Category Archives: Lawyer referral fees

ABA Ethics Opinion provides ethics requirements when lawyer receives an earned fee in which another lawyer has an interest

Hello everyone and welcome to this Ethics Alert which will discuss the recent ABA Formal Ethics Opinion which addresses the ethical requirements when a lawyer receives an earned fee that is subject to a fee sharing arrangement and both lawyers have an interest in the fee.  The opinion is ABA Formal Opinion 475 (December 7, 2016) and is online here: http://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/aba_formal_opinion_475.authcheckdam.pdf.  The opinion discusses the ABA Model Rules which apply when lawyers agree to properly share a fee and one lawyer receives the earned fee.

According to the ABA opinion, “Model Rule 1.5(e) provides for the division of fees between lawyers who are not in the same firm.  A division of a fee “is a single billing to a client covering the fee of two or more lawyers who are not in the same firm.”  Rule 1.5(e) provides that such agreements are permissible only if the division is proportionate to the services performed by each lawyer or both lawyers assume joint responsibility for the representation, the client agrees to the arrangement including the share each lawyer ‘will receive, the arrangement is confirmed in writing, and the total fee is reasonable. Model Rule 1.15(a) provides in pertinent part that a lawyer shall hold property of…third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property.’”

The opinion states that “(t)he receiving lawyer…must, under Rule 1.15(a), deposit the funds in which co-counsel holds an interest in an account (typically a trust account) separate from the lawyer’s own property. Rule 1.15(d) requires the lawyer who receives the earned fees subject to a division agreement to promptly notify the other lawyer who holds an interest in the fee of receipt of the funds, promptly deliver to the other lawyer the agreed upon portion of the fee, and, if requested by the other lawyer, provide a full accounting.”

“Finally, if there is any dispute as to the interest of the receiving lawyer and the lawyer with whom the receiving lawyer is dividing a fee, Rule 1.15(e) requires that the receiving lawyer keep the disputed funds separate from the lawyer’s own property until the dispute is resolved.”

Bottom line:  “A lawyer may divide a fee with another lawyer who is not in the same firm if the arrangement meets the requirements of Model Rule 1.5(e). When one lawyer receives an earned fee that is subject to such an arrangement and both lawyers have an interest in that earned fee, Model Rules 1.15(a) and 1.15(d) require that the receiving lawyer hold the funds in an account separate from the lawyer’s own property, appropriately safeguard the funds, promptly notify the other lawyer who holds an interest in the fee of receipt of the funds, promptly deliver to the other lawyer the agreed upon portion of the fee, and, if requested by the other lawyer, provide a full accounting”.  (Most states, including Florida, the same or substantially similar rules).

Lawyers must be aware that, according to this recent ABA opinion (which is not binding), when there is a fee sharing arrangement (referral or co-counsel fee), and the lawyer receives funds to which another lawyer has an interest, the receiving lawyer must hold the funds in a separate account, safeguard the funds, promptly notify the other lawyer, and provide an accounting if requested by the other lawyer.

Be careful out there.

Disclaimer:  this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

29605 U.S. Highway 19 N. Suite 150

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

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South Carolina ethics advisory opinion states that matching legal services such as those offered by Avvo are prohibited

Hello everyone and welcome to this Ethics Alert which will discuss the recent South Carolina ethics advisory opinion which states that marketing fees to non-lawyer companies collected as part of legal fees are prohibited.  The advisory opinion is here: http://www.scbar.org/Bar-Members/Ethics-Advisory-Opinions/Opinion-View/ArticleId/2455/Ethics-Advisory-Opinion-16-06

The July 14, 2016 ethics advisory opinion discusses a marketing program and fee arrangement similar to the one used by Avvo Legal Services.  Avvo states that the service matches lawyers willing to provide specific legal services to clients who pay a fee to Avvo, which includes a marketing fee.  Lawyers who participate then receive earned fees from Avvo once a month and Avvo takes its marketing fee from the lawyers in a separate transaction.

