Can a Texas lawyer share legal fees with, or honor a referral agreement signed by, a lawyer who was suspended from practice?
Texas Ethics Opinion 592: Sharing Legal Fees With a Suspended Lawyer
Short answer: Per the Committee, a lawyer may not share or promise to share legal fees with a suspended lawyer, because a suspended lawyer is a non-lawyer under Rule 5.04(a) and the arrangement also cannot meet Rule 1.04(f).
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
The opinion addresses a lawyer (A) who was suspended from practice and, while suspended, referred a case to Lawyer B. A, B, and the client signed a referral agreement during the suspension, and B believed A was licensed at the time.
The Committee concludes the arrangement is prohibited. Rule 5.04(a) bars sharing or promising to share legal fees with a non-lawyer, and although a suspended lawyer remains subject to the disciplinary rules for some purposes, the Committee treats a suspended lawyer as a "non-lawyer" for purposes of Rule 5.04(a). So entering the agreement violated Rule 5.04(a), and B may not act on it. The Committee notes the rule applies without regard to the lawyers' knowledge: B violated Rule 5.04(a) by entering the agreement even if he reasonably believed A was in good standing, though that entry would be an unknowing, non-negligent violation. If B were to share fees after learning of A's suspension, that would be a knowing, deliberate violation with normally greater disciplinary consequences.
The Committee distinguishes its Opinion 568 (2006), which allowed sharing a contingent fee with a suspended or disbarred lawyer where the fee-sharing agreement predated the suspension or disbarment and the lawyer fully performed the work beforehand. Here the agreement was made during the suspension. The Committee also notes that the pure referral fee was abolished by the March 1, 2005 amendments adding Rule 1.04(f) and (g); because A was not a lawyer for purposes of Rule 1.04(f) when the agreement was made, it was not an agreement "between lawyers" and could not comply with Rule 1.04(f).
In practice
Under this opinion, and under the Texas rules as they stood at the time, a lawyer cannot enter a fee-sharing or referral agreement with a suspended lawyer or pay fees under one. The Committee treats a suspended lawyer as a non-lawyer for Rule 5.04(a), so the bar applies regardless of the paying lawyer's belief about the other's status, and the agreement also fails Rule 1.04(f)'s requirement that a fee division be "between lawyers." The Committee separates the unknowing entry into the agreement from a later, knowing payment after the suspension is discovered, treating the latter as more serious.
Common questions
Q: I got a referral from another lawyer who turned out to be suspended. Can I pay the agreed fee split?
A: No. Per Opinion 592, a suspended lawyer is a non-lawyer under Rule 5.04(a), so sharing fees is prohibited, and the agreement cannot satisfy Rule 1.04(f).
Q: Does it matter that I reasonably believed the referring lawyer was in good standing?
A: For the violation, no. The Committee says Rule 5.04(a) applies without regard to knowledge, though entering the agreement unknowingly is treated as a non-negligent violation; knowingly paying after learning of the suspension is a deliberate one.
Q: Aren't there situations where I can share a fee with a suspended or disbarred lawyer?
A: The Committee notes Opinion 568 allowed sharing a contingent fee where the agreement predated the suspension or disbarment and the lawyer fully performed the work before then. That is not this case, where the agreement was made during the suspension.
Background and rules framework
The opinion interprets Texas Disciplinary Rule 5.04(a) (a lawyer shall not share or promise to share legal fees with a non-lawyer), corresponding to ABA Model Rule 5.4; and Rule 1.04(f) (the conditions for dividing a fee between lawyers not in the same firm), corresponding to ABA Model Rule 1.5(e). It notes Rule 1.04(f) and (g) took effect March 1, 2005.
Citations and references
Rules of Professional Conduct:
- MR 5.4 (professional independence; no fee sharing with non-lawyers)
- MR 1.5 (fees, including division of fees among lawyers at MR 1.5(e))
- Texas Disciplinary Rule 5.04(a)
- Texas Disciplinary Rule 1.04(f) and (g)
Other opinions cited:
- Texas Ethics Opinion 568 (2006): a lawyer may share a contingent fee with a suspended or disbarred lawyer if the agreement existed and the work was fully performed before the suspension or disbarment
See also
- TX Ethics Op. 590: Restrictions on a Departing Lawyer's Practice and Fees
- TX Ethics Op. 607: Sharing Limited Conflicts Information When Changing Firms
Source
- Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-592/
- Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_592.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 or promise to share legal fees with a suspended lawyer?
STATEMENT OF FACTS
A was suspended from practicing law. While suspended, A referred a case to Lawyer B. A, B, and the client signed a referral agreement while A was suspended. B believed A to be licensed at the time the referral agreement was signed.
DISCUSSION
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" except under circumstances not applicable here.
Although for certain purposes a lawyer suspended from the practice of law remains subject to the Texas Disciplinary Rules of Professional Conduct, a suspended lawyer is a "non-lawyer" for purposes of Rule 5.04(a). Thus, a Texas lawyer would violate Rule 5.04(a) by sharing or promising to share legal fees with a suspended lawyer. The referral agreement described here therefore violates Rule 5.04(a) and Lawyer B is prohibited from acting on the referral agreement. The Committee notes that the terms of the Rule apply without regard to the knowledge of the lawyers involved in the arrangement. Accordingly, on the facts presented, B violated Rule 5.04(a) when he entered into the agreement to share legal fees with A, a suspended lawyer, even if B reasonably believed that A was a lawyer in good standing at the time of the agreement. Although in these circumstances the entry into the agreement would be an unknowing and non-negligent violation on B’s part, if B were to share legal fees pursuant to the terms of the agreement after B became aware of A’s suspended status, such sharing of legal fees would constitute a knowing and deliberate violation. It is to be expected that the disciplinary consequences of the second violation should normally be greater than the disciplinary consequences if any of the first, innocent violation.
Professional Ethics Committee Opinion 568 (April 2006) addressed the situation in which a referral agreement was entered into before the referring lawyer was disbarred and before the fee became payable. The Opinion concluded that "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." Nevertheless, as Opinion 568 noted, the pure referral fee was abolished by amendments that added paragraphs (f) and (g) to Rule 1.04 effective March 1, 2005. Under Rule 1.04, fee sharing is permitted “between lawyers” not in the same firm provided the requirements of Rule 1.04(f) and (g) are met, including the requirement of Rule 1.04(f) that the division of fees either be made in proportion to the professional services performed by each lawyer or be based upon the lawyers' assumption of joint responsibility for the representation. Since A was suspended and hence cannot be treated as a lawyer for purposes of Rule 1.04(f) at the time the referral agreement between A and B was entered into, the agreement was not an agreement "between lawyers" and therefore it could not comply with Rule 1.04(f).
CONCLUSION
Under the Texas Disciplinary Rules of Professional Conduct, a lawyer is prohibited from entering into an agreement to share legal fees with a lawyer who is suspended from the practice of law and from sharing legal fees with a suspended lawyer pursuant to such an agreement.
Tex. Comm. On Professional Ethics, Op. 592 (2010)