Can a lawyer accept a referral fee from a medical provider for sending a client to that provider?

Plain-English summary

A marketing service representing medical practitioners offered to pay lawyers a "referral fee" for steering prospective patients to the service's clients. The Committee concluded that a lawyer may not accept such a fee. The analysis turned on the duty of loyalty under ER 1.7: a lawyer's professional judgment may be impaired when the lawyer has a financial incentive to make a recommendation driven by something other than the client's best interests.

The Committee identified several ways the arrangement could harm the client. The lawyer would have to disclose a direct financial interest and seek consent, which could undermine the client's trust; the fact of the fee would be discoverable and potentially damaging at trial; and the fee would put the lawyer in an awkward position if the client later had a problem with the doctor. Citing In re Been, the opinion observed that disclosure and consent do not always cure a conflict where the lawyer takes a personal benefit from a transaction involving the client.

The opinion also noted two external limits. The reverse arrangement, a lawyer paying someone to recommend the lawyer's services, was expressly prohibited by ER 7.1(j). And Arizona law, A.R.S. section 13-3713, made it a felony to receive a fee for referring someone to a medical provider. The Committee concluded that the profession's integrity and the public interest barred a lawyer from accepting a referral fee of this kind.

Currency note

This opinion was issued in 1995, before the State Bar of Arizona's adoption of the 2003 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could the lawyer cure the conflict by disclosing the referral fee and getting the client's consent?

A: No. The opinion concluded this was a conflict the client should not even be asked to consent to. Citing In re Been, it explained that disclosure and consent do not always satisfy a lawyer's ethical obligation when the lawyer takes a personal benefit from a transaction involving the client.

Q: Why does a referral fee from a doctor create a conflict for the lawyer?

A: Per the opinion, the fee gives the lawyer a direct financial incentive to recommend particular doctors for reasons unrelated to the client's interests, which the Committee treated as impairing the loyalty ER 1.7 requires.

Q: Did anything beyond the ethics rules bar the arrangement?

A: Yes. The opinion pointed to A.R.S. section 13-3713, which made it a felony to receive a fee for referring someone to a medical provider, and to ER 7.1(j), which prohibited the reverse practice of paying for recommendations of the lawyer's services.

Background and rules framework

The opinion applied ER 1.7(b), Arizona's general conflict rule, which barred representation that might be materially limited by the lawyer's own interests unless the lawyer reasonably believed the representation would not be adversely affected and the client consented after consultation. The Committee read that rule together with In re Been, 171 Ariz. 250 (1992), for the principle that some lawyer self-interest conflicts cannot be cured by consent. It also referenced ER 7.1(j) (the then-current Arizona advertising rule barring payment for recommendations) and A.R.S. section 13-3713 as independent grounds.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflict of interest; lawyer's own interests)
• Arizona ER 1.7(b); ER 7.1(j) (payment for recommendations)

Statutes:

• A.R.S. section 13-3713 (felony to receive a fee for referring a person to a medical provider)

Cases:

• In re Been, 171 Ariz. 250, 830 P.2d 462 (1992), personal-benefit conflicts not always cured by disclosure and consent

See also

• ABA Formal Op. 474: Referral Fees and Conflicts
• Alabama Ethics Op. 1995-08: Bar Referral Service Percentage Fees

Source

• Landing page: https://tools.dev.azbar.org/RulesofProfessionalConduct/ViewEthicsOpinion.aspx?id=462

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Lawyers may not accept referral fees from medical providers for referring a client to the medical practitioner. [ER 1.7]

A marketing and consulting service that represents medical practitioners has offered to pay attorneys a "referral fee" for referring prospective patients to medical practitioners who are clients of the marketing and consulting service. The service would provide attorneys with a list of its clients and make suggestions as to which medical practitioner would be appropriate based on the medical practitioner's expertise and location.

QUESTION PRESENTED

Whether receipt by a lawyer of a referral fee from a service as described violates any ethical rules.

RELEVANT ETHICAL RULES

ER 1.7 Conflict of Interest

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's ... own interests, unless:

1) the lawyer reasonably believes the representation will not be adversely affected; and

2) the client consents after consultation.

OPINION

This issue, like most conflict issues, involves the duty of loyalty owed by an attorney to a client. Loyalty to a client may be adversely affected or impaired when an attorney has a financial incentive to make recommendations, or give advice to a client that may be influenced or motivated by something other than the client's best interests.

ER 1.7(b) permits certain conflicts of interest to exist so long as the lawyer reasonably believes the representation will not be adversely affected and the client consents after being provided full information. However, there are certain circumstances where a client should not even be asked to agree to a potential conflict and, in such case, the lawyer involved cannot properly ask for a client's agreement or provide representation on the basis of the client's consent. In In re Been, 171 Ariz. 250, 254, 830 P.2d 462 (1992), the Court stated:

We wish, however, to emphasize that when a lawyer receives a personal benefit apart from the client's fee from a transaction in which he represents a client, the lawyer's ethical obligation is not always fulfilled by merely disclosing the existence of the personal stake, explaining the potential consequences, and obtaining the client's consent. There is an inherent potential for a conflict of interest in such situations, and the lawyer must always ensure that his or her personal interest does not interfere with the unfettered exercise of professional judgment the client is entitled to expect under the circumstances.

The Committee concludes that such is the case under the facts presented here.

Here the lawyer is to receive a certain amount of money as payment for referring a client to doctors that are on a list provided to the lawyer. This direct financial interest has the potential of adverse consequences to the client in several ways.

First, the lawyer is placed in the position of having to disclose a direct financial interest the lawyer has in making a referral and seek the client's consent. This could have the effect of undermining the trust and confidence a client should have in relying on the advice and counsel of an attorney.

Second, if the referral is in connection with a case being handled by the attorney, the fact that the lawyer has received a fee for the referral is information that is not only discoverable but could be injurious to the client at trial.

Third, if the client has any difficulty with the doctor, the payment of the referral fee places the lawyer in an awkward position with respect to resolving the difficulty for the client.

Fourth, the reverse of the issue here expressly is prohibited by the Rules of Professional Conduct. ER 7.1(j), provides that lawyers would be in violation if they paid a doctor or anyone else for recommending their services.

Moreover, legally there may be problems with such an arrangement as A.R.S. § 13-3713 makes it a felony to receive a fee for referring someone to a medical provider.

The Committee concludes that our profession's integrity and the public interest would prohibit a lawyer from accepting a referral fee for the referral of a client to a medical practitioner.