Can a lawyer team up with a nonlawyer claims recovery firm that signs up clients, hires the lawyer to bring their antitrust claims, takes a one-third contingent commission, and pays the lawyer out of that commission?
NY State Bar Ethics Opinion 1068: Joining with a claims recovery firm; aiding UPL, referrals, and fee-splitting
Short answer: A lawyer may not join a nonlawyer claims recovery firm to offer legal services to the public on a systematic, continuing basis, because such a firm is not on the Appellate Division's approved list under Rule 5.8; any permitted non-exclusive referral arrangement must avoid interference with the lawyer's independent judgment, improper solicitation, aiding the unauthorized practice of law, and improper fee-splitting.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.
Plain-English summary
A nonlawyer claims recovery firm signs up businesses that may be entitled to class-action settlement money and handles their claims for a one-third contingent commission (¶¶ 1-2). The firm proposed to extend that model to antitrust claims: it would identify what it believed were colorable antitrust damages claims, act as the client's agent to engage legal counsel (possibly the inquirer exclusively), gather documents, take a one-third commission, and pay the lawyer a percentage of that commission (¶ 3). The inquirer asked whether a lawyer could enter such an arrangement (¶ 4).
The committee identified four recurring concerns with lawyer-nonlawyer arrangements and analyzed each (¶ 5). On multidisciplinary practice, Rule 5.8(a) bars a contractual relationship with a nonlegal professional firm to offer legal and nonlegal services to the public on a systematic and continuing basis unless the firm's profession is on the Appellate Division list maintained under Section 1205.3. Claims recovery firms are not on that list, so an exclusive relationship is prohibited; the committee cited N.Y. State 992 (2013), 976 (2013), and 930 (2012) (¶¶ 6-8). Rule 5.8(c) exempts solely non-exclusive reciprocal referral arrangements, but the committee said the facts did not clearly fit that exemption and that the other concerns still apply (¶ 9).
On interference with the lawyer-client relationship, the committee invoked Rule 5.4(c)'s bar on letting a payer direct the lawyer's professional judgment (¶ 10). On solicitation, it explained that under Rule 8.4(a) a lawyer may not have a nonlawyer do indirectly what the lawyer cannot do directly, such as in-person solicitation, citing N.Y. State 885 (2011); it distinguished the insurance-defense model, which is authorized because the insured is the client and has contractually authorized the insurer to retain counsel (¶¶ 11-13). On aiding the unauthorized practice of law under Rule 5.5(b), the committee said it does not decide what constitutes UPL but looks at the lawyer's conduct, and that the firm's antitrust activities raise serious UPL questions; applying its "substantial assistance" test, it concluded that because the firm would provide significant services in the legal matter and could not act without the lawyer, the lawyer's participation would aid UPL if the firm's conduct is unauthorized practice (¶¶ 14-20). On fee-splitting under Rule 5.4(a), the committee reconciled its prior opinions: a lawyer may share a contingent fee with the firm only if the firm provides substantial services commensurate with its compensation, and the lawyer may not reduce the lawyer's own fee in a way that is in effect a referral fee, nor charge a full fee while offloading work to a paid nonlawyer (¶¶ 21-25).
In practice
Under the New York rules as they stood at the time of the opinion, the committee held that a lawyer may not partner with a claims recovery firm to offer legal services to the public on a systematic and continuing basis, because the firm is not on the Appellate Division's Section 1205.3 list. The opinion frames the permitted path narrowly: even a genuine non-exclusive reciprocal referral arrangement under Rule 5.8(c) must keep the lawyer's independent judgment intact, avoid the firm soliciting business the lawyer could not solicit, avoid aiding the unauthorized practice of law, and avoid improper fee-splitting. On fees, the committee's test is whether the nonlawyer's compensation matches the value of the services it actually performs; if the firm is merely signing up clients and passing them to the lawyer, its cut is a prohibited referral fee, and the lawyer cannot reduce the lawyer's own fee to fund it. The committee distinguished the insurance-defense model, where the arrangement is authorized because the insured is the client and has authorized the insurer to retain counsel.
