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ISBA 2015

Can a lawyer pay a referral fee or share fees with a nonprofit that referred a client?

Short answer: Only court-awarded fees. A lawyer may share any portion of court-awarded fees with a nonprofit that referred the matter under Rule 5.4(a)(4), but may not share other fees or pay a referral fee unless the nonprofit is a not-for-profit lawyer referral service.

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This page answers the general question as of 2015. Ezel answers yours: whether it's allowed on your facts, under the current Illinois Rules of Professional Conduct, with citations.

Currency note: this opinion is from 2015
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.
Disclaimer: Advisory only. Not binding precedent.
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

An employment law firm provides pro bono services to nonprofit organizations (shelters, clinics, worker advocacy groups, and others) that sometimes refer their constituents to the firm for employment matters. The firm represents the individual, not the organization. Several employment statutes (the FLSA, the Illinois Minimum Wage Law, the Illinois Wage Payment and Collection Act) shift attorney fees to a prevailing employee, with fees set by court-approved fee petition or court-approved settlement. The firm wanted to give the referring nonprofit a referral fee, possibly as a percentage of the recovered attorney fees.

The opinion (assuming the nonprofits are not themselves lawyer referral services) holds that the lawyer may share court-awarded fees with the nonprofit under Rule 5.4(a)(4), added in 2010, which permits sharing court-awarded legal fees with a nonprofit that employed, retained, or recommended the lawyer. The committee notes the rule is identical to ABA Model Rule 5.4(a)(4), which codified ABA Formal Opinion 93-374, and that it does not cap the amount shared, so the lawyer may share any percentage, including all, of the court-awarded fees.

The committee stresses the limitation: Rule 5.4(a)(4) reaches only court-awarded fees. Per ABA Opinion 93-374, court-awarded fees do not come from the client (so no risk of burdening the client with excessive fees) and have been reviewed by a court for reasonableness, which satisfies the interest behind the rule against paying for referrals. So the lawyer may not share any other fees, including fees the client pays out of pocket.

In the absence of court-awarded fees, the opinion concludes the lawyer also may not pay a referral fee to the nonprofit, even from non-fee sources. Rule 7.2(b)(2) permits paying only the usual charges of a legal service plan or a not-for-profit lawyer referral service, which (per Comment [6]) is an organization that holds itself out to the public as a lawyer referral service with client protections. If the nonprofits do not qualify, no referral fee may be paid (except as 5.4(a)(4) sharing allows).

In practice

Under this opinion, an Illinois lawyer may share court-awarded fees, in any amount, with a nonprofit that referred the matter, under Rule 5.4(a)(4). The opinion holds the lawyer may not share fees the client pays out of pocket and may not pay the nonprofit a referral fee under Rule 7.2(b)(2) unless the nonprofit qualifies as a not-for-profit lawyer referral service.

Common questions

Q: Can an Illinois lawyer share court-awarded fees with a nonprofit that referred the case?

A: Yes. The opinion concludes Rule 5.4(a)(4) permits sharing court-awarded legal fees with a nonprofit that referred the matter, with no cap on the amount.

Q: Can the lawyer share fees the client pays directly?

A: No. The opinion limits Rule 5.4(a)(4) to court-awarded fees, so fees paid by the client out of pocket may not be shared with the nonprofit.

Q: Can the lawyer just pay the nonprofit a referral fee instead?

A: Only if the nonprofit qualifies as a not-for-profit lawyer referral service under Rule 7.2(b)(2). Otherwise the opinion concludes no referral fee may be paid.

Background and rules framework

The opinion interprets Illinois Rule of Professional Conduct 5.4(a)(4) (sharing court-awarded fees with a referring nonprofit; Model Rule 5.4(a)(4)) and Rule 7.2(b)(2) (paying a not-for-profit lawyer referral service; Model Rule 7.2), with Comment [6] defining a lawyer referral service.

Citations and references

Rules of Professional Conduct:

  • Illinois RPC 5.4(a)(4) (Model Rule 5.4(a)(4)): sharing court-awarded fees with a referring nonprofit
  • Illinois RPC 7.2(b)(2) (Model Rule 7.2): paying a not-for-profit lawyer referral service

Statutes:

  • Fair Labor Standards Act, 29 U.S.C. 201 et seq.; Illinois Minimum Wage Law, 820 ILCS 105; Illinois Wage Payment and Collection Act, 820 ILCS 115: fee-shifting statutes

Other opinions cited:

  • ABA Formal Opinion 93-374 (1993): sharing court-awarded fees in nonprofit-sponsored pro bono litigation

See also

Source

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