May a lawyer accept a contingent-fee client referred by an independent nonlawyer paralegal advisor who has a separate contract for 17% of the client's recovery?

Plain-English summary

An attorney proposed to accept a client referred by a self-described "independent paralegal advisor" who is not the attorney's employee and receives no payment from the attorney. The attorney would represent the client on a standard contingent fee, knowing the client also had a separate contract with the advisor entitling the advisor to 17% of any benefits the client received from the attorney's work, so that the client's total fees on recovery would equal 50% of the amount collected.

The Commission concluded that, strictly on these facts, the lawyer may accept the referred client without violating the Maine Bar Rules, assuming the lawyer and the advisor are completely independent with no ongoing cooperative relationship. Although Rule 3.3(a) bars an "illegal or excessive fee" in contingent fee agreements, the lawyer's own independent agreement with the client comports with customary percentages and so does not violate the rule. Assuming no present or ongoing agency or cooperative arrangement, Rule 3.9(f)(2)'s prohibition on paying compensation or a reward for referrals does not bar the conduct, and the arrangement is not a "sharing" of a fee with a non-lawyer under Rule 3.3(e).

The Commission added a note of caution: additional facts could dictate a contrary result. If the lawyer and the advisor jointly developed a referral arrangement to benefit both financially on an ongoing, repeated basis, the lawyer still could not directly compensate or reward the non-lawyer for referrals or share legal fees, and such a plan, created as part of a joint venture, would "violate, circumvent or subvert" Rules 3.9(f)(2) and 3.3(e) if it were in essence designed to accomplish what those rules forbid. A footnote also reminded the lawyer to satisfy himself that taking the representation with knowledge of the 17% agreement does not violate substantive law (citing Maine's champerty and accomplice-liability statutes), a question outside the Commission's authority.

Currency note

This opinion was issued in 1992, before Maine's replacement of the former Maine Bar Rules with the Maine Rules of Professional Conduct (effective August 1, 2009). 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer take a client referred by a nonlawyer who has a separate fee arrangement with that client?

A: The opinion concluded yes on the stated facts, assuming the lawyer and the nonlawyer advisor are completely independent with no ongoing cooperative relationship.

Q: Is the lawyer's contingent fee excessive because the client also owes the advisor 17%?

A: The opinion concluded no. It treated the lawyer's own agreement, which comports with customary percentages, as not excessive under Rule 3.3(a); the advisor's separate 17% is a distinct contract.

Q: Does the referral count as a barred referral payment or fee-sharing with a non-lawyer?

A: The opinion concluded no, assuming no present or ongoing agency or cooperative arrangement; there is no payment by the lawyer for the referral under Rule 3.9(f)(2) and no fee-sharing under Rule 3.3(e).

Q: What facts would change the result?

A: The opinion warned that a referral plan jointly developed to benefit both on an ongoing basis would "violate, circumvent or subvert" Rules 3.9(f)(2) and 3.3(e) if designed to accomplish what those rules forbid.

Background and rules framework

The opinion interprets Maine Bar Rule 3.3(a) (no illegal or excessive contingent fee), Rule 3.9(f)(2) (no compensation or reward to a person for recommending the lawyer's employment), and Rule 3.3(e) (no sharing of legal fees with a non-lawyer). These correspond to ABA Model Rule 1.5 (fees), Model Rule 7.2 (payment for referrals), and Model Rule 5.4 (sharing fees with non-lawyers).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 (fees); Model Rule 7.2 (payment for referrals); Model Rule 5.4 (sharing fees with non-lawyers)
• Maine Bar Rule 3.3(a), 3.3(e), 3.9(f)(2)

Statutes:

• 17-A M.R.S.A. § 516 (champerty); 17-A M.R.S.A. § 57 (accomplice liability)

Other opinions cited:

• Maine Professional Ethics Commission Op. 60: deference where the question turns on the Maine Criminal Code

See also

• Maine Ethics Op. 133: Referral Service Fee Remittances
• Maine Ethics Op. 145: Referral Fee Barred by Conflict
• ABA Formal Op. 464: Fee Division With Nonlawyers

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=89847

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Issued by the Professional Ethics Commission

Date Issued: May 6, 1992

Question

An attorney proposes to accept a client by referral from a self-described "independent 'paralegal' advisor" who is not an employee of the attorney, and who does not receive any type of payment directly from the attorney. The attorney questions the ethical propriety of accepting the client's case on a standard contingent fee basis when the attorney knows that there is also a contract directly between the client and the "independent 'paralegal' advisor" whereby the advisor will receive 17% of any benefits received by the client as a result of the attorney's work. Thus, the attorney knows that the total fees to be paid by the client in the event of recovery would equal 50% of the amounts collected.

Opinion

We believe that strictly upon the facts presented, the lawyer may accept the referred client without violating any provision of the Maine Bar Rules. We assume in so concluding that the lawyer and the "independent 'paralegal' advisor" are in fact completely independent from one another and that there exists no ongoing cooperative relationship between them. Under such circumstances, although Rule 3.3(a) governing contingent fee agreements prohibits a lawyer from charging or collecting an "illegal or excessive fee," because the lawyer's own independent agreement with the client in question comports with customary percentages there is no violation of that rule. Similarly, assuming no present or ongoing agency or cooperative arrangement between the attorney and the "independent 'paralegal' advisor," Rule 3.9(f)(2) prohibiting the payment of compensation or reward for referral would not prohibit the attorney's conduct. Finally, on such facts the proposed referral cannot be said to involve the "sharing" of a fee with a non-lawyer in violation of Rule 3.3(e). Thus, the lawyer's proposed conduct would be ethically proper.[1]

In conclusion, however, a note of caution must be observed. We can readily postulate the existence of additional facts beyond those provided here which would necessarily dictate a contrary result. For example, the lawyer and the "independent 'paralegal' advisor" might jointly develop a referral arrangement in order to benefit both of them financially on an ongoing, repeated basis. Of course, the attorney could not directly compensate or reward the non-lawyer for the referrals, nor share "legal fees" with a non-lawyer. See Rule 3.9(f)(2) and Rule 3.3(e). Such a referral plan, created as part of a joint venture, would "violate, circumvent or subvert" those provisions of the Maine Bar Rules if the plan were in essence designed to accomplish what otherwise is expressly forbidden.

Footnote

[1] Of course, the lawyer should still satisfy him or herself that taking up representation of the client with full knowledge of the pre-existing 17% contingent fee agreement between the client and the non-lawyer "independent 'paralegal' advisor" does not otherwise constitute a violation of substantive law beyond the relatively narrow question of propriety under the Maine Bar Rules. See, e.g. 17-A M.R.S.A. § 516 (champerty); 17-A M.R.S.A. § 57 (accomplice liability). Cf. Opinion No. 60: "Since the ultimate determination of an attorney's duty in such cases depends on the application and interpretation of the Maine Criminal Code, we conclude that we are unable to authoritatively answer the questions." (p. 216)