Can a lawyer pay a suspended or disbarred lawyer a share of a contingent fee under a referral or fee-sharing agreement made before the discipline?
Texas Ethics Opinion 568: Sharing a Contingent Fee With a Suspended or Disbarred Lawyer
Short answer: Per the Committee, a lawyer may share a contingent fee with a suspended or disbarred lawyer if the fee-sharing agreement existed before the discipline and the suspended or disbarred lawyer had fully performed all work in the matter before the suspension or disbarment.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Texas Disciplinary Rules of Professional Conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.
Plain-English summary
Lawyer A refers a contingent fee case to Lawyer B under a signed agreement to share the contingent fee. Lawyer A is then suspended from practice, and while suspended, the contingent fee becomes payable. The question is whether Lawyer B may pay Lawyer A's agreed share. Rule 5.04(a) bars a lawyer from sharing legal fees with a non-lawyer, a rule aimed at preventing lay solicitation and the unauthorized practice of law.
The Committee traces its own precedent. In Opinion 432 (1986), under the predecessor Disciplinary Rule 3-102, it held a disbarred lawyer could not collect fees on a contingent contract not yet completed, reasoning from Royden v. Ardoin that disbarment or suspension is tantamount to voluntary abandonment that disqualifies the lawyer from compensation. But Opinion 432 expressly left open the situation where the lawyer had completed the services before the discipline. Two Fourteenth Court of Appeals decisions, Lee v. Cherry and A.W. Wright & Associates v. Glover, Anderson, Chandler & Uzick, then held a disbarred lawyer may receive referral fees if the lawyer completed the legal work before disbarment, refusing to extend Royden's abandonment rationale to a lawyer who finished the expected work.
The Committee notes those cases predate the March 1, 2005 amendments to Rule 1.04, which abolished the pure referral fee and now require fee divisions between lawyers in different firms to be proportional to services performed or based on joint responsibility, so a referring lawyer's duties cannot end at referral. Even so, the Committee concludes the underlying rationale of Lee and A.W. Wright is correct: a lawyer may share a contingent fee with a suspended or disbarred lawyer if that lawyer fully performed all work in the matter before the discipline. The Committee cautions that other Texas law (citing Burrow v. Arce) may still bar a suspended or disbarred lawyer from receiving some or all of the fees from a matter that forms the basis of the disciplinary action.
In practice
Under this opinion, and under the Texas rules as they stood at the time, a lawyer can pay a suspended or disbarred lawyer an agreed share of a contingent fee when two conditions hold: the fee-sharing agreement predated the discipline, and the suspended or disbarred lawyer had fully performed all of that lawyer's work in the matter before the suspension or disbarment. The Committee grounds the permission in the completed-work distinction drawn in Lee and A.W. Wright rather than in Rule 5.04(a)'s general bar, and it flags that separate Texas law may independently strip fees tied to the matter that caused the discipline.
Common questions
Q: A lawyer I have a referral fee deal with got suspended before the case settled; can I still pay the agreed share?
A: Yes, if the lawyer fully performed all of that lawyer's work in the matter before being suspended and the fee-sharing agreement existed before the suspension. Under Opinion 568, completing the work before discipline is the key condition.
Q: What if the suspended or disbarred lawyer had not finished the work?
A: The opinion does not authorize sharing in that case. The Committee's reasoning (and Opinion 432, drawing on Royden v. Ardoin) treats discipline before completion as voluntary abandonment that disqualifies the lawyer from compensation.
Q: Does completing the work guarantee the suspended or disbarred lawyer gets paid?
A: No. The Committee cautions that under other Texas law, citing Burrow v. Arce, a suspended or disbarred lawyer may be barred from receiving some or all of the fees from the matter that forms the basis of the disciplinary action.
Background and rules framework
The opinion interprets Texas Disciplinary Rule 5.04(a) (a lawyer or law firm shall not share or promise to share legal fees with a non-lawyer), corresponding to ABA Model Rule 5.4(a), and Rule 1.04(f) (division of fees between lawyers not in the same firm), corresponding to ABA Model Rule 1.5(e), as amended effective March 1, 2005 to abolish the pure referral fee. The predecessor provision was Disciplinary Rule 3-102 of the Texas Code of Professional Responsibility.
