Can a nonprofit public-interest legal organization require the volunteer attorneys it refers civil rights cases to, to hand over the attorney's fees they win?

Plain-English summary

The question (92-7) was whether the Texas affiliate of a national nonprofit public-interest law organization could require cooperating attorneys to share part or all of the attorney's fees they collect in civil rights cases. Under the arrangement, the affiliate screens referred cases (taking those with substantial constitutional or civil rights issues, likely precedential value, and a strong probability of success), pays most litigation costs, and provides a pro bono attorney; the cooperating attorney agrees to share some or all earned fees with the affiliate, which deposits them in a dedicated litigation fund. The Committee declined to opine on the parties' civil obligations or whether the agreement is legally enforceable, addressing only the ethical question.

The Committee concluded Rule 5.04 captures the ethical concern, because it prohibits a lawyer or firm from sharing or promising to share legal fees with a nonlawyer, subject to exceptions not applicable here. It noted Comment 1's rationale: the prohibition codifies traditional limits on fee sharing to prevent impermissible solicitation and discourage the unauthorized practice of law by nonlawyers, with the paramount consideration being protection of the lawyer's professional independence.

The Committee rejected the affiliate's four arguments (that retaining the fee is not "profit," that the affiliate's policy assures professional independence, that protecting civil rights does not offend the rule's traditional limits, and that clients face no excessive fees because the losing party pays). It concluded Rule 5.04 cannot be construed to permit the agreement, found no exception describing this relationship, and held that a cooperating attorney ethically cannot agree to share legal fees with a nonprofit public-interest organization that referred a case in which the attorney is awarded fees by judgment or settlement.

Currency note

This opinion was issued in 1994, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. 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: Can a nonprofit require the lawyers it refers cases to, to share their fee awards?

A: The Committee concluded it cannot; a cooperating attorney may not agree to share legal fees with a nonprofit public-interest organization that referred the case, because Rule 5.04 bars sharing fees with a nonlawyer.

Q: Did the civil rights mission or the losing-party-pays structure change the result?

A: The Committee concluded they did not; it rejected the affiliate's arguments and found no Rule 5.04 exception describing the affiliate-attorney relationship.

Q: Why does Rule 5.04 prohibit this even for a nonprofit?

A: The Committee pointed to Comment 1: the prohibition codifies traditional fee-sharing limits aimed at preventing impermissible solicitation and the unauthorized practice of law, to protect the lawyer's professional independence.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 5.04 (professional independence of a lawyer; no sharing of legal fees with a nonlawyer; ABA Model Rule 5.4), and its Comment 1. The Committee notes that the Rules do not define civil-liability standards or address the enforceability of the parties' agreement.

Citations and references

Rules of Professional Conduct:

• MR 5.4 (professional independence of a lawyer)
• Texas Disciplinary Rule 5.04 (incl. Comment 1)

See also

• TX Ethics Op. 558: Paying a Lender a Percentage of a Contingency Fee as Fee Sharing
• TX Ethics Op. 568: Sharing a Contingent Fee With a Suspended or Disbarred Lawyer
• TX Ethics Op. 695: A Legal-Aid Funder, Confidentiality, and Consent

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-503/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_503.pdf

Original opinion text

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

QUESTION PRESENTED

(92-7)
Whether the Texas affiliate of a national non-profit public interest law organization can require cooperating attorneys to share a portion or all of their fees collected in civil rights cases with the Texas affiliate?

STATEMENT OF FACTS

The Texas affiliate of a national non-profit public-interest law organization contracts with cooperating attorneys to handle referred civil rights cases. If the case involves substantial constitutional or civil rights issues, is likely to have precedential value and there is a strong probability of a favorable result through litigation the Texas affiliate will then accept the case and agree to pay all or most of the costs of the litigation and to provide the complainant with an attorney who will volunteer his or her services pro bono publico. The cooperating attorney agrees to share some or all of any attorney's fees earned in the case with the Texas affiliate, which maintains a separate fund into which these attorney's fees are deposited. This dedicated fund is used exclusively for litigation purposes.

DISCUSSION

The Texas Disciplinary Rules of Professional Conduct (hereinafter "the Rules") do not undertake to define the standards of civil liability of a lawyer's professional conduct, nor are they designed to be legal standards for procedural decisions.

This Committee does not, therefore, issue any opinion regarding the respective legal obligations and responsibilities of the parties, nor whether or not their fee sharing agreement is legally enforceable.

Rule 5.04 captures the ethical concerns raised by the fee-sharing arrangement under discussion. That rule prohibits an attorney or law firm from sharing or promising to share legal fees with a non-lawyer, subject to exceptions not applicable here.

Comment 1 to Rule 5.04 discloses that the principal reasons for the prohibition on fee sharing as expressed in the Rule codify traditional limitations on fee sharing, namely, preventing impermissible solicitation of cases and avoiding encouraging the unauthorized practice of law by non-lawyers. The paramount consideration is the protection of the integrity of the professional independence of the lawyer.

The Texas affiliate advances several arguments that Rule 5.04 is not violated by the fee-sharing arrangement; specifically (1) the retention of the fee is not profit within the meaning of the Rule; (2) the express policy of the Texas affiliate assures the professional independence of the lawyer; 3) the traditional limitations codified in Rule 5.04 are not offended by the protection and promotion of constitutional rights and civil rights by the Texas affiliate and 4) the clients are not exposed to excessive fees since all attorney fees are paid by the losing party.

It is the judgment of this Committee that Rule 5.04 cannot be construed to permit the fee sharing agreement between the affiliate organization and the cooperating attorney.

There is not an exception stated in Rule 5.04 descriptive of the relationship between the affiliate organization and the cooperating attorney.

A cooperating attorney ethically cannot agree to share legal fees with a non- profit public interest organization where the non-profit public interest organization has referred a case to the cooperating attorney and that attorney has been awarded attorney's fees by judgment or settlement.

CONCLUSION

A cooperating attorney ethically cannot agree to share legal fees with a non- profit public interest organization where the non-profit public interest organization has referred a case to the cooperating attorney and that attorney has been awarded attorney's fees by judgment or settlement.

Tex. Comm. On Professional Ethics, Op. 503 (1994)