Can our Bar Association's lawyer referral service require attorneys who take referred cases to pay back a percentage of the fee earned, or does that violate the fee-splitting rule?

Plain-English summary

The inquiring attorney, who chaired a Rhode Island Bar Association legal services committee, asked about the Lawyer Referral and Information Services. The committee proposed a referral fee equal to a percentage of the fee received by the attorney to whom a matter was referred: an attorney who received a case generating a fee over $500 would return ten percent of the amount received above $500. The attorney noted that forty percent of lawyer referral services nationally had adopted such a percentage referral fee.

The panel concluded that the percentage referral fee did not violate Rule 5.4(a)'s fee-splitting prohibition. It relied on the California appeals court's decision in Emmons, Williams, Mires & Leech v. State Bar of California, which held that such a percentage fee did not violate the public policy underlying the ban on fee-splitting. The panel identified the dangers the fee-splitting rule guards against, competitive solicitation, control by a layperson interested in personal profit rather than the client's interests, and a layperson selecting the attorney who pays the highest referral fee rather than the most competent one. Because, as in the California case, the bar association did not seek individual profit but had legitimate interests in offering legal services to the public, the public policy behind the fee-splitting prohibition was not violated.

Currency note

This opinion was issued in 1995, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 5.4 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. 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 Treat this page as historical context, not current guidance.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 mentioned here.

Common questions

Q: Does a bar referral service's percentage fee count as improper fee-splitting?

A: The opinion concluded it does not, because the nonprofit bar association does not seek individual profit and has legitimate interests in making legal services available, so the public policy behind Rule 5.4(a) is not violated.

Q: Why does the fee-splitting rule exist?

A: The opinion identified the dangers as competitive solicitation, control by a layperson interested in personal profit over the client's interests, and steering clients to the attorney who pays the most rather than the most competent.

Q: What authority did the panel rely on?

A: The opinion followed the California appeals court's decision in Emmons, Williams, Mires & Leech v. State Bar of California, which upheld a percentage referral fee against a fee-splitting challenge.

Background and rules framework

The opinion applied Rhode Island Rule of Professional Conduct 5.4(a) (Model Rule 5.4), which bars a lawyer or law firm from sharing legal fees with a nonlawyer except in enumerated situations. The panel read the rule in light of its purposes, protecting the lawyer's independent judgment and preventing lay control, and concluded that a nonprofit referral service's percentage fee did not implicate those concerns, adopting the reasoning of the California Emmons decision.

Citations and references

Rules of Professional Conduct:

• Model Rule 5.4 / RI RPC 5.4(a) (professional independence; sharing fees with a nonlawyer)

Cases:

• Emmons, Williams, Mires & Leech v. State Bar of California, 6 Cal. App. 3d 565 (1970), a percentage referral fee to a bar referral service does not violate fee-splitting public policy

See also

• RI EAP Op. 98-15: A mass mailing to prepaid-plan members must comply with 7.3
• RI EAP Op. 98-16: Contacting lawyer-referral-service clients is not solicitation
• RI EAP Op. 97-16: A referral fee requires a joint-responsibility writing

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2095-03.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

FINAL

ETHICS ADVISORY PANEL
OPINION # 95-3, REQUEST # 560
Issued March 23, 1995

The inquiring attorney who chairs a Rhode Island Bar Association legal services committee ("Committee") writes to the Panel regarding Lawyer Referral and Information Services. The Committee proposes to institute a referral fee equal to a percentage fee received by the attorney to whom the matter is referred. The inquiring attorney states that forty percent of lawyer referral services throughout the country have instituted such a percentage referral fee. More specifically, an attorney who receives a case which generates a fee of over five-hundred dollars ($500.) will be required to return ten percent of the amount received over five-hundred dollars ($500.)

A California Appeals Court has held that such a percentage fee did not violate the public policy underlying the prohibition against fee-splitting as found in our Rule 5.4(a) of the Rules of Professional Conduct. (Emmons, Williams, Mires & Leech vs. State Bar of California, 6 Cal. App. 3d 565 (1970)) That Rule states:

(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:

(1) an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's 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; and

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

The dangers of fee-splitting are competitive solicitation, potential control by the layperson interested in personal profit rather than the interests of the client, and the layperson's potential to select the attorney who pays the highest referral fee rather than the most competent attorney. In the California case cited above, the court found that the bar association did not seek individual profit but had legitimate interests in offering legal services for the public and accordingly, the public policy behind the prohibition of fee-splitting is not violated.