Opinion
Argued September 14, 1983
Decided November 3, 1983
Appeal from the Appellate Division of the Supreme Court in the Third Judicial Department.
Steven R. Shapiro, Jeremiah Gutman, Robin Arzt and Richard G. Collins for appellants. George B. Burke for respondent.
The United States Supreme Court having vacated our prior order in this matter and remanded for further consideration in light of its decision in Matter of R.M.J. ( 455 U.S. 191), we conclude that there is no constitutional infirmity in the application of section 479 of the Judiciary Law and provisions of the Code of Professional Responsibility to respondents' conduct in approving the mailing by the legal clinic in which respondents are partners to some 1,000 realtors in the Albany area of a letter quoting fees for listed real estate transactions. The order of the Appellate Division finding respondents guilty of misconduct in so doing but imposing no sanction is, therefore, affirmed.
I
The committee's petition to the Appellate Division alleged that respondents were admitted to practice in New York, were partners in the legal clinic of Cawley and Schmidt, and were guilty of professional misconduct in that they approved for mailing on the letterhead of the clinic a letter, the body of which is set forth in appendix A of this opinion and the intent of which was to solicit engagement to render legal services in connection with real estate closings, which letter was mailed in August and September of 1979 to approximately 1,000 realtors in the Albany geographical area.
Respondents' motion to dismiss the petition was denied on the basis of our holding in Matter of Greene ( 54 N.Y.2d 118) that to the extent that section 479 of the Judiciary Law and DR 2-103 (A) of the Code of Professional Responsibility proscribe advertising of attorneys' services by direct mail addressed to real estate brokers, those provisions are a constitutionally valid regulation of commercial speech. After the Supreme Court's denial of certiorari in Greene ( 455 U.S. 1035), respondents served their answer denying misconduct or that the intent of the letter was to solicit real estate closings, but otherwise admitting the allegations of the petition. The answer pleaded as complete defenses that respondents' conduct was constitutionally protected free speech, that section 479 of the Judiciary Law on its face forbids all lawyer advertising and thus proscribes constitutionally protected speech, that section 479 on its face violates due process because not all lawyer advertising can be proscribed and the section fails to give sufficient notice of what lawyer advertising is in fact proscribed, and that section 479 as applied to respondents violates due process in that the section was not interpreted to apply to respondents' conduct until after their letter was sent. It pleaded, further, in mitigation, their assumption based on advice of counsel that their mailing was a permissible form of lawyer advertising.
Respondents then moved to refer the issues raised by the pleadings for a hearing. The Appellate Division denied that motion and found respondents guilty of misconduct but, noting that the letters were sent prior to the Appellate Division decision in Greene and in apparent good faith reliance on Bates v State Bar of Ariz. ( 433 U.S. 350), determined that no sanction should be imposed ( 88 A.D.2d 1089). Respondents' appeal to our court was dismissed ( 58 N.Y.2d 689) for want of a substantial constitutional question, but, as already noted, the Supreme Court thereafter granted respondents' petition for certiorari, vacated our order and remanded for further consideration (460 US ___, 103 S Ct 1763).
Other than denial of the legal conclusion that they were guilty of misconduct, respondents denied only the allegation of specification 2 that "The intent of said letter was to solicit real estate closings through the realtors of prospective purchasers and sellers of real property". The intent of the letter is, however, a matter of interpretation of its words in light of the circumstances of its transmission. For the reasons stated in Matter of Greene ( 54 N.Y.2d 118, 126), we agree that the necessary implication of transmittal of the letter to real estate brokers was to have clients of the brokers referred to respondents for legal work. We agree with the Appellate Division, therefore, that no hearing was required.
Respondents now characterize our construction of the governing statute and disciplinary rule in Matter of Greene as a ban on all third-party mailings by attorneys and argue that what is regulated is the content rather than the manner of speech, which under R.M.J. is permissible only "where the particular advertising is inherently likely to deceive or where the record indicates that a particular form or method of advertising has in fact been deceptive" (455 US, at p 202). They suggest, further, that because Greene was decided after their letter was mailed, their due process right to specificity in the statute controlling their advertising activity has been violated. In our view the first argument misconstrues both our Greene decision and the scope of the Supreme Court's holding in Matter of R.M.J., and the second overlooks Supreme Court First Amendment cases decided prior to respondents' mailing as well as governing due process law.
