Can a lawyer accept a referral fee from the title-examining lawyer he selects for a client, without telling the client?

Plain-English summary

Opinion 38 (adopted June 4, 1966; addendum issued 1995) addressed a lawyer who, while representing a client on a building and land-development project, was authorized to get title insurance for a loan. Because the lawyer could select which attorney would examine title for the title company, he received a referral fee from the lawyer he selected, and his client did not know about it.

The Committee concluded that the referral fee violated Canon 34, which permitted no division of fees for legal services except with another lawyer based on a division of service or responsibility. On the facts, the recipient of the referral fee performed no services and bore no responsibility for which the fee was paid, so accepting a fee merely for recommending another lawyer violated that canon. The Committee added that even if the referral fee had been proper, the lawyer's failure to make full disclosure to and obtain the consent of his client would violate Canon 38, which provides that a lawyer should accept no compensation, commission, rebate, or other advantage from others without the client's knowledge and consent after full disclosure. It cited ABA Opinion 304 (a lawyer who takes a commission for recommending or selling title insurance without full disclosure acts unethically) and ABA Informal Opinion 883.

Currency note

This opinion was issued in 1966 under the former Canons of Professional Ethics, before the Colorado Rules of Professional Conduct took effect on January 1, 1993, and before Colorado's 2008 revisions to those rules. A 1995 addendum directed lawyers to Rule 1.5 (fees), Rule 1.6 (confidentiality), Rule 1.7(b) (conflicts of interest), Rule 5.4 (professional independence), and Rule 7.2 (advertising). The fee-division and referral rules have been amended since then. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a lawyer take a referral fee for picking the title-examining lawyer?

A: No, under this opinion, where the recipient did no work. The Committee concluded that a fee for merely recommending another lawyer, not based on a division of service or responsibility, violated Canon 34.

Q: Would client consent have made the referral fee acceptable?

A: Not on these facts. The opinion concluded that even a proper fee division requires full disclosure to and consent of the client, and that the lawyer's failure to disclose and obtain consent independently violated Canon 38.

Q: What is required for a proper fee division between lawyers?

A: The opinion concluded that a division of fees is proper only with another lawyer and only when based on a division of service or responsibility, not for a bare referral.

Background and rules framework

The opinion applied the Canons of Professional Ethics: Canon 34 (division of fees only with a lawyer based on division of service or responsibility) and Canon 38 (no compensation or rebate from others without the client's knowledge and consent after full disclosure). The 1995 addendum restates the analysis under the Colorado Rules of Professional Conduct, citing Rule 1.5 (Model Rule 1.5, fees), Rule 1.7(b) (Model Rule 1.7, conflicts), Rule 5.4 (Model Rule 5.4, professional independence), and Rule 7.2 (Model Rule 7.2, advertising).

Citations and references

Rules of Professional Conduct:

• Colo. RPC 1.5 / Model Rule 1.5 (fees; division of fees; per the 1995 addendum)
• Colo. RPC 1.7(b) / Model Rule 1.7 (conflicts of interest; per the 1995 addendum)
• Colo. RPC 5.4 / Model Rule 5.4 (professional independence of the lawyer; per the 1995 addendum)
• Colo. RPC 7.2 / Model Rule 7.2 (advertising; per the 1995 addendum)

Other opinions cited:

• ABA Committee on Professional Ethics Opinion 97 (1933) (referral fee for recommending another lawyer)
• ABA Committee on Professional Ethics Opinion 304 (1962) (undisclosed title-insurance commission)
• ABA Informal Opinion 883 (1965) (disclosing a title-insurance rebate)

See also

• Tenn. Ethics Op. 80-F-3: Barter Exchange With a Referral Broker and Transaction Fee
• CBA Formal Op. 24: Law Offices in a Client Bank
• CBA Formal Op. 12: Title Opinion Sold to a Lender's Borrower

Source

• Landing page: https://www.cobar.org/ethicsopinions
• Original PDF: https://www.cobar.org/Portals/COBAR/repository/ethicsOpinions/FormalEthicsOpinion_38_2011.pdf