May a California lawyer serve as a partner of one law firm and simultaneously as a partner or employee of a second firm and share in the fees generated by both without the disclosure and written-consent process required by former Rule 2-200?
LACBA Ethics Opinion 511: Sharing Fees Across Two Law Firms
Short answer: Under former California Rules 2-200 and 1-100 as analyzed in this opinion and as construed in Chambers v. Kay, 29 Cal.4th 142 (2002), a lawyer who is not a true partner or common-law employee of a second firm must obtain the client's informed written consent after written disclosure before sharing in fees generated by that second firm. A joint venture, a labels-only employment relationship in which the "employee" controls the employer, or an arrangement structured to evade Rule 2-200 will not qualify. The lawyer must also address conflicts under former Rule 3-310 (treating clients of both firms as the lawyer's clients), firm-name accuracy under former Rule 1-400, and the duty to keep the client informed under former Rule 3-500.
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
The committee considers an estate-planning attorney who is a partner in ABC firm and proposes either (1) a "joint venture" with firm DEF in which the attorney shares fees generated at DEF for the long-standing client's project (including DEF matters in which the attorney provides no services), or (2) becoming an employee of DEF while remaining a partner of ABC. The attorney does not propose to make the disclosures or obtain the written consent required by former Rule 2-200(A).
The committee anchors its analysis in Chambers v. Kay (Cal. 2002), in which the Supreme Court held that a joint-venture relationship between lawyers does not satisfy Rule 2-200's exemption for partners, associates, or shareholders. The Chambers court overruled prior Court of Appeal authority allowing fee sharing without consent when both lawyers contributed substantial effort, and held that Rule 2-200 applies to any fee division between lawyers not in a true partner or common-law employment relationship, regardless of the quantum of work each performed. The Chambers court tied "associate" status to common-law employer-employee analysis under Rule 1-100(D)(4) and tied "partnership" to continuing co-ownership, sharing of profits and losses, and joint control (Weiner v. Fleischman; Bank of California v. Connolly).
The committee identifies a narrow path under COPRAC Opinion 1994-138: an arrangement in which one firm bills a client at a lawyer's regular hourly rate and pays the full collected amount to the lawyer with no retention is not a "division" of fees and Rule 2-200 does not apply. If the proposed arrangement is structured so neither ABC nor the attorney retains any portion of the second firm's fees, that exception applies. The inquiry's facts, however, contemplate retention beyond the attorney's services-only rate.
The committee further identifies issues with the "employee" alternative: a labels-only employment relationship in which the "employee" earns minimal wages but receives substantial compensation through fee sharing, or in which the employee controls the employer, will not be treated as Rule 2-200-compliant employment. The committee directs the attorney to evaluate whether the structure is designed to evade the disclosure obligation.
Beyond fee sharing, the committee identifies three further duties. First, under former Rule 3-310 and COPRAC Opinion 1994-138 (citing People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, 20 Cal.4th 1135 (1999)), the lawyer must treat clients of both ABC and DEF as the lawyer's own clients for conflicts analysis. Second, under former Rule 1-400(D) and Standard 9, the use of two firm names concurrently is presumptively misleading; the attorney bears the burden of showing it is not, and that burden may turn on whether the arrangement meets Rule 2-200. Third, under former Rule 3-500 and Bus. & Prof. Code section 6068(m), and the fiduciary disclosure duty from Neel v. Magana, the lawyer must consider whether the structure, fee arrangements, and supervisory identity are sufficiently important to require disclosure to the client even apart from Rule 2-200.
In practice
The opinion holds that, under former California Rule 2-200 as it stood in 2003 and as construed in Chambers v. Kay, a lawyer who is not a true partner or common-law associate of the second firm cannot share in that firm's fees without the disclosures and written consent required by Rule 2-200(A). The narrow exception is the no-retention arrangement of COPRAC Opinion 1994-138 (firm acts as a collection agent for the lawyer's services billed at the lawyer's normal rate). The committee separately identifies parallel conflicts, firm-name, and disclosure duties that apply regardless of whether the fee-sharing structure satisfies Rule 2-200.
California's professional-conduct rules were revised effective November 1, 2018; former Rule 2-200 corresponds substantially to current Rule 1.5.1 (division of fees among lawyers not in the same firm). The committee's analysis predates the 2018 revisions.
