Can a lawyer cut a contingent fee to share it with a non-attorney tax-reduction firm that refers clients, or be retained by that firm to serve its customers?
NY State Bar Ethics Opinion 885: Fee-Splitting With a Non-Attorney
Short answer: A lawyer may not reduce a contingent fee as part of an arrangement to take referrals from a non-attorney property-tax-reduction firm, and may not be retained by that non-lawyer company to provide legal services to its customers, because the arrangement is impermissible fee-splitting and the company's furnishing of counsel is barred by statute.
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
The inquirer handles tax certiorari proceedings to reduce property assessments on a contingency basis, ordinarily taking one-third of any refund. A non-attorney who owns a company representing residential homeowners in Small Claims Assessment Review proceedings proposed to refer commercial clients to the lawyer in exchange for a referral fee, with the non-lawyer performing some services such as a preliminary property valuation. The lawyer posed three questions: whether he could reduce his contingency fee and refund the difference to the client with the understanding the client would owe the non-attorney; whether he could instead be retained by the non-attorney's company on an hourly basis while returning any refund directly to the client; and whether he could accept referrals knowing the non-lawyer obtains clients by direct solicitation (paragraphs 1 through 4).
On the first question, the committee concluded the lawyer cannot agree to the arrangement, because he would either be impermissibly splitting fees with a non-attorney or entering a cooperative business arrangement with a non-lawyer who is not a member of an eligible profession. Rule 5.8(a) permits a cooperative business arrangement only with non-legal professions on a list maintained by the Appellate Divisions, and tax-reduction services are not on that list. Rule 5.4 bars sharing legal fees with non-lawyers, and Rule 5.5 bars aiding the unauthorized practice of law. Although the non-lawyer company would perform some unspecified services, the committee found no relation between the funds it would receive and the value of any services actually performed; in substance the company would find clients, refer them, and take a cut of the tax reduction, which is improper fee-splitting (paragraphs 5 through 8).
On the second question, the lawyer may not be retained by the non-attorney company to provide legal services to the property owner, because New York Judiciary Law section 495(d) prohibits corporations and voluntary associations from furnishing attorneys or counsel (paragraphs 9 through 10).
On the third question, assuming a referral that does not involve fee-splitting or a referral fee is otherwise permissible, the non-lawyer's direct solicitation is a separate concern. Non-attorneys are not subject to the Rules of Professional Conduct, but under Rule 8.4(a) a lawyer cannot circumvent the advertising or solicitation rules through a non-lawyer's communications. Whether the lawyer is doing so depends on the lawyer's control over the non-attorney or the solicitation, which turns on factors including the amount of business between them and other connections (paragraphs 11 through 14).
In practice
The opinion holds that, under the New York rules as they stood at the time, a lawyer may not reduce a contingent fee so that the reduction flows to a non-attorney tax-reduction firm that supplies clients, because that is impermissible fee-splitting under Rule 5.4 and falls outside the limited cooperative-business-arrangement exception in Rule 5.8(a), which does not list tax-reduction services as an eligible profession. The committee also held the lawyer may not be retained by the non-lawyer company to serve its customers, because Judiciary Law section 495(d) bars such companies from furnishing counsel. On the solicitation question, the committee framed the issue as control: a non-lawyer's solicitation is not attributed to the lawyer unless the lawyer uses the non-lawyer to accomplish indirectly what the advertising and solicitation rules forbid, a determination the committee made fact-dependent on the degree of the lawyer's control.
Common questions
Q: Can I reduce my contingent fee and let a referring non-lawyer firm collect the difference?
A: No. The committee held that this is either impermissible fee-splitting under Rule 5.4 or a cooperative business arrangement with a non-eligible profession barred by Rule 5.8(a), because the funds the firm receives bear no relation to the value of services it performs (paragraphs 6 through 8).
Q: Could the non-attorney company retain me and pay me hourly instead?
A: No. New York Judiciary Law section 495(d) prohibits corporations and voluntary associations from furnishing attorneys or counsel, so the lawyer may not be retained by the company to provide legal services to its customers (paragraph 10).
Q: Can I take referrals at all from a non-lawyer who solicits clients directly?
A: A referral that does not involve fee-splitting or a referral fee may be permissible, but the non-lawyer's direct solicitation is a separate concern. Under Rule 8.4(a) the lawyer may not use the non-lawyer to circumvent the advertising and solicitation rules, and whether that occurs depends on the lawyer's control over the non-lawyer (paragraphs 12 through 14).
Q: Does it matter that the non-lawyer firm does some of the work, like a preliminary valuation?
A: The committee found that there appeared to be no relation between the funds the firm would receive and the value of the services it actually performed, so the payment functioned as a share of the legal fee rather than compensation for services (paragraph 8).
Background and rules framework
The opinion interprets New York Rule 5.4 (sharing legal fees with non-lawyers), Rule 5.5 (aiding the unauthorized practice of law), Rule 7.1 and Rule 7.3 (advertising and solicitation, including the Rule 7.3(a) bar on in-person and real-time solicitation), and Rule 8.4(a) (achieving a violation through another), corresponding to ABA Model Rules 5.4, 5.5, 7.3, and 8.4. It also applies New York Rule 5.8(a), the New York-specific cooperative-business-arrangement provision, and New York Judiciary Law section 495(d), which bars corporations and voluntary associations from furnishing counsel.
Citations and references
Rules of Professional Conduct:
- MR 5.4 / NY Rule 5.4: sharing legal fees with non-lawyers
- MR 5.5 / NY Rule 5.5: aiding the unauthorized practice of law
- MR 7.3 / NY Rule 7.3(a), (b): solicitation and its definition
- MR 8.4 / NY Rule 8.4(a): achieving a violation through the acts of another
- NY Rule 5.8(a): cooperative business arrangements with eligible non-legal professionals
- NY Rule 7.1: advertising standards
Statutes:
- N.Y. Judiciary Law section 495(d): corporations and voluntary associations may not furnish attorneys or counsel
Other opinions cited:
- N.Y. State 705 (1997): a non-lawyer taking a fee from the recovery for finding and referring clients is improper fee-splitting
- Suffolk County 96-2 (1996): a referral arrangement with a non-lawyer tax-reduction firm was unethical as aiding the unauthorized practice of law
See also
- NY State Bar Ethics Op. 1068: Claims-Recovery Firm Referrals, UPL, and Fee-Splitting
- NY State Bar Ethics Op. 1082: Providing Legal Services Through a Non-Lawyer-Owned Company
- NY State Bar Ethics Op. 889: Sharing Legal Fees and Forming a Partnership With a Non-Lawyer
- NY State Bar Ethics Op. 887: Non-Lawyer Marketers and Bonus Compensation
Source
- Landing page: https://nysba.org/ethics-opinion-885/