Can an Ohio lawyer pay a non-profit organization (other than a bar association) a percentage of the legal fee earned from a client it referred?

Plain-English summary

The Board addressed whether a lawyer who serves as a referral attorney for a non-profit organization (one that is not a bar association) may agree to pay that organization a percentage of the legal fee earned from a referred client. It framed the question under DR 2-103, which regulates recommendation of professional employment, and DR 3-102, which bars sharing fees with non-lawyers.

The Board distinguished its earlier Opinion 92-1, which narrowly permitted paying a bar association referral service a percentage of the fee. That result rested on the specific language of DR 2-103(C)(1) allowing payment of a referral service's "fees incident thereto," read together with the bar association's role in making legal services available. Outside the bar-association context, the Board found no basis in the rules for paying a referral source a percentage of the fee.

The Board concluded such a payment would violate several rules. Under DR 2-103(B) a percentage of the fee is not a "usual and reasonable" fee because it bears no relation to the organization's costs of making the referral and contravenes the ban on sharing fees with non-lawyers. Under DR 3-102(A) it is a prohibited division of fees with a non-lawyer, none of the exceptions applying. It also might violate DR 2-103(D)(4)(a) where a nominally non-profit organization derives profit from the rendition of legal services. The Board noted consistent authority from Texas and the ABA.

Currency note

The Ohio Board reports that this opinion was withdrawn by the Board on October 10, 1997, due to amendments to DR 2-103 and DR 3-102 effective July 1, 1996. Because it has been withdrawn, it is indexed here as research only and is not current guidance. The opinion interprets the former Ohio Code of Professional Responsibility, which was superseded by the Ohio Rules of Professional Conduct effective February 1, 2007.

This opinion issued in 1995. Treat this page as historical context, not current guidance. Verify against the current Ohio Rules of Professional Conduct before relying on any specific rule mentioned here.

Common questions

Q: Can a lawyer pay a non-bar nonprofit a percentage of the fee for referring a client?

A: No. The Board concluded such a payment is not a usual and reasonable fee under DR 2-103(B) and is an improper division of fees with a non-lawyer under DR 3-102(A).

Q: Why is paying a bar association referral service a percentage treated differently?

A: The Board explained its Opinion 92-1 rested on DR 2-103(C)(1), which specifically lets a lawyer pay a bar association referral service "its fees incident thereto," read with the bar's role in making legal services available; that specific permission does not extend to other organizations.

Q: Could a flat or cost-based referral charge be acceptable?

A: The opinion addressed only percentage-of-fee payments. The Board reasoned a percentage is unreasonable because it has no nexus with the organization's costs of making the referral, distinguishing it from a charge tied to actual referral costs.

Background and rules framework

The opinion interprets the former Ohio Code of Professional Responsibility: DR 2-103(B) (compensation for recommendations), DR 2-103(C) (requesting referrals), DR 2-103(D) (qualifying organizations, including the DR 2-103(D)(4)(a) no-profit condition), and DR 3-102(A) (sharing legal fees with a non-lawyer).

Citations and references

Rules of Professional Conduct:

• Former Ohio Code of Professional Responsibility DR 2-103(B), DR 2-103(C), DR 2-103(D), DR 3-102(A)

Other opinions cited:

• Ohio BPC Op. 92-1 (1992); State Bar of Texas Op. 503 (1994); ABA Informal Op. 85-1512 (1985)

See also

• Ohio BPC Op. 1992-001: Bar Association Referral Service Fees and Conditions
• Ohio BPC Op. 1991-007: For-Profit Lawyer Referral Service and Joint Advertising
• Ohio BPC Op. 1994-008: Splitting a Contingency Fee With a Non-Lawyer Investigator

Source

• Landing page: https://ohioadvop.org/advisory-opinion-index/
• Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-95-006.pdf

Original opinion text

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

The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE 41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105 (614) 644-5800 FAX: (614) 644-5804

OFFICE OF SECRETARY

OPINION 95-6
Issued June 2, 1995

[Withdrawn- by Board on October 10, 1997 due to amended DR 2-103 and 3-102, eff. July 1, 1996.]

SYLLABUS: It is improper for an attorney to pay a non-profit organization other than a bar association a percentage of the legal fee earned from a referred client.

