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LACBA 2000-01-24

May a California workers' compensation lawyer prepay a flat $250 referral fee to another lawyer when the referring lawyer's underlying fee depends on a future award by the Workers' Compensation Appeals Board?

Short answer: Per the opinion, no. Former Rule 2-200(A) permits dividing fees with non-firm lawyers only after the client gives written informed consent to an existing fee, so prepayment before any fee exists cannot be a division of fees. The payment also does not fit Rule 2-200(B)'s gift exception because it is offered as consideration for the referral.
Currency note: this opinion is from 2000
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 Not binding precedent.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 at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.
View original ethics opinion (PDF)

LACBA Ethics Opinion 503: Prepaying a Referral Fee in Workers' Comp Cases

Short answer: Under former California Rules 1-320 and 2-200 as analyzed in this opinion, a workers' compensation lawyer may pay a referring lawyer a flat $250 fee after the lawyer is awarded a fee in the case, provided the client gives written informed consent under Rule 2-200(A) and the total fee is not increased and is not unconscionable. The lawyer may not prepay the referral fee before any fee has been awarded, because there is no existing fee to divide and the payment does not satisfy Rule 2-200(B)'s gift exception.

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.

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Plain-English summary

The committee considers a workers' compensation lawyer who proposes to pay a fixed $250 per case to another lawyer for each referral. The committee divides the question into post-award payment and prepayment.

On the post-award scenario, the committee follows former Rule 2-200(A): a lawyer may divide a fee with a non-firm lawyer only on (1) full written disclosure to the client, (2) the client's written consent, (3) no resulting increase in the total fee, and (4) a non-unconscionable total fee. The committee anchors the public-policy framework in Moran v. Harris (1982) and Turner v. Donovan (1935), both of which treat fee splitting among lawyers as not against public policy when Rule 2-200's conditions are met.

The committee distinguishes three categories of permitted lawyer-to-lawyer payments not subject to Rule 2-200(A) as fee splits: (1) gifts or gratuities under Rule 2-200(B) that are not offered in consideration of any agreement or understanding that referrals will be made or encouraged in the future; (2) payments to an independent contractor or non-employee lawyer for work actually performed on a client's matter; and (3) pro-rata apportionment of fees among predecessor and successor counsel after substitution.

On the prepayment scenario, the committee holds the prepaid $250 cannot be a division of fees under Rule 2-200(A) because no fee yet exists. The payment also does not fit Rule 2-200(B)'s gift exception because it is offered as consideration for the referral itself. The committee concludes the prepayment is prohibited on those facts.

The committee notes the workers' compensation context's specific statutory framework (Labor Code sections 3215, 3217, 4903, 4906; Title 8 Cal. Code Regs. sections 10775, 10776) but does not extend its analysis to questions of fee-board approval beyond observing that the payor lawyer has no fee until the Workers' Compensation Appeals Board's award.

In practice

The opinion holds that, under former California Rule 2-200 as it stood in 2000, a workers' compensation lawyer may pay a flat $250 referral fee to a non-firm lawyer only after the lawyer is awarded a fee in the case, and only if the four-part Rule 2-200(A) procedure is followed. The committee treats prepayment as outside Rule 2-200(A) (no fee to divide) and outside Rule 2-200(B) (not a gratuitous gift). The committee identifies the curative options as either deferring payment until the fee is awarded and obtaining client consent, or structuring the payment as compensation for work actually performed on the client's matter rather than for the referral itself.

California's professional-conduct rules were revised effective November 1, 2018; former Rules 1-320 and 2-200 correspond substantially to current Rules 5.4 and 1.5.1 respectively. The committee's analysis predates the 2018 revisions.

Common questions

Q: Can a California workers' compensation lawyer pay another lawyer a flat $250 for each referral?

A: Per the opinion, only after the lawyer is awarded a fee in the case and only if the client consents in writing after written disclosure under former Rule 2-200(A), with no increase in the total fee.

Q: Can the lawyer prepay the referral fee on receipt of the referral?

A: Per the opinion, no. Because no underlying fee yet exists, the prepayment cannot be a division of fees under Rule 2-200(A), and because the payment is consideration for the referral, it does not qualify as a gift under Rule 2-200(B).

Q: What about an unsolicited gift to thank another lawyer for a referral?

A: Per the opinion's reading of Rule 2-200(B), an unsolicited gift is permitted only if it is not offered in consideration of any agreement or understanding that referrals would be made or encouraged in the future.

Q: What about paying another lawyer for work actually done on the matter?

A: Per the opinion, a payment to an independent contractor or non-employee lawyer for work actually performed on a client's matter is not subject to Rule 2-200's fee-splitting procedure.

Q: What if the case is referred to new counsel after substitution?

A: Per the opinion, pro-rata apportionment of fees among predecessor and successor counsel after substitution is not a Rule 2-200 division-of-fees event.

Background and rules framework

The opinion interprets former California Rules of Professional Conduct 1-320 (no fee sharing with non-lawyers) and 2-200 (division of fees among lawyers). It anchors the public-policy analysis in Moran v. Harris (1982) and Turner v. Donovan (1935), and incorporates the workers' compensation statutes at Labor Code sections 3215, 3217, 4903, and 4906, and Title 8 Cal. Code Regs. sections 10775 and 10776.

Citations and references

Rules of Professional Conduct:

  • Former California Rule 1-320 (no fee sharing with non-lawyers)
  • Former California Rule 2-200 (division of fees among lawyers)

Statutes:

  • Labor Code sections 3215, 3217, 4903, 4906
  • Title 8 California Code of Regulations sections 10775, 10776

Cases:

  • Moran v. Harris, 131 Cal.App.3d 913 (1982), fee splitting among lawyers not against public policy
  • Turner v. Donovan, 3 Cal.App.2d 485 (1935)

Other opinions cited:

  • Cal. State Bar Formal Opinion 1994-138

See also

Source