Common questions
Q: Can a California lawyer share in fees generated by a second firm without telling the client?
A: Per the opinion, only if the lawyer is a true partner or common-law associate of the second firm. Following Chambers v. Kay, a joint venture or labels-only employment does not qualify; without true partner or associate status, Rule 2-200 requires written disclosure and written client consent.
Q: Does it matter whether the second firm's clients are the lawyer's clients on the matter?
A: Per the opinion, Rule 2-200 still applies because the rule reaches any division of fees, not only referral fees, and does not depend on the quantum of work performed by each lawyer.
Q: When does Rule 2-200 not apply to cross-firm billing?
A: Per the opinion's reading of COPRAC Opinion 1994-138, when one firm acts as a collection agent, billing the client at the lawyer's regular hourly rate and paying the full collected amount to the lawyer with no retention by the firm, there is no division of fees within Rule 2-200's reach.
Q: Does a true joint venture between two firms satisfy Rule 2-200's "partnership" exemption?
A: Per the opinion's reading of Chambers v. Kay, no. The Supreme Court read "partnership" in Rule 2-200 to require a continuing business relationship with co-ownership, sharing of profits and losses, and joint control; a joint venture organized around a specific transaction does not qualify.
Q: Can the lawyer simply become an "employee" of the second firm?
A: Per the opinion, only if the relationship is a true common-law employer-employee relationship. An arrangement labeled as employment but structured around minimal wages plus substantial fee sharing, or in which the "employee" controls the "employer," will not satisfy Rule 2-200.
Q: Are there other duties beyond fee-sharing rules?
A: Per the opinion, yes. The lawyer must treat clients of both firms as the lawyer's own for conflicts purposes (Rule 3-310; SpeeDee Oil); concurrent use of two firm names creates a Rule 1-400(D) presumption of misleading communication that the lawyer must rebut; and the lawyer must consider whether Rule 3-500 and section 6068(m) require disclosing the structure and supervisory identity to the client.
Background and rules framework
The opinion interprets former California Rules of Professional Conduct 1-100 (definitions including "law firm" and "associate"), 1-400(D) and Standard 9 (firm-name and communications), 2-200 (division of fees among lawyers not in the same firm), 3-310 (avoidance of representation of adverse interests), and 3-500 (client communication), along with Bus. & Prof. Code sections 6068(m) and 6106. It anchors its analysis in Chambers v. Kay (Cal. 2002), Neel v. Magana, Olney, Levy, Cathcart & Gelfand (Cal. 1971), and People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (Cal. 1999).
Citations and references
Rules of Professional Conduct:
- Former California Rule 1-100 (definitions including "law firm" and "associate")
- Former California Rule 1-400 (advertising, including Standard 9)
- Former California Rule 2-200 (division of fees with lawyers not in same firm)
- Former California Rule 3-310 (avoidance of representation of adverse interests)
- Former California Rule 3-500 (client communication)
Statutes:
- Bus. & Prof. Code section 6068(m) (duty to keep clients informed)
- Bus. & Prof. Code section 6106
Cases:
- Chambers v. Kay, 29 Cal.4th 142 (Cal. 2002), joint venture does not satisfy Rule 2-200
- Bank of California v. Connolly, 36 Cal.App.3d 350 (1973), partnership versus joint venture
- Martinez v. County of Los Angeles, 87 Cal.App.3d 189 (1978)
- Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal.3d 176 (Cal. 1971), fiduciary duty of full disclosure
- People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc., 20 Cal.4th 1135 (Cal. 1999), imputed conflicts
- Weiner v. Fleischman, 54 Cal.3d 476 (Cal. 1991), distinction between partnership and joint venture
Other opinions cited:
- Cal. State Bar Formal Opinion 1994-138: no-retention billing arrangement is not a division of fees
- LACBA Formal Opinion 473
See also
- LACBA Opinion 467: Referral Fees to Suspended Attorneys
- LACBA Opinion 470: Year-End Bonus to Of-Counsel
- LACBA Opinion 501: Conflicts of Interest Changing Law Firms
Source
- Landing page: https://lacba.org/?pg=ethics-opinions
- Original PDF: https://lacba.org/docDownload/2010592