Do the fee-division rules that limit splitting a fee with an outside lawyer apply when a firm shares legal fees with a lawyer who is 'of counsel' to the firm?
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This page answers the general question as of 1987. Ezel answers yours: whether it's allowed on your facts, under the current Texas Rules of Professional Conduct, with citations.
Plain-English summary
The Committee considered whether DR 2-107(A) of the former Texas Code of Professional Responsibility, which limits how a lawyer may divide a fee with another lawyer, applies when a law firm pays a portion of its legal fees to a lawyer who is publicly held out as "of counsel" to the firm and who has a regular, continuing, and substantial relationship with it.
DR 2-107(A) restricts dividing a fee "with another lawyer who is not a partner in or associate of" the lawyer's firm, unless the client consents after full disclosure, the division is proportional to services and responsibility (or made with a forwarding lawyer), and the total fee is not clearly excessive. The Committee read the provision as aimed at payments to outside lawyers. It noted that although an "of counsel" relationship can be distinguished from "partner" or "associate" for some purposes, for other purposes of the Code an "of counsel" lawyer is appropriately treated as a member of the firm, citing Opinion 445.
Because a lawyer with a regular, continuing, and substantial relationship who is publicly designated "of counsel" should be regarded by the public as part of the firm, the Committee concluded the specific requirements of DR 2-107(A) do not apply to that lawyer's sharing in firm fees. It added that DR 2-106 (limiting fees to a reasonable amount) still governs the firm's fees regardless of whether the "of counsel" lawyer shares in any particular fee.
Currency note
This opinion was issued in 1987, under the former Texas Code of Professional Responsibility, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. The Disciplinary Rules have since been amended, and Texas never adopted the ABA's Ethics 2000 framework. The current Texas rule on dividing fees with a lawyer outside the firm is Rule 1.04(f), and the closest ABA analog is Model Rule 1.5(e). Subsequent rule changes 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 Treat this page as historical context, not current guidance.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: Do fee-division rules apply when a firm shares fees with its "of counsel" lawyer?
A: Per the opinion, no. The Committee concluded DR 2-107(A) does not apply where the lawyer is publicly designated "of counsel" and has a regular, continuing, and substantial relationship with the firm, because that lawyer is treated as part of the firm rather than as an outside lawyer.
Q: Why is an "of counsel" lawyer treated like a firm member for this purpose?
A: The Committee reasoned that, with a regular, continuing, and substantial relationship and a public "of counsel" designation, the public would view the lawyer as part of the firm, like a partner or associate who may work on firm matters and share in firm fee income.
Q: Does any fee rule still apply to those fees?
A: Yes. The opinion states that DR 2-106 still governs the reasonableness of the firm's legal fees, whether or not the "of counsel" lawyer shares in a particular fee.
Background and rules framework
The opinion interprets DR 2-107(A) of the former Texas Code of Professional Responsibility (limits on dividing a fee with a lawyer who is not a partner or associate of the firm) and DR 2-106 (reasonable fees). The closest current concepts are Texas Rule 1.04(f) and Model Rule 1.5(e) on dividing fees among lawyers not in the same firm, and Model Rule 1.5(a) on reasonable fees. The analysis turns on whether an "of counsel" lawyer with a regular, continuing, and substantial relationship is treated as inside the firm rather than as an outside lawyer.
Citations and references
Rules of Professional Conduct:
- MR 1.5 (fees; division of fees among lawyers)
- DR 2-107(A), DR 2-106, Texas Code of Professional Responsibility
Other opinions cited:
- Texas Professional Ethics Committee Opinion 445 ("of counsel" lawyer treated as a member of the firm for purposes of the Code)
See also
- TX Ethics Op. 459: Fee Clawback on a Departing Associate
- TX Ethics Op. 503: Sharing Fees With a Nonprofit Referrer
Source
- Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-450/
- Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_450.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
QUESTION PRESENTED
Under the Texas Code of Professional Responsibility, do the requirements of Disciplinary Rule ("DR") 2-107(A) apply to the payment by a law firm of a portion of legal fees received by the firm to a lawyer who is publicly represented to be "of counsel" to the firm and who has a regular, continuing and substantial relationship with the law firm?
DISCUSSION
DR 2-107(A) provides as follows: "(A) A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm or law office, unless: (1) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made. (2) The division is made in proportion to the services performed and responsibility assumed by each, or is made with a forwarding lawyer. (3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client." This provision applies only in the case of a lawyer's division of legal fees with another lawyer "who is not a partner in or associate of" the first lawyer's law firm or law office. The provision is intended to place special limitations on payments to outside lawyers by a lawyer or law firm to which the client makes payment for the provision of legal services.
Although a lawyer with an "of counsel" relationship to a law firm has a relationship that for some purposes may be distinguished from the relationship of "partner" or "associate," for other purposes of the Texas Code of Professional Responsibility a lawyer who is "of counsel" to a firm is appropriately treated as a member of the firm. See Texas Professional Ethics Committee Opinion No. 445 (Texas Bar Journal Sept. 1987). Where a lawyer has a regular, continuing and substantial relationship with a law firm and is publicly designated as "of counsel" to the law firm, the lawyer should be considered by the public as a part of the firm, like a partner or associate, who may work on firm matters and who may share in the fee income of the firm. Accordingly, the specific requirements of DR 2-107(A) should not apply to the "of counsel" lawyer's sharing in the law firm's legal fees. Of course, the requirements of DR 2-106 would apply as to legal fees charged by the firm regardless of whether or not the "of counsel" lawyer shared in a particular fee.
CONCLUSION
The requirements of DR 2-107(A) of the Texas Code of Professional Responsibility do not apply with respect to a law firm's sharing legal fees with a lawyer designated as "of counsel" to the firm and having a regular, continuing and substantial relationship with the law firm.
Tex. Comm. On Professional Ethics, Op. 450 (1987)
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