Can a Virginia lawyer pay a referring lawyer a share of the fee when the referring lawyer takes no responsibility for the case and does no further work?

Plain-English summary

Law Firm A proposed to tell referring attorneys that any matter referred to it would result in a monthly division of a percentage of the fees Firm A received from the referred client. As contemplated, the client would be advised in writing and in advance of all lawyers' participation, would consent after full disclosure, the fee would be reasonable, and it would be disclosed that the referring lawyer would not participate in or take responsibility for the matter. The committee was asked whether, under Rule 1.5(e), Firm A could divide a fee with a referring lawyer who assumes no responsibility and provides no services.

Rule 1.5(e) permits a division of a fee between lawyers not in the same firm only if the client is advised of and consents to all lawyers' participation, the terms of the division are disclosed and consented to, the total fee is reasonable, and consent is obtained in advance (preferably in writing). The committee relied on the Committee Commentary to Rule 1.5, which states that paragraph (e) deleted the former Virginia Code requirement that each lawyer assume full responsibility regardless of the degree of participation, in order to encourage appropriate referrals; the arrangement is acceptable only if the client consents after full disclosure delineating each lawyer's responsibilities. The committee held that prior opinions applying former DR 2-105(D) (LEOs 1488, 1111, 1160, 1232, 1380, 1459, 1572), which required the referring lawyer to assume responsibility as a condition of sharing fees, are overruled in part by Rule 1.5(e) to that extent.

The committee added two cautions. Marketing that promises to compensate or reward a lawyer for referrals could be viewed as an attempt at improper solicitation under Rule 7.3(d) or as "running and capping" in violation of Chapter 39, Article 7 of Title 54.1 of the Code of Virginia (with an attempt to violate the rules itself misconduct under Rule 8.4(a)); the committee recommended that Firm A publicize its availability for referrals without reference to compensation. And the referring lawyer must still take reasonable steps to ensure competent representation by a lawyer of established competence in the field (Comment 2 to Rule 1.1), so a fee division is improper if the referring lawyer simply refers without assessing the matter and determining whether a referral is appropriate.

Currency note

This opinion was issued in 2000. Virginia's Rules 1.5, 7.3, and 1.1, and the cited Code of Virginia provisions, may have changed since. Verify against current rules before relying on any specific requirement mentioned here.

In practice

The opinion holds that, under the rules as they stood at the time, Rule 1.5(e) permits a fee division with a referring lawyer who takes no responsibility for the matter, provided the client consents after full disclosure (including each lawyer's responsibilities) and the total fee is reasonable. It also holds that referral-reward marketing may amount to improper solicitation under Rule 7.3(d) or running and capping under Title 54.1, and that the referring lawyer must take reasonable steps to ensure competent representation, so a bare referral without assessing the matter does not support a fee division.

Common questions

Q: Does the referring lawyer have to stay responsible for the case to get a referral fee in Virginia?

A: No. The committee holds that Rule 1.5(e) deleted the former requirement that the referring lawyer assume responsibility, so a fee division is permissible if the client consents after full disclosure and the total fee is reasonable.

Q: What does the client have to be told?

A: The committee says the client must be advised of and consent to all lawyers' participation and to the terms of the division, in advance and preferably in writing, with full disclosure that includes a delineation of each lawyer's responsibilities to the client.

Q: Can a firm advertise that it pays lawyers for referrals?

A: The committee cautions against it. Marketing that rewards referrals could be improper solicitation under Rule 7.3(d) or "running and capping" under Title 54.1; the committee recommended publicizing availability for referrals without referencing compensation.

Q: Can a lawyer collect a referral fee for a bare referral with no review of the case?

A: No. The committee holds the referring lawyer must take reasonable steps to ensure competent representation (Comment 2 to Rule 1.1), so a fee division is improper if the lawyer refers without assessing the client's matter and whether a referral is appropriate.

Background and rules framework

The opinion interprets Rule 1.5(e) (division of a fee between lawyers not in the same firm; client consent, reasonable total fee, advance disclosure) and its Committee Commentary, in contrast with former DR 2-105(D)'s requirement that each lawyer assume responsibility. It also references Rule 7.3(d) (solicitation), Rule 8.4(a) (attempting to violate the rules), Comment 2 to Rule 1.1 (competence through association), and the Code of Virginia's running-and-capping provisions.

Citations and references

Rules of Professional Conduct:

• Virginia Rule 1.5(e) and Committee Commentary (division of fees; former DR 2-105(D))
• Virginia Rule 7.3(d) (improper solicitation), Rule 8.4(a) (attempt to violate the rules), Rule 1.1 Comment 2 (competence through association)

Statutes:

• Code of Virginia, Title 54.1, Chapter 39, Article 7 (running and capping)

Other opinions cited:

• Virginia LEOs 1488, 1111, 1160, 1232, 1380, 1459, 1572: prior opinions requiring the referring lawyer to assume responsibility, overruled in part by Rule 1.5(e).

See also

• VA LEO 1751: Percentage Fee for a Bar Referral Service
• VA LEO 1766: Mixed Contingent Plus Hourly Fee
• VA LEO 1744: Pro Bono Court-Awarded Fees to a Nonprofit

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1739.pdf

Original opinion text

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

Committee Opinion
April 13, 2000
LEGAL ETHICS OPINION 1739

RULE 1.5(e): DIVISION OF FEE:
DEGREE OF RESPONSIBILITY
ATTORNEY MUST HAVE IN CLIENT
MATTER TO ACCEPT REFERRAL FEE.

