Opinion 1182

[Formerly published as Published Informal Opinion 88-3. All Informal Opinions are consolidated in this database.]

Question:
Does a lawyer advertisement which offers legal services on a contingent-fee basis and which states that there will be no fee charged if nothing is recovered for the injured person, but which omits the information stating that the client would be responsible for any costs incurred in connection with the representation, violate RPC 7.1?

Short Answer:
Yes, because it is false and misleading in that it omits a fact necessary to make the statement considered as a whole not materially misleading.

Discussion:
An inquiry has been received regarding the propriety of placing advertisements which state that a lawyer will perform legal services on a contingent-fee basis and that the client(s) will be charged no fee if nothing is recovered on their claim. The advertisements, however, do not state that there may be litigation costs that would be chargeable to the client irrespective of the outcome of the case. The question presented is whether the failure to include the fact that, although no fees may be due, a client may be responsible for costs, constitutes a false or misleading advertisement.

This specific question was considered by the United States Supreme Court in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 105 S. Ct. 2265, 85 L. Ed. 2d 652 (1985). In that case, the lawyer`s advertisement informed the public, "if there is no recovery, no legal fees are owed by our clients." The advertisement made no mention of the distinction between "legal fees" and "costs." The Supreme Court said, "[T]o a layman not aware of the meaning of these terms of art, the advertisement would suggest that employing appellant would be a no-lose proposition in that his representation in a losing cause would come entirely free of charge." The Court held, "[T]he assumption that substantial numbers of potential clients would be so misled is hardly a speculative one" and that "a possibility of deception is ... self-evident." The Court found that the state could require that lawyers disclose information regarding the client`s liability for costs. See, Zauderer at 652-653.

Similarly, in Loni v. The State Bar of California, 704 P.2d 183 (1985), the California Supreme Court held that it was misleading to send a solicitation letter to a prospective client which stated, "FILING FEE: The cash money that you need to apply for an ORDER FOR DEBT RELIEF is sixty dollars. This one filing fee protects both husband and wife." The solicitation letter did not disclose that in addition to the $60 filing fee, ten additional monthly payments of $60 would be charged. The Court held, "[A] necessary fact has been omitted and the rule [prohibiting omission of facts necessary to make material not misleading] violated." (At 194).

RPC 7.1 provides that a communication is false or misleading if it omits a fact necessary to make the statement considered as a whole not materially misleading. Upon the basis of the authority cited, it appears that the omission, in the type of advertisement referred to, of the fact that a client will be obligated for costs and expenses of litigation, as required by RPC 1.8(e), would mean that a consumer of legal services would not receive necessary information. Therefore, it is the conclusion of the Committee that such advertisements which fail to disclose the client`s obligation to pay costs regardless of the outcome of the litigation are misleading and therefore not permitted under the Rules of Professional Conduct.