the telephone last week, the answer he filed to the complaint reveals his thinking.
After hearing the cold-call marketing pitch from TotalAttorneys in late March, Lesko stated that he discussed with the caller the company’s bankruptcy Web site and Rule 7.2 of the Rules of Professional Conduct, which pertains to referral fees.
The marketing person assured Lesko that “the business model had been thoroughly researched and structured in a way so as to comply with the ethical requirements of all fifty states,” Lesko stated in his answer to the complaint.
Then Lesko said he personally reviewed Rule 7.2, the TotalAttorneys contract for the bankruptcy Web site and also the relevant portions of the federal bankruptcy laws.
Lesko said he was “satisfied” that the business arrangement was legal, but after paying $455 for contacts over two months, he never retained a client or collected any fees and he cancelled his contract.
But Dubois isn’t buying the defense that the Web sites amount to little more than co-operative advertising.
“The problem with that is that the advertising rules here require there to be the name of a Connecticut-admitted lawyer on the ad and that lawyer has to file the ad with the grievance committee for review,” which hasn’t happened, Dubois said. He noted there also are ethical problems if the fees paid by attorneys are deemed well in excess of the cost of operation.
Different Medium
Probable cause also was found against Orange attorney Kenneth Lenz. Other Connecticut attorneys named in the complaint include Russell Small of Bridgeport, Matthew Rousseau, a Massachusetts-based attorney licensed in Connecticut; and Gregg Wagman of New London.
None of the lawyers provided comment to the Law Tribune, and their attorney, David Atkins of Pullman & Comley in Bridgeport, also declined to discuss the complaint.
Rousseau is one of about a dozen lawyers in Massachusetts named in Zelotes’ ethics complaint.
“Our proceedings are confidential and I don’t have any comment,” said Constance Vecchione, who is Massachusetts bar counsel in charge of complaints against lawyers.
Veteran professional ethics attorney Kimberly Knox, of Horton, Shields & Knox in Hartford, declined to discuss the TotalAttorneys matter specifically, but said this debate is not a new one. It started with similar messages on television in the 1990s.
“Lawyer referral services and advertising come up time and time again,” Knox said. “It’s just a different medium now. Lawyers have to be careful that all ethics criteria are met.”
In 1995, the Alabama Supreme Court, in Alabama State Bar Association v. R.W. Lynch Co. Inc., sided with a California advertising agency that developed a television marketing program for personal injury attorneys. The program billed itself as paid advertising, not a referral service, and routed consumers to lawyers based on geographical proximity.
TotalAttorneys said that decision should be the guide for this case. “The marketing model in Lynch was…essentially identical” to TotalAttorneys model, Chern stated.
Both Zelotes and Chern gird their arguments with ethics opinions from multiple states, underscoring the nuances that exist in the debate over referrals and advertising.
“I wouldn’t be surprised if this [ethics] case migrates to court at some point over First Amendment rights,” Dubois said. “This is going to be my focus for the next few months.”•
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