When can a California attorney pay a referral fee to a lawyer who is not a partner or associate, when must the client consent, and does the referral fee have to reflect work the referring lawyer did?
LACBA Ethics Opinion 467: Referral Fees to an Unassociated Attorney
Short answer: The committee concluded that an attorney may pay a referral fee to a lawyer who is not a partner, associate, or shareholder only if the client consents in writing after written disclosure of the division, the total fee charged is not increased by reason of the division and is not unconscionable; a straight referral fee need not be proportionate to work the referring attorney performed; and the client's written consent need not predate the referral but must precede payment of the fee.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Los Angeles County Bar Association's view of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.
Plain-English summary
Attorney A, not a probate lawyer, declined a will-contest matter and referred the client to Attorney B, who took the case on a contingent fee. By oral agreement, B was to pay A one-third of the fee as a referral fee, which would not increase the amount the client owed. After settling, B wrote to A stating the client had not yet agreed to pay any referral fee. Three questions were presented: when client consent is required, whether the referral fee must be based on actual work performed, and whether a one-third referral fee is reasonable.
On timing, the committee identified Rule 2-200, which permits dividing a fee with a lawyer who is not a partner, associate, or shareholder only if (1) the client has consented in writing after written disclosure that a division will be made and its terms, and (2) the total fee charged is not increased solely by reason of the division and is not unconscionable under Rule 4-200. The committee identified that nothing in the rule requires the consent to predate the representation or the referral-fee agreement, but the fee may be paid only after the client has consented in writing following full disclosure. It identified written consent given before entering the agreement as preferable, noting that failure to do so risks being construed as a breach of fiduciary duty and of the Rule 3-500 duty to keep the client reasonably apprised, because certain client concerns (such as whether the best attorney was retained, whether B would devote sufficient time given a reduced fee, and whether the client might prefer to negotiate directly) cannot be addressed at the conclusion of the engagement.
On proportionality, the committee identified that the amount of the referral fee is not dependent on the time spent or reasonable value of the referring attorney's services, relying on Moran v. Harris, which held referral-fee arrangements are no longer contrary to public policy after the 1979 amendment to former Rule 2-108 (predecessor to Rule 2-200) deleted the requirement that a division be made in proportion to services performed or responsibility assumed. A straight referral fee, without the referring attorney doing any work, may therefore be paid if it complies with Rule 2-200's two conditions.
On reasonableness, the committee identified that the amount of the referral fee is subject to negotiation between the attorneys and that the ethical concern is whether the fee to the client is unconscionable; assuming the fee charged to the client is not unconscionable under Rule 4-200(B), no further inquiry was required.
Currency note
This opinion was issued in 1992, before California's November 1, 2018 adoption of the renumbered Rules of Professional Conduct. It interprets former Rule 2-200 (division of fees among lawyers), former Rule 3-500 (keeping the client informed), and former Rule 4-200 (unconscionable fees); these correspond to current Rule 1.5 and related provisions. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.
Common questions
Q: When must the client consent to a referral fee between lawyers?
A: Per the opinion, the consent must be in writing and precede payment of the fee, after written disclosure of the division and its terms. The committee noted the consent need not predate the referral but said obtaining it up front is preferable.
Q: Does the referring lawyer have to do work to earn a referral fee?
A: Per the opinion, no. Relying on Moran v. Harris and the 1979 deletion of the proportionality requirement, the committee concluded a straight referral fee may be paid even if the referring attorney did no work, so long as Rule 2-200's two conditions are met.
Q: Is a one-third referral fee permissible?
A: Per the opinion, the amount is subject to negotiation between the attorneys; the ethical question is whether the fee charged to the client is unconscionable under Rule 4-200(B). Assuming it is not, the committee required no further inquiry.
Background and rules framework
The opinion interprets former California Rule 2-200 (division of fees with a lawyer who is not a partner, associate, or shareholder), which corresponds to ABA Model Rule 1.5(e); former Rule 3-500 (keeping the client reasonably informed); and former Rule 4-200 (unconscionable fees). The proportionality analysis turns on the 1979 amendment to former Rule 2-108 and Moran v. Harris.
Citations and references
Rules of Professional Conduct (former):
- California Rule 2-200 (division of fees among lawyers)
- California Rule 3-500 (keeping the client informed)
- California Rule 4-200(B) (unconscionable fees)
Cases:
- Moran v. Harris, 131 Cal.App.3d 913 (1982), referral-fee arrangements no longer contrary to public policy
See also
- LACBA Ethics Op. 486: Referrals to Subleasing Attorneys
- LACBA Ethics Op. 503: Prepaying Referral Fees in Workers' Compensation
- LACBA Ethics Op. 473: Disclosure of Additional Attorneys and Fee Splitting
- LACBA Ethics Op. 511: Sharing Fees as Partner or Employee of Two Law Firms
Source
- Landing page: https://lacba.org/?pg=ethics-opinions
- Original PDF: https://lacba.org/docDownload/2010976