II
Phrased as it is in terms of deception, the first argument all but ignores the crux of the holding in Greene which was that there is "a substantial governmental interest in preventing conflicts of interest in attorney-client relationships which the statute directly protects and for which there is no adequately protective less restrictive alternative." (54 N.Y.2d, at p 127.) That holding was supported by citations to Matter of Primus ( 436 U.S. 412), Ohralick v Ohio State Bar Assn. ( 436 U.S. 447), N.A.A.C.P. v Button ( 371 U.S. 415) and Mine Workers v Illinois Bar Assn. ( 389 U.S. 217), all of which establish the substantiality and propriety of the interest. It was, moreover, pointed out that although the potential for conflict had played a part in sustaining a limitation on speech only in Ohralick, the other cases had turned on the broader protection afforded associational activity or, as in Primus, "political expression and association," in the context of which "a State must regulate with significantly greater precision" (436 US, at p 438). Here, of course, neither political expression nor associational activity is involved.
Additional references in Primus to conflict of interest, as well as misrepresentation, as properly subject to governmental control, will be found at pages 426, 432 and 437.
That the R.M.J. opinion speaks in terms of deception and makes no mention of conflict of interest is not surprising, conflict of interest being totally unrelated to the advertising under consideration in that case. To read R.M.J. as restricting to deception the activity that may be controlled is, however, to attribute to the court the unlikely intent to overrule Primus, N.A.A.C.P. and Mine Workers sub silentio and to ignore entirely the citation in the R.M.J. opinion of Ohralick (455 US, at p 202).
Nor can it properly be said that the regulation is of all third-party mailings. The Greene opinion expressly limited its "ruling to third-party mailings to brokers" (54 N.Y.2d, at p 126). Although it also noted that the regulation was of "all third-party mailings, not just mailings to brokers" ( id.), that statement must be read in its context, which limits it to third-party mailings involving a conflict of interest. Thus, the regulation was held to be of manner rather than content because of the " detriment to society in the potential conflict of interest that may be generated when those in need of legal services are approached indirectly through a broker" ( id.; emphasis supplied), and the associational activity cases were distinguished on the basis of "the absence of monetary stakes for the union or other community group" ( id., at p 128), without which there would be no significant danger of conflict or overreaching ( Woll v Attorney Gen., 409 Mich. 500, 550, on remand 116 Mich. App. 791; see Matter of Primus, 436 US, supra, at pp 429-431).
Unlike the statute involved in Bolger v Youngs Drug Prods. Corp. (463 US ___, 103 S Ct 2875), which prohibited the mailing of unsolicited advertisements for contraceptives, the regulatory provisions here in issue, as limited by our holdings in Matter of Koffler ( 51 N.Y.2d 140) and Matter of Greene ( supra), impose no general ban upon all mailings by attorneys to others than potential clients. What is proscribed is mailing to that limited number of third persons who themselves may have dealings with potential clients of the attorney from which a conflict of interest may result. Wholly unrelated to the content of the letter, the proscription is not against the attorney making known to potential clients the availability of his services or even against his doing so through third parties, but against his doing so in a particular manner: through a third party whose interests may be more closely intertwined with those of the attorney than with those of the client. But the proscription would not foreclose a solicitation such as those involved in the N.A.A.C.P., Mine Workers and Primus cases, all supra (see, also, Ann., 5 ALR4th 866, 877), because such a solicitation presents no potential for conflict of interest. For like reason the fact that a title company remains free to solicit referral business from real estate brokers is simply irrelevant.
See Schaumburg v Citizens For Better Environment ( 444 U.S. 620, 637-638, n 11) pointing out that charitable solicitation because not so inherently conducive to fraud and overreaching as is attorney solicitation could not be prohibited. For like reason the fact, noted in footnote 2 of Chief Judge COOKE's dissent, that there is no proscription against an attorney representing a client referred by a broker, does not invalidate the regulation under consideration. The potential for conflict is substantially greater when it is the lawyer who seeks client referrals from the broker than when the broker, unsolicited, refers a client to an attorney.
