Can two unrelated law firms list each other as "of counsel" on their letterheads and pay a 10 percent origination fee on referred work without telling the client?

Plain-English summary

Two separate and independent law firms, practicing entirely different areas of law, agreed to become "of counsel" to each other on a complementary basis. Each firm's letterhead would list the other firm as "of counsel" by firm name only. Work would be referred between them, sometimes performed by both and sometimes by one, and the referring firm would receive 10 percent of the gross billings of the firm doing the work, regardless of whether the referring firm did any work. Both firms would assume responsibility to the client for referred work, but the client would not be asked to consent to the referral (the firms treated themselves as one firm) and would not be told of the 10 percent fee arrangement.

The committee opined that it was improper for each firm to list the other firm's name on its letterhead as "of counsel." It also opined that it was improper for the two firms to permit a 10 percent origination fee. In doing so, the committee retracted the statement in LE Op. 442 that DR 2-105(D) is not applicable to associates and those listed as "of counsel," citing DR 2-102(A) and DR 2-105(D). The committee note records that current Rule 1.5(e) permits fee sharing between lawyers in different firms, including a referral fee without shared responsibility, where the client consents after full disclosure and the fee is reasonable.

Currency note

This opinion was issued in 1987, under Virginia's former Code of Professional Responsibility (the disciplinary rules it cites), before the Virginia State Bar's adoption of the Rules of Professional Conduct effective January 1, 2000. The committee note describes the current fee-division framework under Rule 1.5(e). 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 Treat this page as historical context, not current guidance.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 two separate firms list each other as "of counsel"?

A: Under this 1987 opinion, no. The committee opined it was improper for each firm to list the other firm's name on its letterhead as "of counsel."

Q: Was the 10 percent origination fee permissible?

A: No. The committee opined it was improper to permit the 10 percent origination fee, retracting an earlier statement that had exempted "of counsel" relationships from the fee-division rule.

Q: Did the client have to be told about the fee?

A: The arrangement contemplated not informing the client of the fee or asking for consent to referral; the committee found that improper. The committee note states that current Rule 1.5(e) requires the client's consent after full disclosure for a fee division between firms.

Background and rules framework

The opinion interpreted former Virginia DR 2-102(A) (professional notices and letterheads, including "of counsel" designations, the area now in ABA Model Rule 7.5) and DR 2-105(D) (division of fees, the area now in ABA Model Rule 1.5). The committee note maps the fee question onto current Virginia Rule 1.5(e).

Citations and references

Rules of Professional Conduct:

• Former Virginia DR 2-102(A) (letterheads and "of counsel" designations; area now in ABA Model Rule 7.5)
• Former Virginia DR 2-105(D) (division of fees)
• Virginia Rule 1.5(e) / ABA Model Rule 1.5 (division of fees between lawyers in different firms)

Other opinions cited:

• LE Op. 442: retracted to the extent it stated DR 2-105(D) is inapplicable to associates and "of counsel" relationships

See also

• VA LEO 1735: Contract Attorney "Of Counsel" Billing Disclosure
• VA LEO 1035: A Lawyer Joining a Trade-and-Barter Association
• VA LEO 1130: Dividing a Referral Fee With a Foreign Attorney

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/0945.pdf

Original opinion text

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

Committee Opinion
June 10, 1987
LEGAL ETHICS OPINION 945

LAW FIRM – “OF COUNSEL”
ARRANGEMENT BETWEEN FIRMS.

Two separate and independent law firms have reached an agreement whereby the two
will become “of counsel” to each other. The two firms practice entirely different areas of
law and the agreement provides that the association between the two would be
“complementary.” The letterhead of the respective firms will list the other firm as “of
counsel” by firm name only without listing individual attorneys. Work would be referred
between the two firms; in some instances both firms will perform work, in other instances
only one firm will perform the work. In either situation, the referring firm will be entitled
to a fee of 10% of the gross billings of the firm actually doing the work, regardless of
whether or not the referring firm actually did any work. For all matters referred, both
firms will assume responsibility to the client for the specific work referred. The client
will not be asked for consent to referral of work since both firms would be considered the
same firm. The client will also not be informed of the 10% fee arrangement between the
two firms. In addition, each firm will be independently liable for its own separate work
for which the other firm is not called in.
It is improper, given the above, for each firm to list the other firm's name on its
letterhead as “of counsel.”
It is also improper for the two firms to permit a 10% origination fee. The committee, by
this opinion, retracts the statement of LE Op. 442 which indicates that DR:2-105(D) is
not applicable to associates and those listed as “of counsel.” [DR:2-102(A),
DR:2-105(D) LE Op. 442]
Committee Opinion
June 10, 1987
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.
Rule 1.5(e) does not require that a lawyer sharing in fees also share responsibility, thus
allowing “referral fees” if the client consents after full disclosure.