Can a group of law firms incorporate to share expertise and split referral fees, and pay a percentage of fees to the shared entity?

Plain-English summary

A group of law firms proposed to incorporate so the specialized expertise of each member firm would be available to the others, with shared activities such as seminars, an executive director, common computer capacity, common stationery, and a central office. The committee found no ethical problem with forming the group or those activities, identifying conflicts and fee division as the only potential issues, both resolvable through full disclosure to clients who are made aware of all the members.

On fee sharing, the committee opined that DR 2-105(D) does not appear to require apportionment so long as the client consents to additional counsel, both attorneys expressly assume responsibility to the client, and the terms of the division are disclosed and consented to. On the proposed dues of 5% of the fee paid to the corporation, the committee read DR 2-102(B) (barring payment to a person or organization for recommending or securing employment) as not offended where Canon 2 is complied with; and where specific dues are charged for specific services so the payments are dues rather than a division of legal fees, there is no improper division of fees with a nonlawyer under Canon 3.

Currency note

This opinion was issued in 1986, under Virginia's former Code of Professional Responsibility, before the Virginia State Bar's adoption of the Rules of Professional Conduct effective January 1, 2000. The committee note records that current Rule 1.5(e) permits fee sharing between lawyers in different firms if the client consents and the fee is reasonable, and that a referring attorney may charge a fee for a referral without further participation in the matter. 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 Treat this page as historical context, not current guidance.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 separate firms split a fee between a referring and a working lawyer in Virginia?

A: Under this 1986 opinion, yes, without strict apportionment, provided the client consents to the additional counsel, both lawyers expressly assume responsibility to the client, and the division's terms are disclosed and consented to.

Q: Could the firms pay a percentage of each fee to the shared corporate entity?

A: The committee found no problem with the proposed 5% where Canon 2 is satisfied and the payment functions as dues for services rather than a division of legal fees with a nonlawyer.

Q: Was forming the incorporated group itself a problem?

A: No. The committee saw no ethical issue with the group's formation or related activities such as seminars, shared staff, common stationery, and a central office; the only concerns were conflicts and fee division.

Background and rules framework

The opinion applies the former Code's DR 2-105(D) (division of fees among lawyers) and DR 2-102(B) (paying for recommendation of employment), read against Canons 2 and 3. The committee note maps the question onto current Virginia Rule 1.5(e), the provision on fee sharing between lawyers in different firms, corresponding to ABA Model Rule 1.5(e).

Citations and references

Rules of Professional Conduct:

• DR 2-105(D) (division of fees among lawyers) (former Code)
• DR 2-102(B) (compensating a person for recommending employment) (former Code)
• Virginia Rule 1.5(e) / ABA Model Rule 1.5(e) (fee sharing between lawyers in different firms)

See also

• VA LEO 945: "Of Counsel" Listings and Undisclosed Origination Fees
• VA LEO 850: Contingent Fee for Child Support Arrearages
• VA LEO 956: Selling a Firm's Assets but Not Its Name or Goodwill

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/0844.pdf

Original opinion text

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

LEGAL ETHICS OPINION 844

CORPORATIONS – FEES – DIVISION OF
FEES AMONG RELATED LAW FIRMS.

A group of law firms desires to incorporate for the principal purpose of making the
specialized expertise and experience of the attorneys in each member firm available to
the attorneys in all member firms. The committee finds no ethical problem with regard to
the formation of the group or any related potential activities such as seminars,
employment of an executive director, computer capacity common to all, common
stationery and a central office. The only potential problems foreseen by the committee are
with regard to conflicts and division of fees. The committee opines that, as long as all
clients of the group are aware of all the members and full disclosure is made to the client,
any potential problems may be resolved.

The fee-sharing arrangement will be one whereby a member of the group may refer a
matter to another attorney in a different area. Fees will be shared by the "referring" and
"working" attorney. Disciplinary Rule 2-105(D) [DR:2-105] does not appear to require
proportionment provided that the client consents to the employment of additional
counsel, both attorneys expressly assume responsibility to the client, and the terms of
the division of the fee are disclosed to the client and the client consents thereto.

In addition to dividing fees between the "referring" and "working" attorneys, it is
proposed that dues equal to five percent of the fee be paid to the corporation, which five
percent is to defer some of the expenses of the operation of the entity itself. Disciplinary
Rule 2-102(B) [DR:2-102] prohibits an attorney from compensating a person or
organization from recommending or securing employment by a client. Provided there is
compliance with the disciplinary rules set forth under Canon 2, the Committee finds no
problem with the proposed five percent division. Further, if specific dues are charged for
specific services and any payments made to the entity by the members are dues rather
than a division of legal fees, then there is no division of legal fees with a nonlawyer as
contemplated under Canon 3. [ DR:2-102(B) and DR:2-105(D)]

Committee Opinion
September 2, 1986

Legal Ethics Committee Notes. – Rule 1.5(e) permits fee sharing between lawyers in
different firms provided the client consents and the fee is reasonable. The referring
attorney may charge a fee for referring a case to another lawyer without further
participation in the client’s matter.