Does Rule 5.4(a)'s ban on sharing legal fees with nonlawyers stop a lawyer from paying part of a settlement or fee award to her own client?

Plain-English summary

Opinion 351 (adopted November 2009) considers two proposed payments by lawyers to their clients and whether they violate Rule 5.4(a)'s prohibition on sharing legal fees with nonlawyers. The opinion concludes neither does, in the specific circumstances presented.

In Scenario One, a plaintiff and Lawyer A have a one-third contingent fee agreement. The defendant offers a $90,000 settlement but insists the agreement designate $60,000 as attorney fees and $30,000 as compensatory damages (the claim arises under a fee-shifting statute). Lawyer A wants to keep only the agreed $30,000 (one-third) and allocate the other $30,000 of designated "attorney fees" to the plaintiff, leaving the plaintiff with $60,000. The opinion concludes the "fee" for Rule 5.4(a) purposes is the amount agreed in advance between client and lawyer, not the sum the settlement labels as attorney fees, even if the fee-shifting statute assigns ownership of those funds to the lawyer. Because the advance agreement governs, the payment does not threaten the lawyer's independence; indeed, the opinion notes that failing to give the plaintiff the $60,000 would breach the contingent fee agreement, could improperly withhold client funds under Rule 1.15(b), and could be an unreasonable fee under Rule 1.5(a).

In Scenario Two, a pro bono Lawyer B receives a fee-shifting award (assumed to be the lawyer's property) and wants to give it to the client, having made no advance commitment to do so. The opinion concludes this is not the sharing of a fee but an ex gratia payment, permitted because there was no advance agreement. The opinion adds, in a footnote, that had Lawyer B agreed in advance to pay the client, the payment would be prohibited under Rule 5.4(a), reasoning from the express charitable-organization exception in Rule 5.4(a)(5) that other, similar exceptions are not implied. The opinion reads Rule 5.4(a) in light of its purpose, protecting the lawyer's professional independence, rather than literally.

In practice

Under the D.C. rules as they stood at the time of the opinion, a lawyer who pays settlement or fee-award money to her own client is generally not engaged in prohibited fee sharing under Rule 5.4(a). The opinion concludes that in a contingent-fee case the operative fee is the amount agreed in advance, so returning a settlement's excess "attorney fees" designation to the client is consistent with Rule 5.4(a) and is in fact required by the fee agreement, with Rules 1.15(b) and 1.5(a) reinforcing the point.

The opinion concludes that a pro bono lawyer's unconditioned gift of a fee-shifting award to the client is an ex gratia payment, not fee sharing, but cautions (in a footnote) that an advance commitment to make such a payment would be treated differently under Rule 5.4(a). It also notes neither scenario implicates Rule 1.8(d), since no payment was promised or guaranteed while the litigation was pending. Because the opinion predates later rule developments, verify the current D.C. rules before relying on specific requirements.

Common questions

Q: Can a lawyer give part of the "attorney fees" in a settlement back to the client?

A: The opinion concludes yes in the scenario presented. The Rule 5.4(a) fee is the amount agreed with the client in advance, not the settlement's designation, so allocating the excess to the client is permitted and is required by the contingent fee agreement.

Q: Is paying that money to the client "sharing fees with a nonlawyer"?

A: The opinion concludes no. Rule 5.4(a) protects the lawyer's professional independence against outsiders entitled to share the fee; a payment to the lawyer's own client in these circumstances does not implicate that concern.

Q: Can a pro bono lawyer give a fee-shifting award to the client?

A: The opinion concludes yes, where the lawyer made no advance commitment; that is an ex gratia payment rather than prohibited fee sharing. The opinion notes an advance agreement to pay the client would be treated as prohibited under Rule 5.4(a).

Q: Could keeping the larger designated fee instead create a problem?

A: The opinion notes that, in Scenario One, keeping $60,000 rather than the agreed one-third could breach the fee agreement, improperly withhold client funds under Rule 1.15(b), and amount to an unreasonable fee under Rule 1.5(a).

Background and rules framework

The opinion interprets D.C. Rule 5.4(a) (a lawyer shall not share legal fees with a nonlawyer) and its charitable-organization exception in Rule 5.4(a)(5), read with Rule 1.5(a) (reasonable fees), Rule 1.15(b) (safekeeping and delivery of client property), and Rule 1.8(d) (advancing or guaranteeing financial assistance). It construes Rule 5.4(a) according to its purpose of protecting professional independence rather than by its literal terms, drawing on the Restatement and authorities from other jurisdictions.

Citations and references

Rules of Professional Conduct:

• D.C. RPC 5.4(a), 5.4(a)(5) / Model Rule 5.4 (sharing legal fees with nonlawyers; charitable exception)
• D.C. RPC 1.5(a) / Model Rule 1.5 (reasonable fees)
• D.C. RPC 1.15(b) / Model Rule 1.15 (safekeeping property)
• D.C. RPC 1.8(d) / Model Rule 1.8 (advancing or guaranteeing financial assistance)

Cases:

• Venegas v. Mitchell, 495 U.S. 82 (1990), lawyer and client may agree to a fee exceeding the statutory award
• Central States v. Central Cartage Co., 76 F.3d 114 (7th Cir. 1996), statutory fees as client property
• In re Haar, 667 A.2d 1350 (D.C. 1995), withholding client funds

See also

• ABA Formal Op. 93-374: Pro Bono Fee Sharing
• ABA Formal Op. 95-392: Sharing Fees With Employer
• DC Ethics Op. 369: Fee Sharing With a Referral Service
• ABA Formal Op. 464: Fee Division Across Jurisdictions

Source

• Landing page: https://www.dcbar.org/for-lawyers/legal-ethics/ethics-opinions-210-present/ethics-opinion-351