Can a lawyer pay a bar association referral service a fee when that service will share it with another bar association's referral service?

Plain-English summary

The opinion addresses a referral chain among bar association lawyer referral services. When a client contacts one bar association's referral service that cannot place the matter (no qualified attorney on its list, or the client needs a lawyer in another geographic area), that service may refer the client to a second bar association's referral service. If the second service places the client with an attorney who pays it a referral fee, the question is whether the second service may share that fee with the first, and whether the attorney may pay the fee under this arrangement.

The committee grounds the analysis in Rule 7.2(a), which generally bars a lawyer from compensating anyone for recommending the lawyer's employment, subject to an exception for a "qualified legal assistance organization." Rule 1.0(p) and Rule 7.2(b)(1)-(4) define that term to include bar association legal referral services. Citing NYSBA Op. 651, the committee notes that a lawyer may pay such a service a percentage of the fees from referred clients. It observes that a referral service is not itself directly governed by the Rules (it is not a "law firm" under Rule 1.0(h)), but the Rules still shape how lawyers may interact with such services, and Rule 8.4(a) bars a lawyer from assisting another lawyer in violating the Rules.

The committee concludes that one lawfully operated referral service may cooperate with and share referral fees with another, as long as the lawyer's required payment is not increased because it will be divided. Both services contributed to the ultimate referral, so either may charge the lawyer a fee, and the sharing causes none of the harms the fee-splitting rule guards against. The committee flags a limit: the analysis would be different if the original referral came from a person or entity that is not a qualified legal assistance organization (for example, an acquaintance of the client), because paying that person would function as a forbidden indirect referral fee under Rule 7.2(a), and referral services may not be operated for private individuals' profit.

In practice

Under this opinion, conduct in which a lawyer pays a bar association referral service that shares the fee with another bar association referral service is permitted, as the rules stood at the time, provided both services are qualified legal assistance organizations operating in conformity with the Rules and the total fee the lawyer pays is not increased because of the split. The opinion holds that the result would change if the upstream referral came from someone who is not a qualified legal assistance organization, because compensating that person would be a prohibited indirect referral fee under Rule 7.2(a).

Common questions

Q: Can I pay a bar association referral service a percentage of my fee from a referred client?

A: Yes. The opinion, citing NYSBA Op. 651, treats Rule 7.2(a)'s exception for qualified legal assistance organizations as permitting payment of the usual and reasonable charges, including a percentage of fees from referred clients.

Q: Does it matter that the referral service will split my fee with a second referral service?

A: No, within limits. The opinion concludes both services may share the fee as long as both are qualified legal assistance organizations and the total fee you pay is not increased because it will be divided.

Q: What if a non-lawyer or an acquaintance made the first referral?

A: The opinion says the outcome changes. Sharing the payment with a person or entity that is not a qualified legal assistance organization would function as a forbidden indirect referral fee under Rule 7.2(a).

Background and rules framework

The opinion interprets New York Rule of Professional Conduct 7.2 (payment for referrals; Model Rule 7.2), including the qualified-legal-assistance-organization exception in Rule 7.2(b)(1)-(4) and the definitions in Rules 1.0(h) (law firm) and 1.0(p) (qualified legal assistance organization). It applies Rule 8.4(a) (assisting another's rule violation; Model Rule 8.4) and relies on NYSBA Op. 651 on percentage-based referral payments to bar association services.

Citations and references

Rules of Professional Conduct:

• Model Rule 7.2 / NY RPC 7.2 (payment for recommending a lawyer; qualified-organization exception)
• Model Rule 8.4(a) / NY RPC 8.4(a) (assisting another lawyer's rule violation)
• NY RPC 1.0(h), 1.0(p) (definitions of "law firm" and "qualified legal assistance organization")

Cases:

• Emmons, Williams, Mires & Leech v. State Bar of California, 86 Cal. Rptr. 367 (Ct. App. 1970), fee-splitting concerns

Other opinions cited:

• NYSBA Ethics Op. 651 (1993): percentage payments to bar association referral services
• NYSBA Ethics Op. 917 (2012): a lawyer may not accept referrals from a non-lawyer marketer engaged in in-person solicitation

See also

• ABA Formal Op. 474: Referral fees and conflicts of interest
• NYC Bar Ethics Op. 2009-04: Payments for pro bono referrals
• ABA Formal Op. 501: Solicitation of clients

Source

• Landing page: https://www.nycbar.org/reports/formal-opinion-2017-1-payment-of-fees-to-a-legal-referral-service/