To the extent that the argument raises equal protection clause objections, as respondents' citation of Carey v Brown ( 447 U.S. 455) and Police Dept. of Chicago v Mosley ( 408 U.S. 92) suggests, the issue is not properly before us, respondents' answer having raised only free speech and due process defenses.
Nor do we read R.M.J. as invalidating the proscription as thus defined, as the dissents suggest, because it concerns a potential rather than an actual conflict or specific detriment to a particular client. The Supreme Court held in Ohralick ( supra), that where a lawyer's exercise of judgment on behalf of his client may be clouded by his own pecuniary self-interest and the transaction is not visible or open to public scrutiny, or otherwise subject to effective oversight, the State may constitutionally impose a prophylactic measure whose objective is the prevention of harm before it occurs (436 US, at pp 461, 464-467; see, also, Matter of Primus, 436 US, at p 434). Far from repudiating that concept, the court in Matter of R.M.J. noted that in Ohralick "the Court held that the possibility of `fraud, undue influence, intimidation, overreaching, and other forms of "vexatious conduct"' was so likely in the context of in-person solicitation, that such solicitation could be prohibited" (455 US, at p 202 [emphasis supplied]). We have spelled out in Matter of Greene (54 N.Y.2d, at p 129), and need not now repeat, how the prohibition of third-party mailings by attorneys to recipients whose client-referrals may involve the recipient and the attorney in a conflict detrimental to the interests of the client relates to the governmental interest, and why it is not more extensive than necessary to serve that interest. We add only, in light of respondents' suggestion that even a client-referral based on social contact may involve a conflict of interest, that it is not unreasonable for the State to conclude that broker-referrals will more often than not result in conflict but that social-referrals are not inherently conducive of conflict ( Ohralick v Ohio State Bar Assn., 436 US, at p 466; Schaumburg v Citizens For Better Environment, 444 U.S. 620, 637-638, n 11).
III
Although respondents have a right to fair notice of the acts for which they can be punished, they had notice from section 479 of the Judiciary Law and DR 2-103 (A) of the Code of Professional Responsibility that all solicitation of legal business was proscribed and, as we noted in Matter of Greene (54 N.Y.2d, at p 124), those provisions remain in effect except as they infringe upon constitutionally protected free speech. True, respondents did not have the benefit of either Matter of Koffler ( 51 N.Y.2d 140, supra) or Matter of Greene ( 54 N.Y.2d 118, supra) before their letter was sent, but they were then chargeable with knowledge from Ohralick and Primus, both decided by the Supreme Court on May 30, 1978, and its earlier decisions in N.A.A.C.P. and Mine Workers, that the constitutional invalidity of section 479 did not necessarily extend to solicitation involving personal contact and the potential for conflict of interest.
In the light of that knowledge and the long-standing absolute legislative proscription, respondents' fair notice rights were not violated ( People v Epton, 19 N.Y.2d 496, 506, remittitur amd 19 N.Y.2d 1017, app dsmd and cert den 390 U.S. 29, reh den 390 U.S. 976, second reh den 398 U.S. 944; Dombrowski v Pfister, 380 U.S. 479, 491, n 7; see Rose v Locke, 423 U.S. 48; Woll v Attorney Gen., 409 Mich, at p 544). Application of Greene's construction to conduct occurring prior to that construction involves no violation of respondents' due process right when, as is here the case, it is clear that respondents' conduct has been judged not by the legislative standard alone but by that standard as constitutionally limited (see Shuttlesworth v City of Birmingham, 382 U.S. 87, 92).
For the foregoing reasons, the order of the Appellate Division should be affirmed, with costs.
Judges JASEN, JONES, WACHTLER and SIMONS concur with Judge MEYER; Chief Judge COOKE and Judge KAYE dissent and vote to reverse in separate dissenting opinions.
Following remand by the United States Supreme Court and reinstatement of the appeal herein by this court, order affirmed, with costs.