Citations and references
Rules of Professional Conduct:
- MR 5.4(a) (sharing fees with a non-lawyer)
- MR 1.5(e) (division of fees between lawyers)
- Texas Disciplinary Rule 5.04(a), Comment 1
- Texas Disciplinary Rule 1.04(f)
- Texas Code of Professional Responsibility, Disciplinary Rule 3-102 (predecessor)
Cases:
- Royden v. Ardoin, 331 S.W.2d 206 (Tex. 1960), disbarment or suspension as voluntary abandonment disqualifying the lawyer from compensation
- Lee v. Cherry, 812 S.W.2d 361 (Tex. App. - Houston [14th Dist.] 1991, writ denied), disbarred lawyer may receive referral fees if work completed before disbarment
- A.W. Wright & Associates, P.C. v. Glover, Anderson, Chandler & Uzick, L.L.P., 993 S.W.2d 466 (Tex. App. - Houston [14th Dist.] 1999, pet. denied), following Lee
- Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999), fee forfeiture for breach of fiduciary duty
Other opinions cited:
- Texas Professional Ethics Committee Opinion 432 (October 1986): no fees to a disbarred lawyer on a contingent contract not completed before disbarment
See also
- TX Ethics Op. 592: Sharing Legal Fees With a Suspended Lawyer
- TX Ethics Op. 566: A Lawyer/Receiver Paying Part of the Fee to the Parties' Lawyers
Source
- Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-568/
- Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_568.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
QUESTION PRESENTED
Under the Texas Disciplinary Rules of Professional Conduct, may a lawyer share a contingent fee with a suspended or disbarred lawyer?
STATEMENT OF FACTS
Lawyer A refers a contingent fee case to Lawyer B pursuant to a signed referral agreement that calls for the two lawyers to share the contingent fee. Subsequently, Lawyer A is suspended from the practice of law. While Lawyer A is suspended from the practice of law, a contingent fee becomes payable with respect to the contingent fee case.
DISCUSSION
With exceptions not relevant here, Rule 5.04(a) of the Texas Disciplinary Rules of Professional Conduct provides that "[a] lawyer or law firm shall not share or promise to share legal fees with a non-lawyer ...." The primary rationale behind this rule is to prevent solicitation by lay persons of clients for lawyers and to avoid encouraging or assisting non-lawyers in the practice of law. See Comment 1 to Rule 5.04.
The Committee previously addressed a similar issue under Disciplinary Rule 3- 102 of the Texas Code of Professional Responsibility, the predecessor to current Rule 5.04(a) of the Texas Disciplinary Rules of Professional Conduct. Disciplinary Rule 3-102 provided that "[a] lawyer or law firm shall not share legal fees with a non-lawyer ...." In Professional Ethics Committee Opinion 432 (October 1986), the Committee held that payment of fees to a lawyer who is disbarred prior to the completion of a contingent fee contract violates Rule 3-102 because the disbarred lawyer is not entitled to collect either on the contract or quantum meruit for the services that have been rendered. Relying on the Texas Supreme Court's decision in Royden v. Ardoin, 331 S.W.2d 206 (Tex. 1960), the Committee concluded that the disbarment or suspension of the lawyer is tantamount to voluntary abandonment by the lawyer, which disqualifies the lawyer from compensation because the lawyer is unable to complete the work the lawyer was hired to perform. The Committee, however, expressly did not address the question of payment to a lawyer where there was no abandonment because the services had been completed prior to the disciplinary action.
Two opinions of the Fourteenth District Court of Appeals have addressed the specific question left unresolved by Opinion 432. In Lee v. Cherry, 812 S.W.2d 361 (Tex. App. - Houston [14th Dist.] 1991, writ denied), the court held that a disbarred lawyer may receive referral fees provided that the lawyer completed the legal work on the case prior to disbarment. In Lee, the court refused to extend the holding of Royden v. Ardoin, supra, to a case in which the lawyer had completed all of the work expected of him. The court reasoned that voluntary abandonment only applies to those situations where the lawyer has not completed the legal services prior to disbarment. See 812 S.W.2d at 363. The Lee decision was followed in A.W. Wright & Associates, P.C. v. Glover, Anderson, Chandler & Uzick, L.L.P., 993 S.W.2d 466 (Tex. App. - Houston [14th Dist.] 1999, pet. denied). Both cases involved forwarding lawyers in referral fee arrangements.
Lee and A. W. Wright were decided before the amendments to Rule 1.04 of the Texas Disciplinary Rules of Professional Conduct, which became effective March 1, 2005. The amendments abolished the pure referral fee. Under the amended Rule as currently in effect, fee divisions between lawyers not in the same firm must be made either in proportion to the professional services performed by each lawyer or based on the lawyers' assumption of joint responsibility for the representation. See Rule 1.04(f). Under the amended rule, a referring lawyer's duties cannot end with the referral. Although Lee and A. W. Wright were decided before the 2005 amendment of Rule 1.04, the Committee is of the opinion that the underlying rationale of these decisions is correct and that under the Texas Disciplinary Rules of Professional Conduct a lawyer may share a contingent fee with a suspended or disbarred lawyer if the suspended or disbarred lawyer has fully performed all work in the matter prior to the lawyer's suspension or disbarment. The Committee, however, notes that under other principles of Texas law a suspended or disbarred lawyer may be prohibited from receiving some or all of the fees generated from a matter that forms the basis of the disciplinary action against the lawyer. See Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999).
CONCLUSION
Under the Texas Disciplinary Rules of Professional Conduct, a lawyer may share a contingent fee with a suspended or disbarred lawyer if the fee-sharing agreement existed before the suspension or disbarment and the suspended or disbarred lawyer fully performed all work in the matter before the suspension or disbarment.
Tex. Comm. On Professional Ethics, Op. 568 (2006)