Can a North Carolina lawyer charge another lawyer a referral fee, set it as a percentage or flat amount, and how much must the client be told?

Plain-English summary

The opinion answered a series of inquiries about a lawyer who wanted to refer cases to another lawyer in exchange for a referral fee equal to ten percent of the fee the second lawyer earned. The opinion concluded that the referring lawyer may charge and receive such a fee, provided the requirements of Rule 2.6(d) are met. That rule allows lawyers not in the same firm to divide a fee either in proportion to the services each performs, or, if not in proportion, by a written agreement with the client under which each lawyer assumes joint responsibility for the representation. A referral fee typically falls in the latter category, so a lawyer who takes a referral fee remains responsible for the competent and ethical handling of the matter. Regardless of how the fee is split, the client must be advised of and not object to the participation of all the lawyers, and the total fee must be reasonable.

Applying that framework, the opinion concluded that a referral fee may be based on a percentage of the fee charged by the lawyer who takes the referral, with no maximum percentage; that a flat referral fee is also permitted, again with no limit on amount, so long as the total fee is reasonable, the client does not object, and each lawyer assumes joint responsibility by written agreement; that the client must be informed that a referral fee is being paid; but that the client need not be told or consent to the amount of the referral fee, because the Comment to Rule 2.6 provides that paragraph (d) does not require disclosure of the share each lawyer is to receive.

Currency note

This opinion was issued in 1995, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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 North Carolina lawyer take a referral fee from another lawyer?

A: Yes, if Rule 2.6(d) is met. The opinion concluded the referring lawyer may charge a referral fee where the client is advised of and does not object to all lawyers' participation, each lawyer assumes joint responsibility (or the split is proportional), and the total fee is reasonable.

Q: Can the referral fee be a percentage, and is there a maximum?

A: Yes, and no. The opinion concluded a referral fee may be based on a percentage of the fee the receiving lawyer charges, with no maximum percentage, provided Rule 2.6(d) is satisfied.

Q: Does the client have to be told a referral fee is being paid?

A: Yes, that one is being paid. The opinion concluded the client must be informed that a referral fee is paid to the referring lawyer, under Rule 2.6(d)(1) and (2).

Q: Must the client be told and consent to the amount of the referral fee?

A: No. The opinion concluded the client need not be told or consent to the amount, because the Comment to Rule 2.6 says paragraph (d) does not require disclosure of each lawyer's share.

Background and rules framework

The opinion applied North Carolina's then-current Rule 2.6(d), the fee-division provision corresponding to Model Rule 1.5(e). That rule permits a division of a fee between lawyers not in the same firm where the split is proportional to services, or where each lawyer assumes joint responsibility by written agreement, the client is advised of and does not object to the participation of all lawyers, and the total fee is reasonable.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees; division of fees between lawyers)
• North Carolina Rule 2.6(d)

See also

• NC Ethics Op. RPC 94: private lawyer referral service
• NC Ethics Op. RPC 231: contingent fee on gross recovery and insurer claim

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-205/

Original opinion text

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

Inquiry #1:

Attorney A would like to refer cases to Attorney B in exchange for a referral fee in the amount of ten percent of the fee earned by Attorney B on each case referred. May Attorney A charge and receive a fee from Attorney B for referring cases?

Opinion #1:

Yes, provided that Attorney A complies with the requirements of Rule 2.6(d) of the Rules of Professional Conduct. As the comment to that rule notes, "[a] division of a fee facilitates association of more than one lawyer in a matter in which neither alone could serve the client as well." Rule 2.6(d)(1) allows lawyers who are not in the same firm to divide a fee in one of two ways: (a) in proportion to the services performed by each lawyer, or (b) if the fee division is not in proportion to the services performed by each lawyer, by a written agreement with the client whereby each lawyer assumes joint responsibility for the representation. A referral fee would typically fall within the latter category. Thus, whenever a lawyer accepts a fee for referring a case to another lawyer, the lawyer remains responsible for the competent and ethical handling of the matter. Regardless of whether the fee is in proportion to the services rendered, the client must be advised of and not object to the participation of all lawyers involved and the total fee paid by the client must be reasonable. Rule 2.6(d)(2) and (3).

Inquiry #2:

May a referral fee be based upon a percentage of the fee charged to the client by the lawyer to whom the case is referred?

Opinion #2:

Yes, provided the requirements of Rule 2.6(d) are satisfied.

Inquiry #3:

If a referral fee may be based upon a percentage of the fee charged to the client by the lawyer accepting a referral, is there a maximum percentage for such a referral fee?

Opinion #3:

No. See opinion #2 above.

Inquiry #4:

May a flat fee be charged for the referral of a case to another lawyer?

Opinion #4:

Yes, provided the total fee is reasonable, the client does not object, and, by written agreement with the client, each lawyer assumes joint responsibility for the representation. Rule 2.6(d).

Inquiry #5:

If a flat fee for a referral is permissible, is there a limit on the amount of the flat fee that may be charged for the referral?

Opinion #5:

No. See opinion #4 above.

Inquiry #6:

Does the client have to be informed that a referral fee is being paid to the referring lawyer?

Opinion #6:

Yes. Rule 2.6(d)(1) and (2).

Inquiry #7:

Must the client be told and consent to the amount of the referral fee paid to the referring lawyer?

Opinion #7:

No. As noted in the comment to Rule 2.6, "[p]aragraph (d) does not require disclosure to the client of the share that each lawyer is to receive."