APPENDIX A
Dear Realtor:
We recognize that the costs attendant to the sale or purchase of a home are a real concern to your clients that may indeed influence whether a transaction will even take place. The Legal Clinics of Cawley and Schmidt will handle all aspects (buy or sell) of residential real estate transfers at the following affordable attorney's fees:
1. Where purchase price is $30,000.00 or more $295.00 2. Where purchase price is $20,000.00 or more, but under $30,000.00 215.00 3. Where purchase price is under $20,000.00 175.00 These fees are of course exclusive of Seller's disbursements, such as the cost of the search continuation, survey redate, N YS. Transfer Tax Stamps, Recording/filing fees and Broker's Commissions, and, Purchaser's expenses, such as Recording/filing fees, Mortgage Tax and Bank attorney's fees.Contact us for more information during our convenient office hours;
Monday/Wednesday/Friday 9 AM — 5 PM Tuesday/Thursday 9 AM — 9 PM Saturday 9 AM — Noon Very truly yours,I respectfully dissent. A per se prohibition of direct-mail lawyer advertising to real estate brokers cannot be sustained under the First Amendment free speech clause, particularly in view of the Supreme Court's instruction in this case to reconsider the rule embraced in Matter of Greene ( 54 N.Y.2d 118) in light of its decision in Matter of R.M.J. ( 455 U.S. 191).
The majority reasons that direct-mail advertisement of legal services to real estate brokers, regardless of how it is framed, necessarily involves a request by the attorney to the broker to solicit the latter's prospect to employ the advertising attorney's services (see Matter of Greene, supra, at p 126). This, in turn, gives rise to an attorney's potential conflict of interest between the client and the referring broker. This conflict is said to manifest itself and cause injury to the client through "[t]he possibility that the lawyer's view of marketability of title may be colored by his knowledge that the referring broker normally will receive no commission unless title closes, the improbability that the attorney will negotiate to the lowest possible level the commission to be paid to the broker who is an important source of business for him (or suggest to the client that he do so), [and] the probability that the lawyer will not examine with the same independence that he otherwise would the puffery that the broker has indulged in to bring about the sale" ( id., at p 129). In the majority's view, the appropriate means to obviate these potential harms is an absolute ban on direct-mail lawyer advertising to real estate brokers.
This restriction on the attorney's constitutional right to advertise (see Matter of R.M.J., 455 U.S. 191, supra; Bates v State Bar of Ariz., 433 U.S. 350; Matter of Koffler, 51 N.Y.2d 140) is characterized as a reasonable time, place, and manner restriction, rather than a content-based restriction (at pp 234-235; Matter of Greene, 54 N.Y.2d, at pp 126-127) because "[w]holly unrelated to the content of the letter, the proscription is not against the attorney making known to potential clients the availability of his services or even against his doing so through third parties, but against his doing so in a particular manner: through a third party whose interests may be more closely intertwined with those of the attorney than with those of the client." (At pp 234-235.) As a mere restriction on the manner of speech, the majority argues that the regulation may be sustained under the First Amendment because an attorney has effective alternative means of advertising and the regulation is rationally related to the advancement of the State's interest in protecting clients against retaining attorneys with a conflict of interest (at pp 235-236; Matter of Greene, supra, at pp 126-127).
The majority's analysis errs in fundamental respects.
It is true that the State may place restrictions on the time, place, and manner of protected speech so long as such a restriction is reasonable (see Consolidated Edison v Public Serv. Comm., 447 U.S. 530, 536). To be considered a time, place, or manner restriction, however, a restriction "must be `applicable to all speech irrespective of content'" ( id., quoting Erznoznik v City of Jacksonville, 422 U.S. 205, 209). Thus, the government may regulate how, when, or where a message is delivered, but only without reference to the message's substance (see Grayned v City of Rockford, 408 U.S. 104, 115; Cox v Louisiana, 379 U.S. 536, 554). For example, the State may restrict large street demonstrations to times other than rush hour as a reasonable time and place regulation stemming from its interest in public safety and order (see Cox v Louisiana, supra). Similarly, the State, as a reasonable restriction on the manner of speech, may require that the use of "overamplified loudspeakers" be modulated to protect its interest in public peace (see Grayned v City of Rockford, 408 U.S. 104, 116, supra; Kovacs v Cooper, 336 U.S. 77, 87). Such regulations, to be enforceable, must be, as mentioned, neutral in terms of the content of speech, and "must be narrowly tailored to further the State's legitimate interest" ( Grayned v City of Rockford, supra, at pp 116-117).
