Last week, the California Legal Ethics blog examined a new proposal pending before the State Bar of California to step up enforcement activity against uncertified legal referral services. At that time, the impetus behind this proposal was not clear. Now, more information makes its provenance clearer.
Two bills are pending before the California Legislature that would dramatically change the legal landscape regarding lawyer advertising and litigation financing.
SB 37 would add new Business and Professions Code section 6153 that would create a private right of action for violations of current section 6152, which prohibits capping. This bill would allow for statutory damages up to $100,000 per violation, attorney’s fees, injunctive relief, and “any other relief the court deems proper.”
This bill would also add new Business and Professions Code section 6156.5, which would create a private right of action for violations of current section 6155, the statute requiring lawyer referral services to be certified. Remedies would be the same as those in the proposed new section 6153.
The remedies under both new statutes are specifically independent of “any enforcement action or inaction by any governmental agency or official,” i.e., the State Bar of California.
SB 37 would also strengthen the largely ignored statutes in Article 9.5 of the Business and Professions Code, entitled “Legal Advertising,” otherwise known as the “Larry Parker Law.”
Section 6157 would have more precise definitions of “advertise” and “advertisement”, the later to be defined as “any communication, through any written, recorded, or electronic means, whether available to, or directed generally to, members of the public or to a limited group of individuals, that provides information concerning a lawyer or the lawyer’s services for the purpose of encouraging individuals to secure the services of the lawyer or their law firm.“
Section 6157.2 would be amended to prohibit misleading, deceptive, or false statements, words, or phrases regarding a lawyer’s or law firm’s skills, experience, reputation, or record. It would also be amended to require the location or the address of record listed with the State Bar for the lawyer or law firm.
Finally, the section would be amended to provide that the current provision allowing for a civil action enforcement action may be maintained by A consumer who was misled by an advertisement in violation of this section, not just a “person.”
To view the full bill text, go to https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260SB37.
AB 931 takes a different approach. Current Business and Professions Code section 6156 would be renumbered as 6155.1, and the current civil right of action for violating section 6155 would be maintained through Business and Professions Code sections 17206 (unfair competition) or 17536 (false advertising).
However, the proposed new section 6156 would prohibit fee division between a California lawyer and an out-of-state alternative business structure, defined as any entity that provides legal services while allowing non-attorney ownership, management, or decision-making authority. Remedies include statutory damages, attorney’s fees, injunctive relief, and State Bar discipline.
AB 931 would also add an entire article (new number 17) to Chapter 4 of the Business and Professions Code regulating consumer legal funding. Among many other provisions, litigation financing companies would be prohibited from paying or accepting any consideration to any attorney, law firm, or any of their employees for referring a consumer to the company. They would also be prohibited from referring “in furtherance of legal funding” a customer or potential customer to a specific attorney, law firm, or any of their employees, except that they are not prohibited from “referring a consumer to a publically available attorney referral service operated by a local bar association of the State Bar of California.”
To view the full bill text, go to https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260AB931.
SB 37 is the obvious impetus of the State Bar’s renewed interest in enforcing the legal referral service rules. But the question remains: why now?
Both SB 37 and AB 931 are sponsored by the Consumer Attorneys of California (CAOC). CAOC’s director of litigation cites the threat proposed by “tort reform advocates” inflamed by recent advertising touting a $4 billion settlement as evidence of unchecked and unethical attorney advertising, an initiative by the Los Angeles City Attorney’s Office to limit non economic damages (pain and suffering), a move by Uber to limit uninsured and under-insured motorist coverage somehow related to a nasty advertising campaigns seeking potential clients against Uber and advertising abuse occurring after the Pacific Palisades and Eaton fires.
The backdrop against all this is the relatively passive approach that the State Bar of California has taken to advertising and uncertified LRS complaints for the last few decades. The reasons for this approach make sense. The truism is that consumers don’t complain about lawyer advertising. The general public has come to accept it and largely tunes it out amid the noise of the hundreds, if not thousands, of advertising messages they are exposed to every day. Of course, that means that lawyers have to push the boundaries of ethical rules to get attention and boost the signal past the noise. Bigger billboards, louder ads, and the thing that gets everyone’s attention, the promise of big money. The money lure is so powerful that Business and Professions Code section 6158.1(c) makes a “message referring to or implying money received by or for a client in a particular case or cases, or to potential monetary recovery for a prospective client” presumptively misleading in an electronic ad. “A reference to money or monetary recovery includes, but is not limited to, a specific dollar amount, characterization of a sum of money, monetary symbols, or the implication of wealth.” Remember “Larry Parker Got Me $2.1 Million.”
There isn’t much evidence for it but maybe the general public is tired of lawyer advertising. However, there is a whiff of protectionism about these bills, especially the AB 391 provisions on fee division with out-of-state ABSs. The fervor for abolishing Model Rule 5.4 has faded away, leaving Arizona as the only state holding the fort (although some might say holding the bag). Fee division between non-
Arizona lawyers and Arizona ABSs have been discussed as a way to extend their reach nationwide. California is still the Golden Goose of mass tort and big-damage personal injury lawyers. The California legislature’s hostility to ABS was well established when it pulled the plug on ATILS in 2022. The prospect of an Arizona ABS flush with non-lawyer investor cash and a big advertising budget can’t be comforting to the established injury lawyers in California.
The scuttlebutt is that both bills will probably be passed. However, their mere pendency is going to influence how the State Bar, a creature of the Legislature after all, approaches its disciplinary priorities. We have already seen that with the proposal of increased enforcement of the LRS rules. Part of that proposal is warning letters to lawyers who participate in an uncertified LRS. Perhaps even before these bills pass, but certainly after, the Office of Chief Trial Counsel may actively seek out potential advertising prosecutions, maybe even utilizing the Larry Parker Law for what might be the first time. It would probably be an uphill battle; the few available case law precedents suggest that only a massive scheme of deception, on par with In Re Morse (1995) 11 Cal. 4th 190 will result in substantial discipline.