Ezel / Ethics Opinions / DCBAR
DCBAR November 17, 1998

Can a lawyer pay a nonlawyer a referral fee that is a percentage of the fees earned from the referred case?

Short answer: The opinion concluded that a referral payment contingent on, and tied to the amount of, the lawyer's fees from the referred matter is the sharing of a legal fee, not a Rule 7.1(b)(5) referral fee; so it may be paid only to another lawyer and only if Rule 1.5(e)'s conditions are met, and may not be paid to a nonlawyer, while a fixed, non-contingent referral payment is a permissible marketing expense payable to anyone.

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This page answers the general question as of 1998. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 1998
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
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About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page) is the authoritative source for any reliance.

Plain-English summary

Opinion 286 (adopted November 1998) clarified how the D.C. Rules treat referral payments, reconciling three provisions: Rule 1.5(e) (division of fees between lawyers not in the same firm), Rule 5.4(a) (no sharing of legal fees with nonlawyers), and Rule 7.1(b)(5), a District-specific rule that lets a lawyer pay consideration to a person for referring legal business, subject to client disclosure. The committee revisited its Opinion 253, which had described a "tension" between Rule 5.4 and Rule 7.1(b)(5), and refined the analysis.

The committee drew the line on whether a referral payment is contingent. A non-contingent payment, one paid regardless of the outcome (for example, a set cash payment or gift certificate per client referred), is a marketing expense, not a division of fees; it is the kind of payment Rule 7.1(b)(5) authorizes, and it may be paid to a lawyer or nonlawyer. A contingent payment, tied to the amount of the lawyer's fees or recovery, is different: it functions like a commission paid out of the proceeds of a specific representation, so it is a form of fee-sharing. The committee found support in Florida Opinion 89-4 and several out-of-state decisions.

Accordingly, the committee concluded that a contingent referral payment tied to the lawyer's revenue may not be paid to a nonlawyer at all, and if paid to a lawyer must satisfy Rule 1.5(e). It reframed Rule 7.1(b)(5) as not an exception to the bar on sharing fees with nonlawyers, but rather an authorization of non-contingent referral payments, which are not fee-sharing in the first place; on that reading, the conclusion of Opinion 253 stood, but the reasoning was clarified.

Currency note

The D.C. Bar flags this opinion with the note: "See how Opinion 286 has been substantively affected by the amendments to the D.C. Rules of Professional Conduct that became effective on February 1, 2007." This opinion was issued in 1998, before the District of Columbia's adoption of those 2007 revisions, and it construed Rule 7.1(b)(5), the referral-payment provision later affected by the amendments. Treat this page as historical context, not current guidance, and verify against the current D.C. Rules of Professional Conduct before relying on any specific rule described here.

Common questions

Q: Could a lawyer pay a nonlawyer a percentage referral fee tied to the recovery?

A: The opinion concluded no. A referral payment contingent on and tied to the amount of the lawyer's fees is fee-sharing, which Rule 5.4(a) bars with nonlawyers; it cannot be paid to a nonlawyer.

Q: What about a flat, fixed payment for each client referred?

A: The opinion concluded that a non-contingent payment, paid regardless of outcome, is a marketing expense authorized by Rule 7.1(b)(5) and may be paid to a lawyer or a nonlawyer, subject to the rule's client-disclosure requirement.

Q: Could a contingent referral fee be paid to another lawyer?

A: The opinion concluded yes, but only if the arrangement satisfies Rule 1.5(e)'s conditions for dividing fees between lawyers not in the same firm.

Q: Is Rule 7.1(b)(5) an exception to the ban on sharing fees with nonlawyers?

A: The opinion concluded no. The committee read Rule 7.1(b)(5) to authorize non-contingent referral payments, which are not fee-sharing, so there is no conflict with Rule 5.4.

Background and rules framework

The opinion interpreted D.C. Rule 5.4(a) (no sharing of legal fees with nonlawyers), Rule 1.5(e) (conditions for dividing fees between lawyers in different firms), and the District-specific Rule 7.1(b)(5) (consideration paid to an intermediary for referring legal business, with client disclosure). It distinguished marketing expenses from divisions of fee revenue and clarified its earlier Opinion 253.

Citations and references

Rules of Professional Conduct:

  • D.C. RPC 5.4(a) / Model Rule 5.4(a) (no fee-sharing with nonlawyers)
  • D.C. RPC 1.5(e) / Model Rule 1.5(e) (division of fees between lawyers)
  • D.C. RPC 7.1(b)(5) (District-specific; payment to an intermediary for referrals)

Cases:

  • Son v. Margulius, Mallios, Davis, Rider & Tomar, 709 A.2d 112 (Md. 1998) (fee-division limits)
  • Trotter v. Nelson, 684 N.E.2d 1150 (Ind. 1997) (referral payments)

Other opinions cited:

  • D.C. Ethics Op. 253
  • Florida Bar Op. 89-4 (commission tied to fees is an unethical fee division)

See also

Source

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