The South Carolina advisory opinion states that this type of fee arrangement/program constitutes improper fee sharing with non-lawyers, and, in the alternative, constitutes improper payment of a referral fee to a non-lawyer, which is also prohibited.

According to the opinion, “In the situation described above, the service collects the entire fee and transmits it to the attorney at the conclusion of the case. In a separate transaction, the service receives a fee for its efforts, which is apparently directly related to the amount of the fee earned in the case. The fact that there is a separate transaction in which the service is paid does not mean that the arrangement is not fee splitting as described in the Rules of Professional Conduct.”

“A lawyer cannot do indirectly what would be prohibited if done directly. Allowing the service to indirectly take a portion of the attorney’s fee by disguising it in two separate transactions does not negate the fact that the service is claiming a certain portion of the fee earned by the lawyer as its ‘per service marketing fee.’”

The opinion also states that marketing fees must represent the reasonable cost of the service, and these fees do not meet that criteria.  “Presumably, it does not cost the service any more to advertise online for a family law matter than for the preparation of corporate documents. There does not seem to be any rational basis for charging the attorney more for the advertising services of one type of case versus another.”

“The service, however, purports to charge the lawyer a fee based on the type of service the lawyer has performed rather than a fixed fee for the advertisement, or a fee per inquiry or “click.” In essence, the service’ s charges amount to a contingency advertising fee arrangement rather than a cost that can be assessed for reasonableness by looking at market rate or comparable services.”

Avvo representatives have previously stated that their “matching services” fee arrangement does not violate lawyer disciplinary rules.  I discussed Avvo’s program in my January 15, 2015 Ethics Alert, which is here:  https://jcorsmeier.wordpress.com/2016/01/25/lawyer-directory-website-avvo-is-offering-fixed-fee-legal-services-on-a-limited-basis-and-plans-to-expand-the-services/

An online FAQ about the legal services program on Avvo’s website states that “(l)ocal clients purchase legal services, choose the attorney they want to work with, and pay the full price of the service up front. The chosen attorney then completes the service for the client and is paid the full legal fee. As a separate transaction, the chosen attorney pays a per-service marketing fee for the completed, paid service.”

Avvo General Counsel Josh King also stated in the FAQ that Avvo is not acting as a lawyer referral service and that lawyers should not be concerned about fee splitting since “(f)ee splits are not inherently unethical.  They only become a problem if the split creates a situation that may compromise a lawyer’s professional independence of judgment.  We believe that Avvo Legal Services fees, like credit card fees, would involve the sort of technical fee split that would not create such a potential for compromise.  Nonetheless, we have tried to keep things simple and clear by making the per-service marketing fee a separate charge.”

Bottom line:  The South Carolina ethics advisory opinion makes it clear that Avvo’s (and other similar) “matching service” arrangements constitute improper fee splitting and improper referral fees.  Lawyers who are interested in participating should carefully review their jurisdiction’s Bar rules and/or consult with and consult their Bar or consult with a lawyer familiar with their jurisdictions Bar rules before considering participation in the service.

Disclaimer:  this Ethics Alert is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Please note:  Effective June 27, 2016, my new office address is:

29605 U.S. Highway 19 N., Suite 150, Clearwater, Florida 33761

E-mail addresses and telephone numbers below will remain the same. 

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

29605 U.S. Highway 19 N., Suite 150,

Clearwater, Florida 33761

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

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Filed under Attorney discipline, Attorney Ethics, Avvo legal services, joe corsmeier, Joseph Corsmeier, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer ethics opinions, Lawyer improper referral fees and fee splitting, Lawyer matching services Avvo, Lawyer referral fees, Lawyer Referral Services, Lawyer sharing fees with non-lawyers

Can a referring lawyer be held liable for the referral lawyer’s malpractice?

Hello everyone and welcome to this Ethics Alert blog which will discuss whether a lawyer could be potentially liable for another lawyer’s legal malpractice (and potential Bar rule violations) by making a referral.  The short answer is yes.  Of course, under the Florida Bar lawyer disciplinary rules and most, if not all, jurisdictions, it is certainly ethical for a lawyer to refer a case to another lawyer and receive a referral fee; however, there are certain requirements under the rules and the referring lawyer might be held liable for any malpractice by the referral lawyer.

