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Referral Fees

 
 
gollum
 
Reply Sun 19 Jul, 2009 01:43 pm
If a lawyer refers business to another lawyer or to a CPA, is he or she permitted to charge a referral fee?
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Type: Question • Score: 2 • Views: 4,160 • Replies: 14
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jespah
 
  1  
Reply Mon 20 Jul, 2009 03:42 am
@gollum,
A lawyer, yes. It's usually around 1/4 to 1/3. With a CPA, doubtful, I think that's a sharing of fees but I'm sure folk who still practice know that better than I do.
joefromchicago
 
  1  
Reply Mon 20 Jul, 2009 12:13 pm
@jespah,
I believe that's correct. A lawyer can collect a referral fee from another lawyer, but I don't think it's ethical to split fees with a non-lawyer.
Robert Gentel
 
  1  
Reply Mon 20 Jul, 2009 12:23 pm
@joefromchicago,
Why? I don't get why a referral from a lawyer is ethically different from a non-lawyer or why the fee would be.

What am I missing?
joefromchicago
 
  2  
Reply Mon 20 Jul, 2009 12:39 pm
@Robert Gentel,
It all has to do with a lawyer's duty to remain independent. Here's the ABA model rule:

(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:

(1) an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate or to one or more specified persons;

(2) a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may, pursuant to the provisions of Rule 1.17, pay to the estate or other representative of that lawyer the agreed-upon purchase price;

(3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement; and

(4) a lawyer may share court-awarded legal fees with a nonprofit organization that employed, retained or recommended employment of the lawyer in the matter.

COMMENT: [1] The provisions of this Rule express traditional limitations on sharing fees. These limitations are to protect the lawyer's professional independence of judgment. Where someone other than the client pays the lawyer's fee or salary, or recommends employment of the lawyer, that arrangement does not modify the lawyer's obligation to the client. As stated in paragraph (c), such arrangements should not interfere with the lawyer's professional judgment.

[2] This Rule also expresses traditional limitations on permitting a third party to direct or regulate the lawyer's professional judgment in rendering legal services to another. See also Rule 1.8(f) (lawyer may accept compensation from a third party as long as there is no interference with the lawyer's independent professional judgment and the client gives informed consent).
Robert Gentel
 
  1  
Reply Mon 20 Jul, 2009 12:53 pm
@joefromchicago,
joefromchicago wrote:
It all has to do with a lawyer's duty to remain independent.


In order to avoid corruption, conflict of interest, etc? If so, what I don't get is how paying other lawyers is different.

Is it because with other lawyers there is recourse against their license in case of unethical behavior?
joefromchicago
 
  2  
Reply Mon 20 Jul, 2009 12:59 pm
@Robert Gentel,
Well, sorta'. I think it has more to do with the fact that other lawyers also have the same obligations, so that minimizes the danger that fee-splitting won't interfere with the lawyer's independence.

Keep in mind, however, that these ethical rules were often written to justify practices that pre-date the rules. Fee-splitting among lawyers is a well-established tradition, so it's likely that the rule conformed to the practice rather than the other way around. In other words, fee-splitting among lawyers is ethical because that's the way it has always been done, it's not done that way because it's ethical.
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Rockhead
 
  1  
Reply Mon 20 Jul, 2009 12:59 pm
I will dig for the article from a few weeks back, but I was going to start a thread on it then.

A local small county prosecutor was dragging his heels, and the wife of a victim was hot on him to keep moving on the case. (car crash wrongful death)

he told her to pursue it as a civil case and gave her a name.

move forward 3 years or so.

settlement comes in.

prosecutor has a $90,000 thank you from civil attorney included in the split.

lady says no flippin way. (charges were not brought)


thoughts?
joefromchicago
 
  1  
Reply Mon 20 Jul, 2009 01:01 pm
@Rockhead,
I have serious ethical reservations about a public prosecutor getting referral fees in connection with a civil suit.
Rockhead
 
  1  
Reply Mon 20 Jul, 2009 01:27 pm
@joefromchicago,
It struck me wrong as well.

don't think they really wanted it in the papers...

she went public after they told her she had to approve the settlement, and asked her to please reconsider his cut...
0 Replies
 
gollum
 
  1  
Reply Mon 20 Jul, 2009 06:36 pm
I believe the legal profession (guild?) started during the Middle Ages to maximize the income of its members. The subject rule helps achieve that goal.
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Ticomaya
 
  1  
Reply Thu 20 Aug, 2009 08:03 am
@gollum,
The Arizona Ethics Rules for lawyers places a limitation on such fee-splitting between lawyers:

Quote:
ER 1.5. Fees

. . .

(e) A division of a fee between lawyers who are not in the same firm may be made only if:

(1) each lawyer receiving any portion of the fee assumes joint responsibility for the representation;

(2) the client agrees, in a writing signed by the client, to the participation of all the lawyers involved; and

(3) the total fee is reasonable.

gollum
 
  1  
Reply Thu 20 Aug, 2009 05:59 pm
@Ticomaya,
What if Lawyer 1 (the Referrer) refers his client to Lawyer 2 (the Referee)? The client pays the fee rendered by Lawyer 2 who is the only lawyer rendering a service to the client.

May Lawyer 1 charge Lawyer 2 a fee for the referral (i.e., for being a rainmaker)?
joefromchicago
 
  1  
Reply Thu 20 Aug, 2009 09:29 pm
@gollum,
That's exactly how referral fees work.
0 Replies
 
Ticomaya
 
  1  
Reply Thu 20 Aug, 2009 10:18 pm
@gollum,
gollum wrote:
What if Lawyer 1 (the Referrer) refers his client to Lawyer 2 (the Referee)? The client pays the fee rendered by Lawyer 2 who is the only lawyer rendering a service to the client.

May Lawyer 1 charge Lawyer 2 a fee for the referral (i.e., for being a rainmaker)?

In Arizona, the referral may only be paid if Lawyer 1 has assumed joint responsibility for the representation, and the client consents in writing.
0 Replies
 
 

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