Common questions
Q: Can a lawyer contract with a nonlawyer claims recovery firm to provide legal services to its clients?
A: Not on a systematic and continuing basis. The committee concluded that because claims recovery firms are not on the Appellate Division list under Rule 5.8(a), such an arrangement (especially an exclusive one) is prohibited (¶¶ 7-8, 26).
Q: When does accepting referrals from a nonlawyer firm aid the unauthorized practice of law?
A: When the lawyer provides substantial assistance to the nonlawyer's own practice-of-law activity. The committee concluded that because the firm would provide significant services in the legal matter and could not act without the lawyer, the lawyer's participation would aid UPL if the firm's conduct is unauthorized practice (¶¶ 19-20).
Q: Can the lawyer share a contingent fee with the claims recovery firm?
A: Only if the firm provides substantial services in the proceeding and its compensation is commensurate with those services, and the lawyer's fee is not reduced so the reduction is in effect a referral fee. Merely signing up and passing on clients does not qualify (¶¶ 24-26).
Q: Isn't this like an insurance company hiring a lawyer for its insured?
A: No. The committee distinguished insurance defense because the insured is the client and has contractually authorized the insurer to retain counsel, an arrangement long authorized by New York's rules; the claims recovery arrangement lacks that footing (¶¶ 12-13).
Background and rules framework
The opinion interprets New York Rules 5.8(a) (contractual relationships with nonlegal professional firms), 5.5(b) (aiding the unauthorized practice of law), 5.4(a), (b), (c) (sharing fees with and independence from nonlawyers), 7.2 (payment for referrals), 8.4(a) (acting through another), and 1.5(a) (reasonable fees), with Rules 1.2 and 1.4(a) on client control and communication. Rule 5.8 is a New York-specific multidisciplinary-practice rule with no direct ABA Model Rule counterpart; the related fee, UPL, and referral provisions correspond to ABA Model Rules 5.4, 5.5, 7.2, 8.4, and 1.5. The analysis turns on whether the firm's profession is on the Appellate Division Section 1205.3 list and on whether the firm's compensation matches services it actually renders.
Citations and references
Rules of Professional Conduct:
- NY RPC 5.8(a), (c) (contractual relationships with nonlegal professional firms; New York-specific)
- MR 5.5 / NY RPC 5.5(b) (aiding the unauthorized practice of law)
- MR 5.4 / NY RPC 5.4(a), (b), (c) (sharing fees with nonlawyers; professional independence)
- MR 7.2 / NY RPC 7.2(b) (payment for recommending services)
- MR 8.4 / NY RPC 8.4(a) (violating the rules through the acts of another)
- MR 1.5 / NY RPC 1.5(a) (reasonable fees)
Statutes:
- N.Y. Judiciary Law §§ 478, 484, 485-a, 495 (unauthorized practice of law)
Cases:
- In re Lefkowitz, 47 A.D.3d 326 (1st Dep't 2007), attorney aided UPL by an immigration-services entity
Other opinions cited:
- N.Y. State 705 (1998): accepting engagements from a nonlawyer tax reduction company; fee allocation
- N.Y. State 885 (2011): referrals from a nonlawyer property tax firm; no disguised referral fee
- N.Y. State 992 (2013), 976 (2013), 930 (2012): exclusive arrangements with off-list nonlawyer firms
- N.Y. State 698 (1998): "package deal" with a medical consultant as improper referral payment
See also
- NY State Bar Op. 1081: Lawyers employed by a debt-management company
- NY State Bar Op. 1082: Providing legal services through a nonlawyer-owned company
- NY State Bar Op. 1093: Dual practice with a foreign nonlawyer partnership
Source
- Landing page: https://nysba.org/ethics-opinion-1068/