Getting Real (Estate Business): Ethics Of Marketing Legal Services In Ontario

The Law Society of Ontario Tribunal Hearing Division has found that aspects of an attorney’s business marketing violated the rules governing solicitation of legal services.

Case summary

The Lawyer operated a province-wide real estate firm, having created a business model that used an online process to allow potential clients to obtain precise fixed-rate quotes for their particular transactions – The firm’s website domain name was “realestatelawyers.ca” – It used the firm name “Real Estate Lawyers.ca LLP” – The panel found that the Lawyer engaged in professional misconduct when two of his firm’s mailers did not comply with the rules on advertising because they failed to specify that there would be disbursements charged, in addition to the legal fees quoted – The panel dismissed all of the other allegations that related to potential breaches of the Society’s rules dealing with misleading, confusing, or deceptive advertising – The allegations that were dismissed involved: the size and experience of the firm; legal fees, discounts and guarantees; and stating that the firm “specialized” in real estate transactions when the Lawyer had not been designated as a “certified specialist” by the Society – A dissenting panel member would have found that the Lawyer engaged in professional misconduct in using the firm name “Real Estate Lawyers.ca LLP” on the basis that the descriptive nature of the name created confusion or deception because, on its face, the name suggested an entity that encompassed all real estate lawyers or a listing of all real estate lawyers, rather than a unique firm – The majority of the panel, however, dismissed this allegation.

Governing principles

Rule 4.2 of the Rules of Professional Conduct (Rules) addresses marketing and advertising standards. The rule is not intended to create an even playing field among lawyers, as may have been the case in bygone years. Rather, the rule is intended to protect consumers of legal services from being misled about the nature of the services provided and the cost of those services. Over the years, as the Law Society has focused on protection of the public interest and as the legal professions have become more competitive, the Law Society has recognized that fair competition among professionals is good for the consuming public. Fair competition includes the promotion and sale of legal services through advertising and market research. If the advertising or marketing does not misrepresent the services offered and does not bring the legal profession into disrepute, or otherwise violate the Rules, licensees are permitted, if not encouraged, by the Law Society to market their services to the public in new and creative ways to meet the demands and expectations of the consuming public.

The Rules therefore provide that a lawyer may market legal services only if the marketing is “demonstrably true, accurate and verifiable,” “neither misleading, confusing or deceptive,” “is in the best interests of the public,” and “is consistent with a high standard of professionalism.”

A passionate lawyer

Mr. Rothman is passionate about the business model he chose for his firm. He is proud of the success that his firm has had in the market since his call to the bar in 2008, when he took over the practice of his great-uncle. He saw an opportunity to provide standardized residential real estate services at fixed and competitive prices by “scaling up” what had been a suburban real estate practice to a province-wide practice, with multiple locations. He went about this in several ways. First, he incorporated the goodwill and practices of several senior, retired real estate lawyers, undertaking to store and provide access to their client files. Second, he created a website and an online process that permits a potential client to obtain a precise quotation by inputting key details of the proposed real estate transaction. Third, he focused on making the experience for the client convenient by offering various locations and a mobile signing service for clients to execute documents. Fourth, knowing that the model would require a large and continuous volume of similar real estate transactions to be profitable, he committed his firm to an aggressive and expansive marketing and advertising strategy. Fifth, by generating a high volume of business, his firm can quote fixed fees, which are highly competitive, for standard residential real estate transactions. Finally, he encouraged and created incentives for his clients to complete surveys and provide feedback on the services rendered so that his firm could constantly adjust and calibrate its processes based on client feedback. In so doing, the firm has been able to improve the quality of the service and expand the market demand for its services.

Some will say that this model of doing business effectively commoditizes the practice of residential real estate; others will say that his model for the delivery of legal services for real estate transactions is innovative and long overdue. Given the consistent increase in the number of residential real estate transactions that his firm closes in a month, the residential real estate market for legal services seems to have welcomed his business model.

The Law Society does not fault Mr. Rothman for attempting to market legal services innovatively but alleges that he went too far in his advertising about the services that his firm provided. Ms. Murchie has canvassed and addressed the Law Society’s allegations in her reasons. Except with respect to Mr. Rothman’s use of the firm name, “Real Estate Lawyers.ca LLP”, we agree with her analysis.

But

  The Law Society asserts, however, that this consumer, upon coming across the firm name on the internet or in print advertising, would not have the level of comprehension or discernment to differentiate between a listing of real estate lawyers in Canada from a private law firm of real estate lawyers. Essentially, the submission is that this consumer would not be able to make this distinction by applying no more than ordinary care to observe that which is staring them in the face when they first came across the firm name. In our view, the Law Society’s characterization of the ordinary hurried purchaser of residential real estate legal services in this case is overly protective and somewhat denigrating of the modern consuming public in Ontario. In context, we are not satisfied that a mere “suggestion” that the name refers to a listing of Canadian real estate lawyers rises to the level of a statement or representation that misleads or confuses consumers of real estate law services.

The majority found misconduct and set the matter for a hearing on penalty.

A dissent would find an additional count of misconduct and sets out the history of regulation in this area

The Law Society has been increasingly attentive to misleading advertising in recent years as the extent and range of marketing and advertising, as well as complaints about it, have increased. In February 2016, Convocation struck a working group to consider whether the regulation of licensee marketing activities was appropriate or needed to be enhanced. In September 2017, after repeated consultations with the profession, and in its sixth report to Convocation, the working group recommended changes to the Rules that set out the requirements under which a lawyer may advertise prices for a real estate transaction.

Mr. Rothman agrees that the Law Society is entirely justified in policing misleading advertising. He accepts that the profession must self-assess its advertising as the Law Society does not have the resources to look at every website of every law firm across the province. He supports the Law Society crackdown on firms who engage in misleading advertising. But he firmly maintains that he is not one of the offenders.

The additional finding

In my view, on the balance of probabilities, an ordinary hurried consumer of real estate services is likely to be confused or misled by the name, Real Estate Lawyers.ca LLP. It is the descriptive and general nature of the name that creates the confusion or deception. On its face, Real Estate Lawyers.ca LLP suggests an entity that encompasses all real estate lawyers or a listing of all real estate lawyers rather than a unique firm.

Real Estate Lawyers.ca is misleading or confusing. There are many real estate lawyers practising in Ontario or Canada. Real Estate Lawyers.ca describes all of them or a listing of all of them. The name suggests the whole profession of real estate lawyers but relates to only one firm. It suggests something it is not. Like Human Rights Law Firm or Personal Injury Law Firm, names unacceptable according to the Guidelines, it is too general and only descriptive. The name is confusing and not in the best interests of the public.

This violation of the Rules is professional misconduct and cannot be excused on the basis that it is merely technical or without fault. Mr. Rothman chose to use the name, while recognizing that the Law Society would or at least could be of the view that it was misleading or confusing as too general and descriptive. When Ms. Walker contacted him about the name, he did not insist the name was in accordance with the rules. Instead, he assured her that he was using it in conjunction with Parnes Rothman LLP and, on that basis, she did not proceed with an investigation. In my view, Mr. Rothman knew that he was taking a chance in using Real Estate Lawyers.ca LLP as his firm name and, notwithstanding his understanding that Ms. Walker was satisfied, I cannot now say his breach was an oversight or without fault.