Time, place, or manner regulations are evaluated under a less rigorous standard than content-based restrictions (see Linmark Assoc. v Willingboro, 431 U.S. 85, 93). If the former is reasonable, and rationally related to a legitimate State interest, it will be upheld so long as there exist effective alternate means of communication (see Virginia Pharmacy Bd. v Virginia Consumer Council, 425 U.S. 748, 771). For a content-based restriction to be sustained, at least with respect to protected, nonmisleading commercial speech, the State must assert a substantial State interest and the restriction may extend only in proportion to the degree the interest is served (see Matter of R.M.J., supra; Central Hudson Gas Elec. v Public Serv. Comm., 447 U.S. 557, 566). Moreover, the State must show that there are no less-restrictive means of regulation ( Central Hudson Gas Elec. v Public Serv. Comm., supra, at p 566).
Content-based restrictions on noncommercial speech will be sustained "only in the most extraordinary circumstances" ( Bolger v Youngs Drug Prods. Corp., 463 US ___, ___, 103 S Ct 2875, 2879 [n omitted]).
When the State seeks to restrict the time, place, or manner of speech with reference to a particular type of message such a regulation has been held to be an attempt to control content (see Consolidated Edison v Public Serv. Comm., 447 US, supra, at p 537; Erznoznik v City of Jacksonville, 422 US, supra, at p 209; Police Dept. of Chicago v Mosley, 408 U.S. 92, 95). For example, regulations have been struck down as content-based restrictions when they prohibited placing "For Sale" signs on residential property but not signs with other messages (see Linmark Assoc. v Willingboro, 431 U.S. 85, 93-94, supra), prohibited exhibiting movies that are visible from a public street only when the movie contains nudity ( Erznoznik v City of Jacksonville, supra), and prohibited inserting messages in utility bills only when the insert addresses a controversial public issue ( Consolidated Edison v Public Serv. Comm., supra).
In analyzing the present case, certain basic factors are noted. The subject regulation is plainly content-based. Although, indeed, it regulates a manner of speech, the regulation is not, as the majority contends, "[w]holly unrelated" to the speech's content. The restriction is invoked solely by reason of the message's nature — attorney advertising. "That the proscription applies only to one mode of communication * * * does not transform this into a `time, place, or manner' case" ( Linmark Assoc. v Willingboro, supra, at p 94).
Moreover, there is no claim here that the advertisement was false or misleading. The message itself was not unlawful. The court is concerned here only with whether a lawyer's protected right to advertise may be restricted by an absolute ban on direct-mail advertising to real estate brokers.
For the regulation to be consistent with First Amendment protections, "the State must assert a substantial interest and the interference with speech must be in proportion to the interest served. Restrictions must be narrowly drawn, and the State lawfully may regulate only to the extent regulation furthers the State's substantial interest" ( Matter of R.M.J., 455 U.S. 191, 203, supra [citation and n omitted]). It may be assumed that the State's interest in protecting individuals from retaining attorneys with conflicts of interest is substantial. The issue, therefore, narrows to whether the regulation may be said to reasonably advance this interest and, if so, whether the degree to which the interest is advanced justifies the interference with petitioner's First Amendment right to advertise.
The State has not established that the problem asserted actually exists or that it has attempted to control the problem through less restrictive means that have failed (cf. Matter of R.M.J., supra, at p 206). This concept that the regulation of lawyer advertising must be related to a State interest and should proceed on a least restrictive path is the import of the Supreme Court's decision in Matter of R.M.J. ( supra). It is true, as the majority points out, that much of that case involved questions of whether the ethical rules of the Supreme Court of Missouri that regulate lawyer advertising were a proper means of protecting against potentially deceptive advertising. But many of the rules prohibited absolutely the inclusion of certain information in advertising (see Matter of R.M.J., supra, at pp 193-195). And, in each instance, the rigid formulation of the State rules were found not sufficiently related to the interests of the State to be upheld ( id., at pp 205-206). Of particular relevance to this appeal was the court's review of a rule that permitted the mailing of professional announcement cards only to "lawyers, clients, former clients, personal friends, and relatives" ( id., at p 196). The court would not sustain the rule because no interest or established problem was proffered to justify the limitation, and even assuming any interest existed, there was no indication that that problem could not be attended in a less restrictive means.
