Can a lawyer agree to pay a public interest organization a percentage of court-awarded attorney's fees on cases it refers?

Plain-English summary

A public interest litigation organization (PILO) proposed an agreement under which a percentage of the court-awarded attorney's fees the adversary pays in a referred case would go to a foundation affiliated with the PILO. The lawyer asked whether this was permitted.

The Commission held it was not. Bar Rule 3.3(e) prohibits a lawyer from sharing legal fees with a non-lawyer except in three narrow situations (payments to a deceased lawyer's estate, payment for a deceased lawyer's unfinished business, and profit-sharing retirement or compensation plans for employees), none of which applied. Neither the PILO nor its foundation is a lawyer or law firm, and the PILO is not licensed to practice in Maine. The Commission noted ABA authority (EC 3-6 and Formal Opinion 297) allowing a lawyer to work with legal-support organizations only where the lawyer keeps a direct relationship with the client, supervises the work, and bears complete professional responsibility, and where the organization's compensation is computed without regard to the legal fees collected. The proposed percentage-of-fee arrangement fell outside those bounds and amounted to splitting legal fees with a non-lawyer, which Rule 3.3(e) unambiguously forbids.

A concurring member added that the framing assumed the court-awarded fee was entirely the attorney's to dispose of. He observed that a court-awarded attorney's fee usually belongs to the client, not the attorney (such awards rest on statutes like 42 U.S.C.A. section 1988 or 5 M.R.S.A. section 213 that authorize fees to the party litigant), and is subject to the court's control until paid over. On that view, an agreement to divide a fee award between the client and the PILO, or a division ordered by the court, would not implicate Rule 3.3(e), because the lawyer would simply be accepting the client's (or the court's) distribution of the judgment rather than agreeing to split his own fee.

Currency note

This opinion was issued in 1986, 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 Treat this page as historical context, not current guidance.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 give a public interest organization a cut of court-awarded fees for referring a case?

A: The opinion concluded no. Paying a non-lawyer organization a percentage of the lawyer's court-awarded fees is prohibited fee splitting with a non-lawyer under Bar Rule 3.3(e).

Q: Does it matter that the organization supports public interest litigation?

A: The opinion concluded it does not. However worthy its mission, the PILO is not a lawyer or law firm and is not licensed to practice law in Maine, so the fee-sharing prohibition applies.

Q: Can a lawyer work with a legal-support organization at all?

A: The opinion noted that under ABA EC 3-6 and Formal Opinion 297 a lawyer may, if the lawyer keeps a direct relationship with the client, supervises the work, bears full professional responsibility, and the organization's compensation is set without regard to fees collected on particular cases.

Q: What did the concurrence add about court-awarded fees?

A: The concurrence observed that a court-awarded fee usually belongs to the client and is subject to the court's control, so an agreement to divide the award between the client and the organization, or a division the court orders, would not be barred by Rule 3.3(e).

Background and rules framework

The opinion interprets former Maine Bar Rule 3.3(e), which prohibits sharing legal fees with a non-lawyer subject to three narrow exceptions. This corresponds to ABA Model Rule 5.4(a) (a lawyer or firm shall not share legal fees with a non-lawyer, with limited exceptions), the rule protecting the lawyer's professional independence. The opinion relies on ABA EC 3-6 and ABA Formal Opinion 297 for the limits on working with non-lawyer legal-support organizations.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4(a) (sharing legal fees with a non-lawyer)
• Maine Bar Rule 3.3(e)

Statutes:

• 42 U.S.C.A. section 1988; 5 M.R.S.A. section 213 (statutory attorney's fee awards), cited in the concurrence

Cases (concurrence):

• International Travel Arrangers, Inc. v. Western Airlines, Inc., 623 F.2d 1255 (8th Cir. 1980)
• Sargent v. Sharp, 579 F.2d 645 (1st Cir. 1978)
• Carmel v. Hillsdale, 428 A.2d 548 (N.J. App. 1981)
• Miller v. Amusement Enterprises, Inc., 426 F.2d 534 (5th Cir. 1970)
• Farmington Dowel Products v. Foster Manufacturing Co., 421 F.2d 61 (1st Cir. 1970)

Other opinions cited:

• ABA Formal Opinion 297; ABA Code EC 3-6

See also

• ABA Formal Op. 93-374: Pro Bono Fee Sharing
• ABA Formal Op. 464: Fee Division Across Jurisdictions

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=91169

Original opinion text

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

Issued by the Professional Ethics Commission

Date Issued: March 14, 1986

Question

A Public Interest Litigation Organization ('PILO') wishes to enter into an agreement with an attorney to handle a case in which the PILO is interested under which a percentage of the attorney's fees which may be awarded by the court to be paid by the adversary party would be paid to a foundation affiliated with the PILO. This foundation 'is to direct its principal efforts toward initiating and supporting the educational and litigative activities of the PILO which can be funded with tax deductible contributions.' The attorney questions whether this arrangement is permitted by the Code of Professional Responsibility.

Opinion

Bar Rule 3.3(e) states that with three exceptions 'A lawyer or law firm shall not share legal fees with a non-lawyer.' The three exceptions involve (1) payments upon a lawyer's death by his firm or associates to his estate or named beneficiaries, (2) payment for unfinished legal business of a deceased lawyer, and (3) retirement or compensation plans to employees of a lawyer or law firm based upon profit-sharing arrangements. The exceptions to the general prohibition are very narrow and are not applicable to this matter.

