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What's in a name? On the letterhead.

Over the last 15 years, the United States Supreme Court has issued a series of decisions that has brought about significant changes in the way members of professions, including accounting, can advise the public of their availability and special qualifications.

In 1976, the Supreme Court held that the First Amendment to the United States Constitution guaranteeing freedom of speech applied to commercial speech -- that is, speech directed to potential purchasers of goods and services urging them to avail themselves of such goods and services. [1] The Court ruled that it was proper for federal and state regulatory authorities to prohibit or attack commercial speech that was deceptive or misleading but that total prohibition of such commercial speech on the grounds that it was "unprofessional" for physicians, lawyers, engineers or other professionals to advertise the availability of their services was unconstitutional.

Because many regulatory bodies, especially those governing the licensed occupations, had a long history of total prohibitions or severe restrictions on the use of commercial speech by their members, it was not surprising that this decision was followed by a number of other cases in which efforts to define exactly what speech was "misleading or deceptive" and therefore not protected by the First Amendment were undertaken.

These decisions had significance for accountants, and especially for non-licensed accountants. They raised the question of whether efforts to prohibit the use of terms such as "accountant," "accounting services" or "accounting" and similar phrases by non-licensed accountants were valid under the Supreme Court's decisions.

This issue is currently being fought in the legislatures and courts of various states. Those supporting such restrictions assert that use of the terms will cause people to believe that non-licensed accountants using them are CPAs; those attacking restrictions on use of the terms contend that such phrases are truthful descriptions of lawful services provided by non-licensed accountants and are therefore protected by the First Amendment.

The most significant pending court matter in this area is probably the Moore case in California2 in which a state intermediate appellate court ruled that total prohibitions of the use of "accountant" and similar terms by non-licensed accountants were invalid. The court determined that these terms could be used if they were qualified by a waiver or disclaimer that avoids their misleading nature." The case, in which the California Association of Independent Accountants is a party and the National Society of Public Accountants has filed an amicus (that is, friend of the court") brief,' has been granted review by the California Supreme Court.

The most recent decision of the United States Supreme Court concerning the use of titles and the degree to which their use may be constitutionally protected is the Peel case,' decided by the Supreme Court earlier this year. At issue in this case was the legality of an effort by the bar authorities of Illinois to prohibit the use of language on an attorney's letterhead denoting the attorney as a "certified civil trial specialist" by the National Board of Trial Examiners. The bar authorities contended that this language was in violation of a specific section of the Illinois Code of Professional Responsibility, applicable to attorneys licensed in the state, which prohibits representations of certification by a lawyer. Interestingly, the Federal Trade Commission (FTC), the federal agency primarily responsible for regulating false or unfair advertising, filed an amicus brief in which it took the position that the challenged words on the lawyer's letterhead were entitled to First Amendment protection as truthful commercial speech.

The Illinois bar authorities contended that their attack on the letterhead statement was justified under the law governing commercial speech because such references to certification are "inherently misleading" even when there is no question about their truthfulness. Indeed, the trial court in the Peel decision determined that there was no dispute about either the good faith of Peel's use of the challenged language or the relevance of the certification in question.

The challenged letterhead specifically read "Gary E. Peel, Certified Civil Trial Specialist by the National Board of Trial Advocacy, Licensed: Illinois, Missouri, Arizona." The Illinois Supreme Court ruled that this letterhead was not protected by the First Amendment because the public might be confused into thinking that the states that had licensed Peel as an attorney were also the source of his certification, rather than the National Board of Trial Advocacy, a private (although highly respected) body. [5] The United States Supreme Court overruled the state Supreme Court, with the majority opinion stating that Peel had a constitutional right to advertise his certification as a trial specialist by NBTA because truthful advertising related to lawful activities is entitled to First Amendment protection. Peel's letterhead was, in the Court's judgment, neither actually nor inherently misleading (there was no evidence whatever of actual deception); it was only "potentially misleading."

Under the Court's analysis, regulatory bodies may prohibit misleading advertising but may not place an absolute prohibition on information that is only "potentially misleading" so long as the information may also be presented in a way that is not deceptive. The apparent reasoning of the Court was that while the National Board of Trial Advocacy may not be a body whose nature is particularly well known or meaningful to consumers, there was no evidence that consumers or potential consumers of legal services were misled or should be considered misled if they simply did not inform themselves of the precise standards for such certifications.

It was important to the Court's decision that nothing presented to it provided any basis for a belief that Peel's letterhead representation would be associated with formal state or other governmental action in the minds of those reading the letterhead. It noted that many private organizations issued certificates and that there was no certainty that the public was able to distinguish such certification from the licensure that comes from the state. Indeed, the two other state supreme courts that had reviewed this question came to an opposite conclusion from the Illinois Supreme Court. They determined that advertisements of NBTA certifications were not misleading and were protected by the First Amendment. [6]

Although the state of Illinois and other regulatory bodies have an interest in avoiding the potential misleading of their citizens by advertisements and letterheads, that interest was not so strong as to justify a total prohibition on such listings. Indeed, Illinois specifically allowed the designations of "registered patent attorney" and "proctor in admiralty" by attorneys on their letterhead, and information of that nature may well be beneficial in advising consumers of lawyer's specialty or particular expertise. The Court did indicate that when a state was truly concerned about consumer confusion, it might either require a disclaimer about a certifying organization or the standards of a specialty without violating the Constitution.

