Can a bar association referral service require lawyers to remit a percentage of the fees earned from referred clients, and can the lawyer pass that cost to the client?
NY State Bar Ethics Opinion 651: Percentage-of-fee remittances to a bar referral service
Short answer: The opinion concluded that a bar association lawyer referral service may require participating lawyers to remit a percentage of the fees earned from referred clients, and that a lawyer may pass that cost on to clients provided the total fee is not excessive under DR 2-106.
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 bar association asked whether its lawyer referral service could require participating lawyers to pay, instead of or in addition to a fixed fee, a percentage of fees over $500 earned from referred clients, and whether a lawyer could pass that cost to the client. The committee answered both questions in the affirmative.
The committee started from the general bars: DR 2-103(B) prohibits compensating a person or organization for recommending a lawyer, and DR 2-107 and DR 3-102(A) prohibit dividing fees with unaffiliated lawyers or with nonlawyers. But DR 2-103(C)(1) lets a lawyer request referrals from a bar-operated, sponsored, or approved referral service and "pay its fees incident thereto." The committee held that this exception permits a percentage-based remittance, reasoning that the arrangement does not implicate the concerns behind the fee-splitting prohibitions (competitive solicitation, lay control, steering clients to the most generous rather than most competent lawyer). It quoted Emmons, Williams, Mires & Leech v. State Bar of California and noted that every ethics opinion to address the issue since ABA Formal Op. 291 (1956) had reached the same conclusion.
On the second question, the committee found no basis in the Code for restricting how a participating lawyer recoups the referral cost. The only applicable limit is DR 2-106, which bars an illegal or excessive fee; provided the total fee to the client is not excessive, the lawyer may pass the referral cost along, whether by setting rates generally or by adding it for the referred client. The committee added that the referral service may regulate this as a condition of participation, and that if the fee is charged through, the service should advise potential clients that it is not without cost to them (DR 2-101(A); DR 1-102(A)(4)). Two committee members dissented from the portion allowing lawyers to increase fees charged to referred clients, viewing it as contrary to the public policy favoring access to legal services and as creating an appearance of impropriety under Canon 9.
Currency note
This opinion was issued in 1993, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. The provisions on referral services and fee division have since been revised. 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 bar referral service charge lawyers a percentage of the fees they earn from referrals?
A: Under this opinion, yes. The committee held DR 2-103(C)(1)'s allowance of "fees incident thereto" permits a percentage-based remittance, notwithstanding the general fee-splitting bars.
Q: Why doesn't this violate the fee-splitting rules?
A: The committee reasoned that a nonprofit bar referral service does not raise the concerns behind DR 2-107 and DR 3-102(A), such as lay control or steering clients to the most generous lawyer.
Q: Can the lawyer pass the referral fee on to the client?
A: Yes, provided the total fee is not excessive under DR 2-106. The committee found no Code basis to restrict how the lawyer recoups the cost, though the referral service may limit pass-through and two members dissented on this point.
Background and rules framework
The opinion interpreted DR 2-103(B), (C)(1), and (D)(3) (referral services and payment for recommendations), DR 2-107 and DR 3-102(A) (fee division with lawyers and nonlawyers), and DR 2-106 (excessive fees) of New York's former Code. The closest Model Rule analogues are Rule 7.2 (advertising and payment for recommendations, including the not-for-profit lawyer-referral exception) and Rule 5.4 (sharing fees with nonlawyers). New York replaced the Code with the Rules of Professional Conduct in 2009; the provisions cited here are historical.
Citations and references
Rules of Professional Conduct:
- MR 7.2 (advertising; payment to a lawyer referral service)
- MR 5.4 (sharing legal fees with a nonlawyer)
- NY DR 2-103(B), (C)(1), (D)(3); DR 2-107; DR 3-102(A); DR 2-106
Cases:
- Emmons, Williams, Mires & Leech v. State Bar of California, 86 Cal. Rptr. 367 (Ct. App. 1970): bar referral service's forwarding fee is not improper fee-splitting
Other opinions cited:
- ABA Formal Op. 291 (1956); ABA Informal Op. 1076 (1968): percentage remittances to bar referral services permitted
- Wisconsin Op. E-88-8 (1988): lawyers may pass the referral cost to clients with disclosure and consent
See also
- NY State Bar Op. 667: Referral fee from a mortgage broker
- NY State Bar Op. 779: Paying a marketing organization for referrals
- NY State Bar Op. 1086: Referral fee from an investment advisor
Source
- Landing page: https://nysba.org/opinion-651/