Neither the PILO nor its foundation, despite their interest in, and concern for, law related matters, are lawyers or a law firm. The PILO is not licensed to practice law in the State of Maine and is not subject to the Code of Professional Responsibility. An informal opinion of the American Bar Association dealing with arrangements between lawyers and so-called legal support or consultation organizations has held that participation with, or engagement of, such organizations may be permissible if the lawyer 'maintains a direct relationship with his client, supervises the delegated work, and has complete professional responsibility for the work product.' See ABA Code of Professional Responsibility, E.C. 3-6. However, the inquiring attorney was cautioned that compensation of the consultant organization must be computed 'without regard to the legal fees collected by the attorneys requesting this service. . . . (A) contingent fee agreement between attorney and his non-lawyer employees is forbidden . . . Formal Opinion 297 states that an accountant employee of a law firm must be `paid a regular salary computed without regard to fees collected for legal services rendered to particular clients'.'[1]

Clearly the arrangement described in the present inquiry falls outside the bounds of permissible fee arrangements contemplated by the above ABA opinions. The prohibition of Rule 3.3(e) is unambiguous and does not permit the fee arrangement contemplated as it would involve splitting legal fees with a non-lawyer.[2]

Concurring Opinion

One member of the Commission believes the following comments should be added to the opinion.

Adopting an assumption encouraged by the form of the question and perhaps required by the proposed agreement, the opinion treats a court-awarded attorney's fee as entirely subject to the attorney's disposition. Given this assumption, the result can only be that division of the fee is barred by Rule 3.3(e). By thus limiting the question and answer, however, we risk misleading the bar, since a court-awarded attorney's fee is not necessarily subject to the attorney's control until it is actually paid over unconditionally to the attorney.

In the first place, the right to a court-awarded attorney's fee usually belongs, not to the attorney, but to the client. Such an award is nearly always based on explicit statutory authority, such as 42 U.S.C.A. section 1988 or 5 M.R.S.A. section 213. Generally those statutes authorize an award of attorney's fees to the party litigant, not to the attorney who represents that litigant. International Travel Arrangers, Inc. v. Western Airlines, Inc., 623 F.2d 1255 (8th Cir. 1980). Hence the courts have held that the existence of a private fee agreement with the attorney is irrelevant to an award of attorney's fees, both in cases in which the private agreement provides for payment of a sum greater than that awarded by the court, Sargent v. Sharp, 579 F.2d 645 (First Cir. 1978), and when the private agreement, such as it was, did not provide for payment of any attorney's fee. The latter includes the many cases in which courts have held that attorney's fees may be awarded despite representation of the plaintiff by a legal services organization or by some other entity devoted to providing free legal services. In many of those cases the opinions refer to the award as if it were an award to the attorney, but when the question has been presented it is clear that in reality the recipient is the client.

Since the award goes to the client, absent directions from the court, the client may decide how it is to be distributed. It may be paid to his attorney, or it may be kept by the client, as a reimbursement for fees already paid or otherwise. It seems clear that Rule 3.3(e) cannot prohibit an agreement for division of a fee award between client and PILO. An attorney who accepts employment subject to that agreement has not agreed to divide an attorney's fee within the meaning of Rule 3.3(e). He simply accepts the client's distribution of the judgment that may be recovered. Whether or not the public interest litigation organization provides any services for the attorney or for the client should not matter. The amount the defendant is required to pay as an allowance for costs and attorney's fees will have been determined by the court, after hearing, on the basis of such criteria as the court deems applicable; consequently, it is hard to see how the size of the attorney's fee could later be questioned.

In the second place, disposition of an allowance for attorney's fees is subject to the control of the Court. For example, in Carmel v. Hillsdale, 428 A.2d 548 (N.J. App. 1981), the court seems to have determined that the fee allowance would be paid to the American Civil Liberties Union, which would control subsequent distribution to cooperating attorneys and to itself. In Sargent v. Sharp, 579 F.2d 645 (First Cir. 1978), the court noted that the trial judge could restrict the application of any fee award paid by the defendant to reimbursement for amounts the plaintiff might already have paid to counsel, citing an earlier opinion in Farmington Dowel Products v. Foster Manufacturing Co., 421 F.2d 61 (First Cir. 1970).

The converse situation seems to have occurred in Miller v. Amusement Enterprises, Inc., 426 F.2d 534 (Fifth Cir. 1970), in which the Court of Appeals observed that the District Court could use its general equitable powers to insure that an award of attorney's fees actually reached the attorney and was not retained by the plaintiffs. If the court ordering an award decides that the allowance is to be divided between attorney and PILO, Rule 3.3(e) cannot be implicated. The PILO might present such a request pro se or through separate counsel, or the attorney may simply have agreed to disclose to any such court the terms of a cooperating attorney agreement to provide services pro bono, with the court to decide on the consequences.

Footnotes

[1] The facts do not indicate what, if any, services the PILO performs for the attorney in the matter. If none were performed then additional issues such as charging an excessive fee would be of concern.

[2] The Commission is aware that there may be instances where, pursuant to applicable Federal law, a court has awarded attorney's fees directly to PILO's. Those decisions are not relevant to the issue presented. Construction of federal statutes is beyond the jurisdiction of this Commission. However, the fact that a court may determine it can award "fees" to a PILO in a civil rights case has no relevance to whether an attorney and PILO can agree to split legal fees awarded to the attorney by a court.