Did taxpayers just fund a lawyer advertising boom?
By Daniel Fisher
Plaintiff law firms that accepted federal aid under the Paycheck Protection Program appear to have recycled at least some of the money into advertising designed to recruit clients to sue other businesses over the COVID-19 crisis.
After falling in February of this year, lawyer advertising is believed to have surged in March and nearly doubled by May to above 2019 levels, even as some of the nation’s richest law firms told the government they needed as much as $100 million in loans to preserve jobs during the pandemic.
One of the most prolific borrowers was Morgan & Morgan, a Florida personal injury law firm that applied for $12 million to $27 million in loans through offices in five states, ostensibly to support some 1,400 jobs. The loans become forgivable grants if spent on payroll, rent and other specified expenses.
At the same time as it apparently received the federal loans, Morgan & Morgan boosted its advertising from an estimated $50,000 a day to over $300,000 a day, according to Deep Root Analytics, which tracks advertising spending.
Morgan & Morgan didn’t respond to an e-mailed request for comment. A person who answered the firm’s phone said email is the only point of contact for media inquiries. Morgan & Morgan’s PPP loan data is publicly available through the Treasury Dept. and compiled by outside entities including PPPReport.org.
Morgan & Morgan founder John Morgan and his wife Ultima, also a partner, are considered some of Florida’s richest residents with a net worth of $500 million. The firm is estimated by Deep Root to have spent some $14 million on coronavirus-related advertising so far this year, including more than 45,000 advertising spots in 25 markets that were seen almost 700 million times. In addition to having a lead role in opioid litigation, the firm advertises for car accidents, slip-and-fall injuries, air crashes and birth injuries.
Law firms nationally spent $9.5 million on the subcategory of mass tort advertisements in February, increasing that spending to $15 million in April and $17.1 million in May, according to X Ante, which analyzes legal ad spending using Kantar CMAG data. That was a substantial increase from the $15.8 million law firms spent on mass tort ads in May of 2019, X Ante said. The increase in spending belies the image of an industry in financial distress.
Many of the nation’s most powerful law firms availed themselves of federal aid including most of the firms in charge of litigation against the opioid industry, which almost certainly will result in several billion dollars in fees. Motley Rice borrowed $5-10 million, Lieff Cabraser borrowed $2-5 million, Cohen Milstein borrowed $2-5 million, Labaton Sucharow borrowed $2-5 million and McKool Smith borrowed $5-10 million.
The borrowing angers some critics including competitors who say lawyers who operate on the contingency fee model should have the financial resources to weather a temporary disruption in courtroom activity. Some of the borrowers, including Motley Rice and Lieff Cabraser, were involved in the $260 billion tobacco settlement in 1998 that produced $14 billion in fees that are still being paid out at a rate of $500 million a year.
The money these firms obtain in forgivable loans likely replaces funding they would otherwise draw from their own retained earnings or more expensive sources of outside finance, providing a potential profit windfall for partners.