Texas lawyers relying on lead generators to find potential clients had better think twice.
A new wave of litigation focused on the illegal solicitation of potential clients for Texas law firms is leading to massive penalties of up to $50,000 “from each person who engaged in barratry.”
The wave of so-called “barratry” claims arise under Texas Government Code §38.12 and Texas Government Code §82.0651, that allows for a private right of action when a person who was solicited through prohibited barratry.
So far the case law here is pretty sparce but the statutory language is enticing enough that numerous repeat litigators—including Kim Starling, Brandon Callier, and Kelly Bland—are making numerous claims under the statute.
The root cause of the wave of claims is Texas law firms connecting with marketing companies to solicit potential accident clients based upon alleged online webform submissions. But many times lead sellers supply false data to marketers—up to 40% of such leads are false according to Anura CEO Rich Kahn—leading to a large number of folks who are being illegally solicited on behalf of Texas law firms.
And despite being lawyers, the defendants in these cases don’t seem to know what hit them.
Texas has one of the country’s strongest laws against barratry and prohibited solicitation of professional employment under Texas Government Code §38.12. What makes Texas different from every other state in the country is that barratry also gives rise to a civil cause of action. The conduct can result in $50,000 in civil penalties, criminal prosecution, professional discipline, AND an award of attorney’s fees. And depending on the circumstances, a person may be able to void a legal services contract and recover fees and actual damages.
Barratry in Texas not only applies to lawyers, it can apply nonlawyers, lead generators, referral sources, and others involved in obtaining professional employment through prohibited solicitation.
Under §38.12(a) a person commits an offense, with the intent to obtain an economic benefit, if the person:
- pays or offers money or something of value to another person to solicit employment;
- accepts or agrees to accept money or something of value to solicit employment;
- solicits employment in person, by telephone, through a social media direct message, or through another electronic communication;
- pays or offers money or something of value to a prospective client to obtain professional employment;
- knowingly institutes a suit or claim without authorization; or
- pays or offers money or something of value to a family member of a prospective client to solicit employment.
So a prohibited solicitation may potentially involve:
- A telephone call;
- An in-person solicitation;
- A text message;
- A social-media direct message;
- An email or other electronic communication;
- A third-party lead generator;
- A paid referral arrangement; or
- Another person acting on behalf of an attorney or other “professional”
Under Texas Pen. Code §38.01(11), “solicit employment” means to communicate [] by telephone with a prospective client [] concerning professional employment within the scope of a professional’s license [] arising out of a particular occurrence or event [] or concerning an existing problem of the prospective client within the scope of the professional’s license [] for the purpose of providing professional services to the prospective client, when neither the person receiving the communication nor anyone acting on that person’s behalf has requested the communication.”
“Professional” means an “attorney, chiropractor, physician, surgeon, private investigator, or any other person licensed, certified, or registered by a state agency that regulates a health care profession.” Texas Pen. Code §38.01(11).
So if you’re a lead generator, call center, or marketer soliciting clients on behalf of law firms via telemarketing in Texas without the request of the potential client you may be violating Tex. Pen. Code §38.12(a)(2).
But if a prospective client—or someone acting on that person’s behalf—requests a communication from the professional, the communication may fall outside the definition of “solicit employment.” An accident victim who fills out a webform and asks a specific attorney to call is different from an accident victim who receives an unexpected—or unrequested—telephone call from a law firm immediately after an accident. While case law and the statue is sparce on the definition of “request,” it appears this “request” may be provided via text, email, orally, online, etc.
§38.01(11) also excludes communications by a professional who has a prior or existing professional-client relationship with the person receiving the communication—almost like an EBR.
Also, the statute does not define “prospective client.” Arguably then serial litigants who for instance fabricate accident claims and use false identities to participate in intake processes cannot plausibly contend that they were legitimate “prospective clients” entitled to relief under the statute.
