Can a D.C. lawyer pay a lawyer referral service a percentage of the fees earned on referred cases without violating the rule against fee sharing with nonlawyers?

Plain-English summary

Opinion 369 (published July 2015) addresses a nonprofit lawyer referral service that would direct low-income clients to network lawyers charging modest rates. For each referral, the lawyer would pay the service a flat fee (about $200), and, if the representation continued, fifteen percent of the fees earned. The service would qualify as a 501(c)(3) and would cover all types of representation, not just litigation. The Committee analyzes the two payments separately under Rule 5.4(a) (a lawyer may not share legal fees with a nonlawyer, to protect professional independence) and Rule 7.1 (limits on giving value for recommendations).

On the flat payment, the opinion concludes there is no problem: because the flat fee does not depend on the amount the client pays the lawyer, it is not a sharing of legal fees and does not violate Rule 5.4(a). On the percentage payment, the opinion concludes it is permitted only if it fits one of two exceptions. The first is Rule 5.4(a)(5), adopted in 2007, which permits a lawyer to share fees "awarded by a tribunal or received in settlement of a matter" with a 501(c)(3) nonprofit that employed, retained, or recommended the lawyer; the Committee reads this as limited to fees recovered from an opposing party, and therefore to litigation matters. For non-litigation matters, that exception does not apply.

The second exception is comment [6] to Rule 7.1, which lets a lawyer pay the "usual fees" of a lawyer referral program. The opinion concludes the 2007 revision did not repeal this exception and that the service can qualify as a genuine "lawyer referral service" if it meets criteria drawn from ABA Model Rule 7.2 and its comment: it is generally open to D.C. Bar members who accept the reduced-fee terms; takes reasonable steps to ensure referred lawyers are competent (Rule 1.1); does not interfere with professional independence; charges only reasonable referral fees (the fifteen percent qualifies, Rule 1.5(a)); requires participating lawyers to carry reasonably adequate malpractice insurance; has a neutral dispute-resolution mechanism; and does not refer matters to lawyers who own, operate, manage, or are employed by the service. The opinion concludes the fifteen-percent payment is a "usual fee" within comment [6].

In practice

Under the D.C. rules as they stood at the time of the opinion, a lawyer may pay a referral service a flat per-referral fee without implicating the fee-sharing rule, because the flat fee does not turn on the client's fee. The opinion concludes a percentage of the lawyer's earned fees may be paid only if it fits Rule 5.4(a)(5) (limited to litigation fees awarded or settled, shared with a 501(c)(3)) or qualifies as a "usual fee" of a genuine lawyer referral service under Rule 7.1 comment [6].

The opinion concludes a service qualifies as a bona fide referral service only if it meets the listed criteria, including open membership on the reduced-fee terms, competence and malpractice-insurance requirements, a neutral dispute-resolution mechanism, and a bar on referring to lawyers who own or operate the service. Because the opinion predates later rule developments, verify the current D.C. rules before relying on specific requirements.

Common questions

Q: Can a D.C. lawyer pay a referral service a flat fee per referred client?

A: The opinion concludes yes. A flat payment that does not depend on the amount of fees the client pays is not a sharing of legal fees and does not violate Rule 5.4(a).

Q: Can the lawyer pay the service a percentage of the fees earned?

A: The opinion concludes only if the payment fits Rule 5.4(a)(5) (litigation fees awarded or received in settlement, shared with a 501(c)(3)) or qualifies as a "usual fee" of a bona fide lawyer referral service under comment [6] to Rule 7.1.

Q: Why is the percentage limited for non-litigation matters?

A: The opinion concludes Rule 5.4(a)(5) reaches only fees recovered from an opposing party (litigation), so outside litigation the percentage is permitted only if it is a usual fee of a genuine lawyer referral service.

Q: What makes an organization a real "lawyer referral service"?

A: The opinion lists criteria drawn from ABA Model Rule 7.2: generally open membership on the reduced-fee terms, competence screening, no interference with independence, reasonable fees, malpractice-insurance requirements, a neutral dispute-resolution mechanism, and no referrals to lawyers who own or operate the service.

Background and rules framework

The opinion interprets D.C. Rule 5.4(a) (no fee sharing with nonlawyers) and its 2007 exception Rule 5.4(a)(5) (sharing litigation fees with a 501(c)(3)), together with Rule 7.1 and its comment [6] (paying the usual fees of a lawyer referral program), informed by ABA Model Rule 7.2(b)(2) and its comments. It builds on D.C. Opinions 201, 286, 307, and 329.

Citations and references

Rules of Professional Conduct:

• D.C. RPC 5.4(a), 5.4(a)(5) / Model Rule 5.4 (no fee sharing with nonlawyers; nonprofit litigation-fee exception)
• D.C. RPC 7.1 cmt. [6] / Model Rule 7.2(b)(2) (paying the usual fees of a lawyer referral program)
• D.C. RPC 1.1, 1.5(a) / Model Rules 1.1, 1.5 (competence; reasonable fees)

Other opinions cited:

• D.C. Bar Legal Ethics Op. 201 (1989): percentage to a public-interest referral project
• D.C. Bar Legal Ethics Op. 286 (1998): revenue-tied payment to a nonlawyer violates Rule 5.4(a)
• D.C. Bar Legal Ethics Op. 307 (2001): GSA program fee permitted

See also

• ISBA Ethics Op. 15-04: Sharing Court-Awarded Fees With a Nonprofit
• ABA Formal Op. 474: Referral Fees and Conflicts of Interest
• Colorado Formal Op. 106: Referral Fees and Networking Organizations
• DC Ethics Op. 391: Firm-Government Agreements Limiting Practice

Source

• Landing page: https://www.dcbar.org/for-lawyers/legal-ethics/ethics-opinions-210-present/ethics-opinion-369