You have presented a hypothetical situation in which Law Firm A proposes to advise any
referring attorney or firm that any new matters referred to Law Firm A will result in a division of
any fees received by Law Firm A from the client referred to Law Firm A. The division of fees
paid to the referring attorney or firm will be a percentage of the total fee received by Law Firm
A, and Law Firm A will divide a percentage of fees received from the client with the referring
attorney or firm on a monthly basis. As required by Rule 1.5(e), the client will be advised in
writing in advance of the participation of all lawyers involved, client's consent to the
participation of all lawyers involved will be sought after full disclosure to the client, and the fee
will be reasonable. It will be disclosed to the client in writing and in advance that the referring
attorney or firm will not be assuming any participation in or responsibility for the matter in
which Law Firm A will be engaged.
Under the facts you have presented, you have asked the committee to opine as to whether it is
ethically permissible under Rule 1.5(e) for Law Firm A to divide a fee received for representing
a client referred to Law Firm A by a referring attorney or firm, when the referring attorney or
firm assumes no responsibility to the client and will provide no services to the client.
The appropriate and controlling rule applicable to your inquiry is Rule 1.5(e) which states:
A division of a fee between lawyers who are not in the same firm may be made only if:
1. the client is advised of and consents to the participation of all the lawyers
involved;
2. the terms of the division of the fee are disclosed to the client and the client
consents thereto;
3. the total fee is reasonable; and
4. the division of fees and the client’s consent is obtained in advance of the
rendering of legal services, preferably in writing.
Also pertinent to your inquiry is the Committee Commentary which follows Rule 1.5 of the
Rules of Professional Conduct which states in pertinent part:
Paragraph (e) eliminates the requirement in the Virginia Code [of Professional
Responsibility] that each lawyer involved in a fee-splitting arrangement assume
full responsibility to the client, regardless of the degree of the lawyer's continuing

Committee Opinion
April 13, 2000
participation. The requirement in the Virginia Code [of Professional
Responsibility] was deleted to encourage referrals under appropriate
circumstances by not requiring the lawyer making the referral to automatically
assume ethical responsibility for all of the activities of the other lawyers involved
in the arrangement. However, such an arrangement is acceptable only if the client
consents after full disclosure, which must include a delineation of each lawyer's
responsibilities to the client.
Applying former DR 2-105(D) 1 of the Code of Professional Responsibility, the committee has
previously opined that it is improper for an attorney to share legal fees with or pay an attorney
merely for referring a client, where the referring attorney has no further responsibility to the
client after the referral is made. LE Op. 1488 (1992). See also LE Op. 1111, LE Op. 1160, LE
Op. 1232, LE Op. 1380, LE Op. 1459 and LE Op. 1572. The committee believes that these
opinions are overruled, in part, by Rule 1.5(e) to the extent that they require the referring
attorney to assume responsibility to the client, after referring a client to another lawyer, as a
condition to sharing fees with the other lawyer. The committee believes that the drafters of the
Rules of Professional Conduct intended to permit a lawyer to receive a share of the legal fees
generated by another attorney or law firm to whom a client was referred, provided that the client
consents to such an arrangement and the fee is reasonable. Unlike former DR:2-105(D), Rule
1.5(e) does not require the referring attorney to assume responsibility to the client. The new rule,
in the committee’s view, encourages a lawyer to fulfill other ethical obligations to a client by
referring the client to another attorney if he or she believes they lack the required competence or
if there is a conflict.
The committee warns, however, that Law Firm A’s marketing efforts, which include promises
to compensate or reward any lawyer or law firm for a referral of clients to Law Firm A, could be
viewed as an attempt 2 to engage in improper solicitation under Rule 7.3(d) 3 or “running and
capping” in violation of Chapter 39, Article 7 of Title 54.1 of the Code of Virginia. The

1

Former DR2-105(D) of the Code of Professional Responsibility stated:
A division of fees between lawyers who are not in the same firm may be made only if:
(1) The client consents to the employment of additional counsel;
(2) Both attorneys expressly assume responsibility to the client; and
(3) The terms of the division of the fee are disclosed to the client and the client consents thereto.
(Emphasis added).
2
Under the Virginia Rules of Professional Conduct, it is professional misconduct to attempt to violate the Rules.
Rule 8.4(a).
3
Rule 7.3(d) — A lawyer shall not compensate or give anything of value to a person or organization to recommend
or secure employment by a client, or as a reward for having made a recommendation resulting in employment by a
client, except that the lawyer may pay for public communications permitted by Rule 7.1 and the usual and
reasonable fees or dues charged by a lawyer referral service and any qualified legal services plan or contract of legal
services insurance as authorized by law, provided that such communications of the service or plan are in accordance
with the standards of this Rule or Rule 7.1, as appropriate.

Committee Opinion
April 13, 2000
committee recommends that Law Firm A publicize its availability for referrals without reference
to compensation for the referral being made.
In the facts you present, the committee concludes that it is not improper under Rule 1.5(e) for
Law Firm A to divide a fee with a referring attorney as a result of representing a client referred
to Law Firm A by a referring attorney or firm, when the referring attorney or firm assumes no
responsibility to the client and will provide no further services to the client. When involving
another attorney in the client’s matter, the referring attorney should take reasonable steps to
ensure that competent representation can be provided through the association of a lawyer of
established competence in the field in question. Comment [2], Rule 1.1. Thus, a fee division
under Rule 1.5(e) is not proper if the referring attorney simply makes a referral without assessing
the client's legal matter and without determining whether a referral is appropriate or necessary.