OPINION: Organizations that provide services to the public sometimes establish a network of referral attorneys to provide legal services to individuals that contact the organization for assistance. This opinion addresses an attorney's participation as a referral attorney for a non-profit organization other than a bar association. The question relates to the propriety of an attorney agreeing to divide legal fees with the organization.

Is it proper for an attorney to pay a non-profit organization other than a bar association a percentage of the legal fee earned from a referred client?

Recommendations of professional employment are regulated by DR 2-103 of the Ohio Code of Professional Responsibility. Under DR 2-103 (C) a lawyer may request referrals from certain persons or organizations--bar association referral services and organizations identified in DR 2-103 (D).

DR 2-103 (C) A lawyer shall not request a person or organization to recommend or promote the use of his [her] services or those of his [her] partner or associate, or any other lawyer affiliated with him [her] or his [her] firm, as a private practitioner, except that:

(1) He [she] may request referrals from a lawyer referral service operated, sponsored, or approved by a bar association and may pay its fees incident thereto.

(2) He [she] may cooperate with the legal service activities of any of the offices or organizations enumerated in DR 2-103 (D) (1) through (4) and may perform legal services for those to whom he [she] was recommended by it to do such work if:
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(a) The person to whom the recommendation is made is a member or beneficiary of such office or organization; and

(b) The lawyer remains free to exercise his [her] independent professional judgment on behalf of his [her] client.

Under DR 2-103 (B) a lawyer may pay usual and reasonable fees to organizations listed in DR 2- 103 (D).

DR 2-103 (B) A lawyer shall not compensate or give anything of value to a person or organization to recommend or secure his [her] employment by a client, or as a reward for having made a recommendation resulting in his [her] employment by a client, except that he [she] may pay the usual and reasonable fees or dues charged by any of the organizations listed in DR 2-103 (D).

Set forth in DR 2-103 (D) are the organizations from which an attorney may receive referrals and pay usual and reasonable fees.

DR 2-103 (D) A lawyer shall not knowingly assist a person or organization that furnishes or pays for legal services to others to promote the use of his [her] services or those of his [her] partner or associate or any other lawyer affiliated with him [her] or his [her] firm except as permitted in DR 2-101 (B). However, this does not prohibit a lawyer or his [her] partner or associate or any other lawyer affiliated with him [her] or his [her] firm from being recommended, employed or paid by, or cooperating with, assisting and providing legal services for, one of the following offices or organizations that promote the use of his [her] services or those of his [her] partner or associate or any other lawyer affiliated with him [her] or his [her] firm if there is no interference with the exercise of independent professional judgment in behalf of his [her] client. [Emphasis added].

(1) A legal aid office or public defender office:

(a) Operated or sponsored by a duly accredited law school.

(b) Operated or sponsored by a bona fide non-profit community organization.
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(c) Operated or sponsored by a governmental agency.

(d) Operated, sponsored, or approved by a bar association.

(2) A military legal assistance office.

(3) A lawyer referral service operated, sponsored, or approved by a bar association.

(4) Any bona fide organization that recommends, furnishes or pays for legal services to its members or beneficiaries provided the following conditions are satisfied:

(a) Such organization, including any affiliate, is organized and operated that no profit is derived by it from the rendition of legal services by lawyers, and that, if the organization is organized for profit, the legal services are not rendered by lawyers employed, directed, supervised or selected by it except in connection with matters where such organization bears ultimate liability of its member or beneficiary.

[ (b) through (e) omitted.]

(f) The lawyer does not know or have cause to know that such organization is in violation of applicable laws, rules of court and other legal requirements that govern its legal service operations.

(g) Such organization has filed with the Supreme Court of Ohio on or before January 1 of each year a report with respect to its legal service plan, if any, its schedule of benefits, its subscription charges, agreements with counsel, and financial results of its legal service activities or, if it has failed to do so, the lawyer does not know or have cause to know of such failure.

In Opinion 92-1, this Board narrowly advised that attorneys may pay bar association referral services a percentage of legal fees earned from clients referred. The linchpin of the opinion was the language of DR 2-103 (C) (1). The rule specifically permits an attorney to pay a bar association referral service "its fees incident thereto." Taking into consideration the role of the bar association in assisting the legal profession
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to make legal services available to the public and reading the permissive language in DR 2-103 (C) (1) in harmony with DR 2-103 (B), this Board viewed percentages of legal fees paid to bar association referral services as "usual and reasonable fees." See Ohio SupCt, Bd of Comm’rs on Griev & Disc, Op. 92-1 (1992).