As is often the case, the United States Supreme Court was not unanimous in this decision. justice Marshall wrote a separate concerning opinion, joined by justice Brennan (who has since resigned from the Court) stating that while the

letterhead was neither actually nor inherently misleading they agreed with the majority that it was potentially misleading and therefore they would have allowed the state to enact some regulation short of a total ban (such as qualifying language concerning the nature of the certification). justices Marshall and Brennan accepted the argument that consumers might confuse the licensure by state authorities with certification from private bodies.

Two separate dissenting opinions were filed - one by justice White, who also agreed that the letterhead was only potentially misleading but believed that it was the responsibility of attorney Peel to eliminate that potentiality and, in the absence of such action by Peel, the Illinois prohibition should be allowed to stand. A dissenting opinion by justice O'Connor, joined by Chief justice Rehnquist and justice Scalia, took the position that the letterhead was not just potentially misleading but inherently misleading and therefore subject to regulation.

Some legal analysts and commentators believe that it would be unwise to place too much emphasis on the Peel decision. [7] With four justices believing the First Amendment protected the letterhead completely even though it was potentially misleading, two justices believing that because it was potentially misleading it was therefore subject to some qualification or clarification, and three justices believing that the letterhead was inherently misleading, the overall result of a 5-4 majority of the court in favor of truthful notations of certification or specialization on a letterhead was the closest possible division of the nine justices (although six of the justices agreed that the material at issue was not inherently misleading). Moreover, justice Brennan has already been replaced and it seems likely that at least one other justice will be stepping down, due to age or health, in the near future. It is hazardous indeed to predict the future decisions of any court, and this is especially true of the United States Supreme Court which is as much a policy-making body as it is a traditional adjudicative one.

Nonetheless, it would be consistent with the Court's historic approach for it to reaffirm the fundamental holding of Peel--that the letterhead listing of a specialty was truthful commercial speech entitled to First Amendment protection, especially since that holding is consistent with a number of other cases preceding it - rather than to reverse it. However, the changing composition of the Court could lead to efforts to distinguish Peel from apparently similar situations that may come before the Court in the future. For the time being, the law of the land is that truthful representations by an attorney of his or her specialty or certification is entitled to constitutional protection. Past decisions indicate that rulings about the commercial speech of attorneys are likely to be given serious consideration for application to similar situations involving practitioners of other professions.

The Peel decision, therefore, gives increased strength to the argument that absolute prohibition of the use of the term "accountant" and similar terms by non-licensed accountants violates the constitutional rights of non-licensed accountants to indicate the services that they may lawfully provide to the public. At the very least, it would seem to place a greater burden on those who claim that the use of such phrases misleads the public into believing that non-licensed accountants are CPAs to present some evidence of public opinion in support of that proposition.

Of course, these issues are not exactly the same as those faced by the United States Supreme Court in the Peel case. Therefore, the decision does not, in and of itself, render prohibition of "accounting" and similar terms by non-licensed accountants unconstitutional or otherwise illegal. Unless or until there is a specific pronouncement by the United States Supreme Court on that precise question, this issue will be decided in the individual states based on the facts and records established there.

Nonetheless, the Peel decision should be heartening to all those who believe that the First Amendment prevents regulatory authorities from imposing a total prohibition on the use of "accountant" and related terms by non-licensed accountants offering their services to the public. The battle is far from over, but Peel has provided those taking that position with new ammunition to battle such absolute laws.


1 Virginia State Bar Board of Pharmacy v. Virginia Citizens Consumer Council Inc., 425 U.S. 478 (1976).

2 Moore v. California State Board of Accountancy, Cal. App. (1st Dist.) No. A046979, decided August 1, 1990.

3 In the interest of full disclosure, I note here that I was the co-author (with William Sager, Legal Counsel to NSPA) of that amicus brief.

4 Peel v. Attorney Registration, Etc. of Illinois, U.S. Supreme Court No. 88-1775, decided June 4, 1990.

5 126 Ill. 397, 534 N.E.2d 980.

6 Those two states were Minnesota and Alabama. Johnson v. Director of Professional Responsibility, 341 N.W.2d 282 (Minn. 1983); Ex Parte Howell, 487 So. 2d 848 (Ala. 1986).

7 See, for example, the remarks of David Ostrone in "Peel Decision Analysis" in the July-Sept. 1990 issue of The Attorney-CPA (p. 1).

Gerald J. Thain is associate dean and professor of law at the University of Wisconsin Law School. He held positions in the U.S. Air Force Judge Advocate's Corps, in the General Counsel's Office of the Federal Trade Commission, as Director of National Advertising Practices for the FTC and special assistant (on advertising) to FTC's director of ythe Bureau of consumer Protection. a graduate of the University of Iowa, he holds BA and JD degrees. He is a member of the Wisconsin and Iowa Bars, admitted to practice before the United States supreme Court, and a member of the american Law Institute. He has served as a consultant to NSPA on several over the years, often submitting briefs and documents in legal proceedings, including an amicus brief in the Moore case, discussed in this article.
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Title Annotation:legal aspects of terms and phrases used by accountants
Author:Thain, Gerald J.
Publication:The National Public Accountant
Date:Jan 1, 1991
Previous Article:TRA '86 -- its impact on tax practitioners.
Next Article:Tax strategies for corporations.

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