Can a lawyer accept 20% of a bail bond premium as a referral fee from the bonding company the lawyer sends clients to?

Plain-English summary

A bonding company in the business of posting criminal bonds offered each attorney who referred a client twenty percent of the bond premium as a "referral fee," with all bonds made in cash and no credit given. The Committee was asked whether it is unethical for the attorney to accept such a referral (a) without informing the client or (b) after disclosure to the client.

The majority concluded that an attorney may receive a percentage of the bond premium for a referral so long as there is full disclosure to the client and the client consents. Applying Canon 31 (which bars dividing fees for legal services except with other lawyers based on division of services or responsibility), the majority reasoned that the entire bond premium paid to the bonding company is not a fee for legal services and the attorney has not divided his fee with the bonding company, so Canon 31 is not violated. Applying Canon 35 (barring acceptance of commissions, compensation, or rebates from others without the client's knowledge and consent after full disclosure), it concluded the twenty percent referral is such a rebate, which the attorney may accept only with full disclosure and client consent. Because whatever the attorney receives from others in the client's service properly belongs to the client, the amount of the rebate must be credited against the attorney's fee.

A minority of the Committee disagreed and would have held that the conduct violates Canon 31 whether or not the attorney informs the client, and one member viewed the arrangement as tending to divide the attorney's loyalty and create a potential conflict of interest under Canon 6. The vote was 6-3.

Currency note

This opinion was issued in 1970, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. A lawyer's acceptance of compensation from someone other than the client is now governed by Texas Rule 1.08 and ABA Model Rule 1.8(f), and the prohibition on sharing legal fees with nonlawyers by Texas Rule 5.04 and Model Rule 5.4. 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 Treat this page as historical context, not current guidance.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: May a lawyer accept a referral percentage of a bond premium from a bondsman?

A: The majority concluded a lawyer may accept it only with full disclosure to the client and the client's consent, and the amount must be credited against the lawyer's fee.

Q: Is this a prohibited division of a legal fee?

A: The majority said no. It reasoned the bond premium is not a fee for legal services and the attorney has not divided his fee with the bonding company, so Canon 31 is not violated.

Q: What does Canon 35 require here?

A: The majority treated the twenty percent as a rebate or commission from another, acceptable only with full disclosure and client consent; because it belongs to the client, it must be credited against the attorney's fee.

Q: Was the Committee unanimous?

A: No. The vote was 6-3; the minority would have found a Canon 31 violation regardless of disclosure, and one member saw a potential conflict of interest under Canon 6.

Background and rules framework

The opinion interprets former Texas Canon 31 (division of fees for legal services), Canon 35 (commissions and rebates from others), and Canon 6 (conflicting interests). The modern analogs are Texas Rule 1.08 and ABA Model Rule 1.8(f) (compensation from a third party) and Texas Rule 5.04 and Model Rule 5.4 (sharing fees with nonlawyers).

Citations and references

Rules of Professional Conduct:

• MR 1.8 (current client conflicts; third-party compensation under 1.8(f)), as the modern analog
• MR 5.4 (professional independence; no fee-sharing with nonlawyers), as the modern analog
• Texas Canons 6, 31, 35 (former Texas Canons of Ethics)

Other references:

• Drinker, Legal Ethics 97 (rebate from others not treated as splitting a fee with a layman)

See also

• TX Ethics Op. 377: Office Lease Paying Rent as a Percentage of the Lawyer's Fees
• TX Ethics Op. 446: Referrals and Fee Payment From a Financial Planning Organization
• TX Ethics Op. 366: Attorney Holding a Financial Interest in a Bail Bond Business

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-351/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_351.pdf

Original opinion text

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

QUESTION PRESENTED

A bonding company engaged in the business of posting criminal bonds offers to each attorney who refers a client to the bonding company twenty per cent of the bond premium as a "referral fee." All the bonds are made in cash and there is no credit given. Is it unethical for the attorney to accept such referral (a) without informing the client or (b) after disclosure to the client?

23 Baylor L. Rev. 893 (1972)

COMPENSATION, COMMISSIONS AND REBATES - DIVISION OF FEES - CONFLICTING INTERESTS
An attorney may receive from a bonding company engages in writing of criminal bonds a percentage of the bond premium for referral, so long as there is a full disclosure to the client and the client consents.

Canons 6, 31, 35

Canon 31 provides that a division of fees for legal services is not proper except with other lawyers, based upon a division of services or responsibility. However, the bond premium is not a "fee for legal services." It is true that the attorney is performing a legal service when he, after undertaking to represent a client, refers a client to a particular bonding company. It is also true that the twenty per cent that is paid to the attorney by the bonding company is a fee for legal services. Yet, the entire amount of the bond premium paid directly to the bonding company is not a fee for legal services. The attorney has not divided his fee with the bonding company and therefore there is no violation of Canon 31.

Canon 35 provides that an attorney shall not accept commissions, compensation or rebates from others without the knowledge and consent of his client after full disclosure. The twenty per cent referral paid to the attorney by the bonding company would be "compensation, commission, rebates or other advantage from others" within the meaning of Canon 35. The attorney may accept this rebate only if there is a full disclosure and the client consents. If the client gives his consent for the attorney to accept the rebate, the attorney must consider this in arriving at his attorney's fee. Whatever the attorney receives from others in the service of his client properly belongs to his client. Therefore, the amount of the rebate must be credited against the attorney's fee. Some regard this as splitting a fee with a layman. However, such is not the case. Drinker, Legal Ethics, 97.

A minority of the members of the Committee on Professional Ethics disagrees with the majority opinion, and would hold that the conduct in question violates Canon 31, whether or not the attorney informs his client of the rebate. One Committee member feels that the arrangement with the bonding company would tend to divide the loyalty of the attorney and create potential conflict of interests in violation of Canon 6. (6-3)

Tex. Comm. On Professional Ethics, Op. 351 (1970)