A person who entered into a contract with an attorney as a result of unlawful solicitation is entitled to damages from a person who was solicited by but did not enter into a contract with the soliciting attorney. Those we who are “solicited by conduct violating §38.12(a) (or Rule 7.03 of the Texas Disciplinary Rules of Professional Conduct–more on this below) but who did not enter into a contract as a result of that conduct, may file a civil action” for a penalty of $50,000 from “each person who engaged in barratry” and attorneys’ fees under §82.0651(c). Those who entered into a contract for legal services in violation of §38.12(a) (or Rule 7.03 of the Texas Disciplinary Rules of Professional Conduct) are entitled to a penalty in the amount of $10,000 “from any person who committed barratry” and “entitled to all fees and expenses paid to that person under the contract” §82.0651(b).
Additionally, §82.0651(c) also allows a private right of action for violations of Rule 7.03 Texas Disciplinary Rules of Professional Conduct—Rule 7.03 prohibits several kinds of conduct that involve soliciting professional employment. Although similar, the Texas Disciplinary Rules are slightly different: Subsection (b) prohibits in-person or other forms of contact that involve “communication in a live or electronically interactive manner”; subsections (c) and (d) prohibit various kinds of false communications; subsection (e) prohibits a lawyer from paying someone to solicit employment on their behalf:
(1) “Regulated telephone, social media, or other electronic contact” means telephone, social media, or electronic communication initiated by a lawyer, or by a person acting on behalf of a lawyer, that involves communication in a live or electronically interactive manner.
(2) A lawyer “solicits” employment by making a “solicitation communication,” as that term is defined in Rule 7.01(b)(2).
(b) A lawyer shall not solicit through in-person contact, or through regulated telephone, social media, or other electronic contact, professional employment from a non-client, unless the target of the solicitation is:…(2) a person who has a family, close personal, or prior business or professional relationship with the lawyer;…
…
(e) A lawyer shall not pay, give, or offer to pay or give anything of value to a person not licensed to practice law for soliciting or referring prospective clients for professional employment, except nominal gifts given as an expression of appreciation that are neither intended nor reasonably expected to be a form of compensation for recommending a lawyer’s services.
Rule 7.03(a), (b), (e) (emphasis added).
A “solicitation communication” is defined as follows:
A “solicitation communication” is a communication substantially motivated by pecuniary gain that is made by or on behalf of a lawyer to a specific person who has not sought the lawyer’s advice or services, which reasonably can be understood as offering to provide legal services that the lawyer knows or reasonably should know the person needs in a particular matter.
Rule 7.01(b)(2) (emphasis added).
Further to comply with Rule 7.01, “a lawyer must not pay a lead generator that states, implies, or creates a reasonable impression that it is recommending the lawyer, is making the referral without payment from the lawyer, or has analyzed a person’s legal problems when determining which lawyer should receive the referral.” Comment 13 of Rule 7.03.
Similar to Texas Pen. Code §38.12, Rule 7.03 adds that a communication made in response to a request for information, including an electronic search is not a solicitation. Comment 2 of Rule 7.03.
Therefore a person who was solicited by conduct violating Rule 7.03 of the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas regarding barratry by attorneys or other persons may also file a civil action against any person who committed barratry and recover penalties in the amount of $50,000, actual damages caused by the prohibited conduct, and attorney’s fees
Plaintiffs are increasingly filing class actions under § 82.0651 in conjunction with claims for violations of the TCPA and the Texas Business And Commerce Code (“TBCC”) §305.053 (TBCC’s telemarketing restrictions) and §302.101 (TBCC’s registration requirements). As TCPAWorld readers know the TCPA contains a $500-$1,500 per violation penalty and violations of the TBCC (the “Mini-TCPA”) range as high as $10k with $5k permitted for registration violations.
So if you’re a lawyer or marketer soliciting on behalf of law firms in Texas you ought to be well aware of Texas’ barratry regulations and the risk of STACKED damages.
Indeed, everything is bigger in Texas.
As always, we’ll continue to keep an eye out on these claims.
Xoxo Queenie
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