Can a divorce lawyer take a contingent referral fee for sending the client's separate civil-rights claim to another lawyer?

Plain-English summary

Attorney A was handling a client's divorce and arranged for Attorney B to take the client's separate claim for aggravated assault against the husband under the Omnibus Crime Bill's gender-violence civil-rights remedy, which provides prevailing-plaintiff fees like 42 U.S.C. Sec. 1988. B agreed to take the civil-rights claim on contingency and to pay A a referral fee contingent on the recovery. The Commission was asked whether the contingent referral fee violated the Bar Rules, and what would change if A and B jointly negotiated an overall settlement of the divorce property division and the civil-rights claim together.

The Commission concluded that Bar Rule 8(c)(2), which bars contingent fees "in respect of the procuring of a divorce," did not reach the civil-rights claim, because a damages claim based on domestic violence is not an action to procure a divorce, and so the claim could be separated from the divorce. It cautioned, however, that an overall settlement covering both the marital property and the civil-rights claim could create a conflict of interest: A's duty to represent the client aggressively on the property division could be undermined by his interest in keeping enough of the husband's assets available to fund a generous civil-rights settlement (and thus a larger contingent referral fee).

The Commission identified two governing requirements. Bar Rule 3.3(d) permits a referral fee only where the client, after full disclosure, consents to the other lawyer's employment and to the fee-division terms. And Bar Rule 3.4(f)(2)(i) applied because A's referral-fee stake was a pecuniary interest in the civil-rights outcome that would be affected by the property division, so the terms had to be fair and reasonable to the client, disclosed in terms she could readily understand, and consented to in writing after she was given the opportunity to consult independent counsel. The Commission concluded the arrangement did not violate the Bar Rules on its face and would be permissible if A met those strict disclosure and consent conditions.

Currency note

This opinion was issued in 1995, 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: Could the divorce lawyer take a contingent referral fee on the client's civil-rights claim?

A: The opinion concluded yes in principle. It held that Rule 8(c)(2)'s ban on contingent fees for procuring a divorce did not reach a separate domestic-violence damages claim, so the contingent referral fee did not violate the rule on its face.

Q: What had to happen before the lawyer could collect it?

A: Strict disclosure and consent. The opinion concluded the lawyer had to satisfy Rule 3.3(d) (full disclosure and client consent to the referral and fee split) and Rule 3.4(f)(2)(i) (fair terms, understandable disclosure, written consent, and an opportunity to consult independent counsel).

Q: When did a conflict of interest arise?

A: On a combined settlement. The opinion reasoned that jointly settling the property division and the civil-rights claim could undermine A's duty to pursue the property division aggressively, since he had an interest in leaving the husband enough assets to fund a generous civil-rights recovery.

Background and rules framework

The opinion interprets Maine Bar Rule 8(c)(2) (contingent fees barred for procuring a divorce), Rule 3.3(d) (referral and division of fees, requiring full disclosure and client consent), and the business-transaction provision Rule 3.4(f)(2)(i). These correspond to ABA Model Rule 1.5(e) (division of fees among lawyers), Model Rule 1.7 (concurrent conflicts), and Model Rule 1.8(a) (business transactions and pecuniary interests adverse to a client).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5(e) (division of fees among lawyers)
• Model Rule 1.7 (concurrent conflicts of interest)
• Model Rule 1.8(a) (business transactions; pecuniary interest adverse to client)
• Maine Bar Rule 8(c)(2), 3.3(d), 3.4(f)(2)

Statutes:

• 42 U.S.C. Sec. 1988 (attorney's fees); the Omnibus Crime Bill gender-violence civil-rights remedy

See also

• ABA Formal Op. 487: Fee Split With Prior Counsel
• ABA Formal Op. 94-388: Relationships Among Law Firms

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=89762

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 12, 1995

Facts

Attorney A is handling a divorce matter. He has arranged with Attorney B to undertake representation of his divorce client with respect to a claim of aggravated assault against her husband. Under the recent Omnibus Crime Bill, a civil rights type remedy is available with respect to certain acts of violence against any person or property which are based on the gender of the victim. Under the Act, attorneys? fees are available to a prevailing plaintiff in the same manner as provided under 42 U.S.C. §1988. Attorney B has agreed to undertake the civil rights claim on a contingency basis and to pay a referral fee to A which is contingent on the size of the recovery. The Commission has been asked if the contingent fee arrangement would violate the Bar Rules. We are also asked what the result would be if A and B were jointly to negotiate an overall settlement of the property division issues in the divorce action and of the civil rights claim.

Opinion

Bar Rule 8(c) (2) prohibits contingent fee arrangements ?in respect of the procuring of a divorce, annulment of marriage or legal separation.? However, the Commission sees no reason to conclude that the civil rights claim may not be separated from the divorce. After all, a claim for damages based on domestic violence is not an action to ?procur(e) a divorce.?

The Commission has not been advised regarding the division of fees between A and B which would result if there were to be an over‑all settlement involving the marital property issues as well as the civil rights claim. However, it is conceivable that these arrangements could create a conflict of interest if A?s obligation to represent C aggressively in connection with the division of property in the divorce settlement were undermined by his desire to make sure that her ex‑husband retained sufficient assets to fund a generous settlement of the civil rights claim.[1]

A disclosure requirement is imposed by Rule 3.3(d) dealing with the division of fees. That rule limits referral fees to cases in which the client, ?after full disclosure, consents to employment of the other lawyer and to the terms for the division of fees .?[2] The proposed fee arrangement does not on its face violate the Bar Rules, however, and would be acceptable if A is able to satisfy the strict disclosure and consent requirements which the rule imposes.

Bar Rule 3.4(f)(2) also appears to be implicated by the proposed division of fees. That rule states that:

(2) Avoiding Adverse Interest.

(i) A lawyer shall not knowingly acquire a property or pecuniary interest adverse to a client, or enter into any business transaction with a client, unless:

(A) The transaction and terms in which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted to the client in manner and terms which should have reasonably been understood by the client;

(B) The client is advised and given a reasonable opportunity to seek independent professional advice of counsel of the client?s choice on the transaction; and

(C) The client consents in writing thereto.

In this case, Attorney A?s ?pecuniary interest? in the transaction arises from the fact that, by virtue of the fee arrangement with B, he has acquired a stake in the outcome of the settlement of the civil rights claim which will, in turn, be affected by the division of the marital property. A is, therefore, subject to the stringent requirements of the rule which requires that the terms of the fee division be fair to the client, be disclosed to her in terms she can readily understand, and that her consent to the arrangement be given in writing after having been afforded the opportunity to discuss it with independent counsel. If these conditions can be met, however, the fee arrangement described is permissible.

Footnotes

[1] Presumably, A?s percentage of the contingent fee will increase in direct proportion to the size of the share of the marital property used to fund the husband?s settlement of the civil rights action.

[2] The adequacy of the disclosure would presumably be closely scrutinized in any subsequent proceeding challenging A?s fee since the client would seem to have little to gain by agreeing to the proposed referral fee arrangement.