Outside the context of a bar association referral service, there is no basis within the rules for permitting a lawyer to pay a referral source a percentage of legal fees earned from client referred. In fact, to pay other organizations a percentage of a legal fee earned from a client referred would violate several disciplinary rules, DR 2-103 (B), 3-102 (B), and possibly DR 2-104 (D) (4) (a).

Under DR 2-103 (B), the payment to an organization, other than a bar association, of a percentage of a legal fee earned from a client referred would not be a "usual and reasonable" fee. An amount based upon a percentage of a legal fee earned from a client is not a "reasonable" amount because it has no nexus with the organization's costs, if any, of making the referral. Such percentage amount is not "usual'' because it contravenes the Code's prohibition against sharing fees with non-lawyers.

Under DR 3-102, a lawyer is prohibited from sharing legal fees with a non-lawyer.

DR 3-102 (A) A lawyer or law firm shall not share legal fees with a non-lawyer, except that:

(1) An agreement by a lawyer with his [her] firm, partner, or associate may provide for the payment of money, over a reasonable period of time after his [her] death, to his [her] estate or to one or more specified persons.

(2) A lawyer who undertakes to complete unfinished legal business of a deceased lawyer may pay to the estate of the deceased lawyer that proportion of the total compensation which fairly represents the services rendered by the deceased lawyer.

3) A lawyer or law firm may include non-lawyer employees in a retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement.

None of the exceptions within DR 3-102 (A) permits the sharing of fees with a referral source. The prohibition on fee-splitting with non-lawyers protects clients. It discourages referrals based on financial motives rather than a
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client's best interest and it decreases the likelihood that legal fees will increase to compensate for the money paid to the referral organization.

The payment of a percentage fee to a non-profit organization might also violate DR 2-103 (D) (4) (a). The requirement of DR 2-103 (D) (4) (a) is that “[s]uch organization, including any affiliate, is so organized and operated that no profit is derived by it from the rendition of legal services by lawyers, and that, if the organization is organized for profit, the legal services are not rendered by lawyers employed, directed, supervised or selected by it except in connection with matters where such organization bears ultimate liability of its member or beneficiary."

As to other authorities, the State Bar of Texas advises that a lawyer may not share legal fees awarded in a civil rights case with a non-profit public interest organization that refers cases to a lawyer as a cooperating attorney. See State Bar of Texas, Op. 503 (1994). The Standing Committee on Ethics and Professional Responsibility of the American Bar Association advises that "neither the Model Rules nor the Model Code prohibits lawyers from participating in a legal services program sponsored by a bona fide nonprofit corporation that merely supplies an inquirer with the names of attorneys who have volunteered to be available to assist a class of persons who may be in need of legal assistance." ABA, Informal Op. 85-1512 (1985). A factual basis of that opinion was that the organization would not share in any portion of the fee received by the referral attorney. Id.

For the reasons stated above, the Board considers the sharing of a percentage of a legal fee with a DR 2-103 (D) organization, other than a bar association, as a prohibited compensation under DR 2- 103 (B) rather than as a usual and reasonable fee. The Board also views the sharing of a percentage of a legal fee with a DR 2-103 (D) organization, other than a bar association, as an improper division of a fee with an non-lawyer under DR 3-102 (A). In addition, the sharing of a percentage of a legal fee with a DR 2-103 (D) organization, other than a bar association, might violate DR 2- 103 (D) (4) (a) if the organization is non-profit but derives profit from the rendering of legal services. In conclusion, the Board advises that it is improper for an attorney to pay a non-profit organization other than a bar association a percentage of the legal fee earned from a referred client.

Advisory Opinions of the Board of Commissioners on Grievances and Discipline are informal, nonbinding opinions in response to prospective or hypothetical questions regarding the application of the Supreme Court Rules for the Government of the Bar of Ohio, the Supreme Court Rules for the Government of the Judiciary, the Code of Professional Responsibility, the Code of Judicial Conduct, and the Attorney's Oath of Office.