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Constitutionality of in-person solicitation.

Nearly 30 years ago, John L. Carey and William O. Doherty, in Ethical Standards of the Accounting Profession, confidently asserted that "the general prohibition against advertising is accepted today without much question. To be sure, there is nothing illegal or immoral about advertising as such, but it is almost universally regarded as unprofessional."

Carey and Doherty argued there were many sound reasons to prohibit advertising. For example, contrary to common belief, the young or unestablished CPA would not benefit from it because "the well-established firms could afford to advertise on a scale that would throw the young practitioner wholly in the shade." For many years, the AICPA Code of Professional Ethics generally prohibited advertising without many exceptions.

Currently, Rule 502--Advertising and Other Forms of Solicitation of the AICPA code generally permits advertising and other forms of solicitation with the qualification it not be false, misleading or deceptive. However, some states and boards of accountancy have taken a more restrictive view, prohibiting "direct, in-person, uninvited solicitation of a specific potential client," including "uninvited in-person visits or conversations or telephone calls to a specific potential client" (Florida Statutes [1989] sec. 473.323[1][1]).

Recently, the U.S. Court of Appeals for the Eleventh Circuit and the District Court of Appeals of Florida were asked to determine the constitutionality of that state's prohibition. The two courts, confronting virtually identical situations and applying the same legal principles, reached diametrically opposite conclusions. The issue was resolved by the U.S. Supreme Court.

THE FLORIDA CONFLICT

In State of Florida v. Rampell, the district court of appeals reasoned that "the State has an interest in preventing |vexatious' conduct which may include uninvited solicitations intruding on the right of privacy of both individuals and businesses in the State. Whether the solicitation is by a lawyer or a CPA, pressure can be exerted on a potential client to make a hasty and uninformed decision. While CPAs may not be trained in the art of persuasion, they are trained in the intricacies of taxes and financial statements [that] even the most sophisticated client finds confusing.... It is the possibility of harmful solicitation and the knowledge that--whether by the door-to-door salesman [sic], the attorney or the CPA--all in-person solicitation is particularly susceptible to abuse [that] allows the State to regulate such conduct."

In the second Florida case, the Eleventh Circuit Court, applying the same standards, found the in-person solicitation statute unconstitutional (Fane v. Edenfield, 945 F.2d 1514 [11th Cir. 1991]). Stating "blanket prohibitions on commercial speech are disfavored," it added that the possibility "isolated abuses or mistakes may occur" did not justify a ban on a type of commercial speech, and that in-person solicitation by CPAs was lawful and not misleading. It said Florida had a substantial interest in regulating the accounting profession but a ban on in-person solicitation did not directly advance that interest and found that, in any event, the statute was too broad and unduly restrictive.

The court said the state board of accountancy had offered no evidence a CPA was likely to engage in dishonest or oppressive conduct during a solicitation. Although prohibitions against in-person solicitation by lawyers and funeral home directors have been upheld in other cases, the court in this case said that CPAs did not have the opportunity to intrude in times of tragedy and great emotional distress.

The court rejected the Florida board's argument that a general prohibition was necessary to assure the public of an independent and objective attest function. It noted that many CPAs did not perform the attest function and, since the Florida board sought a general ban to promote the public's confidence in that function, the board's goal and its remedy were improper. The board also failed to persuade the court that in-person solicitation was impossible to regulate and that a general proscription was, therefore, necessary to protect the public.

According to the court, there already were other valid methods to limit any misconduct arising out of in-person solicitation, including statutes that require CPAs to exercise independent judgment, prohibitions against fraudulent or deceptive conduct and the possibility of negligence that could give rise to tort liability. It acknowledged that restrictions on in-person solicitation might be reasonable if limited to appropriate bounds of time, place and manner but did not suggest what they might be.

THE SUPREME COURT DECISION

The Supreme Court, in an eight-to-one decision, reiterated the reasoning and conclusion of the Eleventh Circuit Court of Appeals against Florida's prohibition of in-person solicitation. The high court's decision permits accountants to solicit in person as long as the solicitation is not false, misleading or deceptive, which is consistent with the AICPA Code of Professional Ethics.

While the Court found a substantial state interest in regulating in-person solicitation, it did not believe the Florida board's broad rule advanced that interest (113 S.Ct. at 1797-98). Specifically, the Supreme Court found a dearth of evidence to support the claim of inherent harm in in-person solicitation. The Court supported its position with, among other evidence, an AICPA study, Report of the Special Committee on Solicitation (1981), which reported its authors were "unaware of the existence of any empirical data supporting the theories that CPAs (a) are not independent of clients obtained by direct uninvited solicitation or (b) do not maintain their independence in mental attitude toward those clients subjected to direct uninvited solicitation by another CPA."

ANOTHER TOOL

The practice of public accounting clearly has changed substantially during the decades since Carey and Doherty wrote on ethical standards. CPAs now sanction and apply a wide variety of practice development techniques that once were unheard of in the profession. The Supreme Court decision in Edenfield clarifies that in-person solicitation is a permissible practice-expansion method for CPAs as long as the communications are not false, misleading or deceptive.

EXECUTIVE SUMMARY

* ALTHOUGH MANY MARKETING techniques once were considered unacceptable for practitioners, advertising and other forms of solicitation now are generally permitted.

* SOME STATES, however, have prohibited in-person solicitation by CPAs. After two Florida courts reached diametrically opposite conclusions on the constitutionality of this prohibition, the issue was resolved by the U.S. Supreme Court.

* THE HIGH COURT, in a decision that may affect how CPAs develop their practices, sanctioned in-person solicitation by CPAs as long as it is not false, misleading or deceptive.

CHAUNCEY M. DePREE, JR., DBA, is associate professor at the School of Professional Accountancy, University of Southern Mississippi, Hattiesburg. REBECCA KATHRYN JUDE, JD, is an attorney with Bryan, Nelson, Randolph, Land and Weathers, Hattiesburg.
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Title Annotation:State of Florida v. Rampell and Fane v. Edenfield
Author:Jude, Rebecca Kathryn
Publication:Journal of Accountancy
Date:Sep 1, 1993
Words:1084
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