The blunt conclusion that all direct-mail lawyer advertisements to brokers necessarily pose a grave potential threat that, in the event that a referral results from the advertisement, the lawyer will not act in the best interests of the client is unsubstantiated. Similarly, the assertion that the complete prohibition of direct-mailings to brokers will mitigate conflicts of interest not otherwise deterred is unrealistic. These points are self-evident and have been made before (see Matter of Greene, 54 N.Y.2d 118, 133-135, supra [FUCHSBERG, J., dissenting]). It need only be reiterated here that the rule announced in Matter of Greene ( supra) and reaffirmed in this appeal does not advance any substantial State interest.
It is noteworthy that, as a general matter, attorneys need not decline to represent a client who has been referred by a broker (see, generally, DR 2-105, DR 2-109, DR 5-101) nor are they proscribed from placing nonmisleading advertisements in publications whose primary readership may be real estate brokers (see, generally, DR 2-100 — 2-101).
In any event, the rule as drawn interferes with free speech disproportionately to the interest it purportedly furthers. In the present case, the ban on direct-mail advertisements to brokers is complete. It is imposed irrespective of whether the intent of the advertisement, as indicated by its text, is to seek the referral of clients or is merely to give notice of the availability of the lawyer's services (at p 232, n 1; Matter of Greene, 54 N.Y.2d 118, 126, supra). In the majority's view, the lawyer's request for referral is a "necessary implication" of any advertisement sent to a broker, whether it be a mere notice of the opening of a law office (see Matter of R.M.J., 455 US, at p 206) or a neutral statement of the services provided by a law office or lawyer. To the extent that the rule does not differentiate between (1) advertisements that relate solely to disseminating neutral information and (2) advertisements that intimate that the broker should intercede as an intermediary and actively solicit on behalf of the lawyer, it constitutes an unjustified imposition on a lawyer's right to advertise (see Matter of R.M.J., supra; Matter of Primus, 436 U.S. 412, supra; Bates v State Bar of Ariz., 433 U.S. 350, supra). Moreover, any asserted interest in mitigating potential conflicts of interest in the attorney-client relationship would be as adequately served by the less restrictive means of, for example, reviewing mailings to brokers to ensure they do not include such intimations (see Matter of R.M.J., supra; Central Hudson Gas Elec. v Public Serv. Comm., 447 U.S. 557, 566, supra).
Accordingly, the order of the Appellate Division should be reversed and the petition dismissed.
Advertising by attorneys may be regulated only where the advertising in question is inherently deceptive, or where there is a finding that a particular method of advertising has in fact been deceptive or subject to abuse. ( Matter of R.M.J., 455 U.S. 191, 202-203.) Here, there is no contention that respondents' advertising is inherently deceptive or misleading. The clear direction of R.M.J. is that, in such situations, prohibition of advertising can be sustained only when the record establishes that the method of advertising is in fact misleading or subject to abuse (455 US, at p 207).
There is no finding that respondents' method of advertising is in fact misleading or subject to abuse. On this point, the majority states only that the predicate for the prohibition of respondents' advertising was spelled out in Matter of Greene ( 54 N.Y.2d 118). But there is no finding in Greene that this method of advertising is in fact misleading or subject to abuse. The decision in Greene to prohibit such advertising was based on the possibility that the lawyer's view of marketability of title may be colored, the improbability that the attorney will negotiate the lowest possible broker's commission, and the probability that the lawyer will not examine the broker's puffery with the independence he otherwise would (54 N.Y.2d, at p 129). It is clear from R.M.J. that prohibition of attorney advertising cannot be founded on such hypothesis.
Since the ban imposed on respondents' advertising lacks any factual predicate, there is no need to reach the questions of whether it should be characterized as one of form or content, or whether some less restrictive alternative would address the imagined potential for conflict.