In Noris v. Silver, 701 So. 2d 1238 (Fla. 3rd DCA 1997), which is here: http://www.legalmalpracticelawreview.com/wp-content/uploads/sites/271/2012/03/Noris.pdf, the plaintiff was injured when a vehicle struck his bicycle in Chicago, Illinois. The plaintiff contacted an appellate attorney in Florida (Silver) who did not handle personal injury cases.  The Florida lawyer then referred the matter to another lawyer (Falk) to whom he had previously referred cases and received a referral fee.  The fee agreement with the referral lawyer did not disclose a fee arrangement with the referring lawyer, which violated Florida Bar Rule 4-1.5(g).  The referral lawyer then failed to file the case before the expiration of the Illinois two-year statute of limitation for personal injury claims and the client sued the Illinois lawyer and the referring Florida lawyer for malpractice.

The opinion stated:  “In the instant case, there is a genuine issue of material fact as to whether Silver retained a financial interest in plaintiff’s personal injury case by entering into an express or implied agreement to divide the legal fee.”  “This issue of fact is material because pursuant to Rule Regulating The Florida Bar 4-1.5(g), if Falk and Silver agreed to divide the attorney’s fee, Silver would be liable for the malpractice committed by Falk.”

“Attorneys in different firms may divide fees under two circumstances: first, if the ‘division is in proportion to the services performed by each lawyer,’ R. Regulating Fla. Bar 4-1.5(g)(1); and second, if the client agrees in writing and the agreement discloses “the basis upon which the division of fees will be made,’ R. Regulating Fla. Bar. 4-1.5(g)(2).  Moreover, when fees are divided pursuant to Rule 4-1.5(g)(2), ‘each lawyer assumes joint legal responsibility for the representation….’  Therefore, if Silver and Falk agreed to divide the attorney’s fee, Silver would be liable for the malpractice committed by Falk.” (emphasis added).

“It is true that if Falk had recovered attorney’s fees, Silver could not have enforced the purported oral agreement against Falk since the agreement did not comply with Rule 4-1.5(g)(2).  See Chandris, S.A. v. Yanakakis, 668 So. 2d 180, 185 (Fla. 1995).  However, we find that the failure to comply with Rule 4-1.5(g) cannot be used to shield a referring attorney from a legal malpractice claim made by a client. (emphasis added). To hold otherwise would allow attorneys to thwart their responsibility to a client by intentionally disregarding the Rules Regulating The Florida Bar. This cannot be condoned. It would also be unfair to lawyers who comply with Rule 4-1.5 to allow an avenue of escape for those who do not.  Accordingly, we hold that if Falk and Silver agreed to divide the attorney’s fees, then Silver is legally responsible for the malpractice committed by Falk.” (emphasis added).

“We point out that in order for the plaintiff to prevail, the plaintiff must prove that there was an express or implied agreement between the referring attorney, Silver, and the working attorney, Falk, to divide the legal fee. The plaintiff can prove this by showing that there was an express agreement for division of the fee. Alternatively, plaintiff can show that there was an implied agreement, for example by showing a past course of dealing whereby it was understood between the two attorneys that a fee would be paid in exchange for referrals. When the summary judgment record is read in the light most favorable to the plaintiff as nonmoving party, the evidence supports the existence of an implied agreement for division of the fee in this case.”

Bottom line:  This case involved a lawyer who referred a personal injury matter which occurred in another state to a lawyer who practiced in that state.  In Chandris v. Yanakakis, the Florida Supreme Court stated that a contingent fee agreement between a Florida lawyer and an out of state law firm in a Florida case lawyer is void.  The opinion stated:  “We have determined that the requirements for contingent fee contracts are necessary to protect the public interest. Thus, a contract that fails to adhere to these requirements is against public policy and is not enforceable by the member of The Florida Bar who has violated the rule.”  (Emphasis added).  The opinion is here:  http://archive.law.fsu.edu/library/flsupct/82934/op-82934.pdf.

Lawyers must be aware that, in Florida (and most, if not all jurisdictions), if a matter is referred to another lawyer and the referring lawyer expects to receive a referral fee, there must be a written fee agreement which discloses “the basis upon which the division of fees will be made” and “each lawyer assumes joint legal responsibility for the representation.”

Be careful out there!

Disclaimer:  this Ethics Alert is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2454 McMullen Booth Road, Suite 431

Clearwater, Florida 33759

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Filed under Attorney Ethics, Florida Bar, Florida Bar rule 4-1.5 resolution of extraordinary liens, Florida Lawyer Ethics and Professionalism, joe corsmeier, Joseph Corsmeier, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer referral fees, Lawyer referral fees legal malpractice, Lawyer referral fees void under Chandris, Lawyer referrals liability for legal malpractice

ABA Formal Opinion 475 addresses when lawyers from different law firms are permitted to share a referral fee

Hello and welcome to this Ethics Alert blog which will discuss the recent American Bar Association Formal ethics Opinion which addresses when lawyers may share a fee in a referral arrangement.  The opinion is ABA Formal Ethics Opinion 475 and was issued on April 21, 2016.  The formal opinion is here: http://www.abajournal.com/files/FO_474.pdf

Under ABA Model Rule 1.5(3) (and the Bar Rules of most jurisdictions), lawyers may refer cases to lawyers in other firms and receive a fee as long as the referring lawyer performs legal services or assumes joint responsibility for the case. Comment 7 to Model Rule 1.5 explains that these arrangements most often occur between a referring lawyer and a trial lawyer.  ABA Formal Ethics Opinion 474 discusses the propriety of referral fees between lawyers, explains that clients must consent in writing to such arrangements, and provides examples of when a lawyer does and does not have a conflict of interest.

The opinion notes that state rules related to referral fees vary widely.  Some states only require client consent and a total reasonable fee and some states prohibit referral fees altogether.  Other states (including Florida) require that the referring lawyer either perform legal services of assume joint responsibility for the case (which would include potential legal malpractice liability) and limit the amount of the fee without court approval.

The client must consent to the referral arrangement and be fully informed of the agreement regarding the division of fees before or within a reasonable time after the representation begins.  A lawyer cannot be involved in the case (or receive a referral fee) if there is a conflict of interest unless the lawyer obtains a waiver which meets the requirements of ABA Model Rule 1.7(b), which includes the requirement that each affected client give informed consent in writing (if the conflict is waivable).  A lawyer cannot perform legal services or assume responsibility for the case, however, if he or she has a conflict of interest.

The opinion also states that “(t)he agreement must describe in sufficient detail the division of the fee between the lawyers including the share each lawyer will receive.”  In addition, a referral agreement should not be entered into toward the end of the attorney-client relationship but must be disclosed and agreed to by the client “either before or within a reasonable time after commencing the representation.”

Bottom line:  Lawyers should be aware that, although most jurisdictions (including Florida) permit referral fees, the Bar rules typically impose the requirement that the client provide informed consent in writing to the referral fee and the fee is also subject to limitations in the amount without court approval (25% in Florida without court approval).  In addition, if a lawyer is unable to represent a client outright because of a conflict of interest that is not waived or waivable, the lawyer will not be able to accept a referral fee since, in Florida and most jurisdictions, the referring lawyer must either perform legal services or assume joint responsibility for the matter (which includes potential legal malpractice liability).  Lawyers should consult the Bar Rules in his or her jurisdiction before participating in a referral fee.

Be careful out there.

Disclaimer:  this e-mail is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2454 McMullen Booth Road, Suite 431

Clearwater, Florida 33759

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

 

 

Leave a comment

Filed under ABA Formal Ethics Opinion referral fees, ABA Formal Opinion referral fees and conflict of interest, ABA formal opinions, Attorney Ethics, joe corsmeier, Joseph Corsmeier, Lawyer ethics, Lawyer Ethics and Professionalism, Lawyer improper fees, Lawyer referral fees