Ezel / Ethics Opinions / WISBAR
WISBAR 1984

Can a law firm pay an insurance company's referral subsidiary a fee equal to a percentage of the fees the firm earns on referred cases?

Short answer: The opinion concluded that paying the proposed 2 percent-of-fees referral charge would be improper: it is in substance a division of fees with a nonlawyer, and paying any fee for referrals is seeking to influence another to recommend the lawyer's employment, which the Code prohibited.

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This page answers the general question as of 1984. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Currency note: this opinion is from 1984
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
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About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.
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Plain-English summary

Opinion E-84-17 addressed an insurance company that was creating a subsidiary to act as a resource center and referral agency for the company's independent agencies. The subsidiary wanted a law firm available to accept referrals on certain legal problems, and proposed to charge a fee equal to 2 percent of the fees the firm generated on referred cases. The subsidiary characterized the charge not as a referral commission or finder's fee but as a way to cover the costs of operating the subsidiary. The question was whether it would be proper to pay such a fee.

The committee concluded the arrangement was improper. It reasoned that under the former Wisconsin Code (Chapter 20 of the Supreme Court Rules), a lawyer may not share legal fees with a nonlawyer (SCR 20.19), and that the proposed referral charge was in fact a division of fees and therefore improper. The committee added that the Code also barred a lawyer from requesting a person or organization to recommend the lawyer's employment, except through a bar-operated, sponsored, or approved lawyer referral service (SCR 20.09(3)), and that recommendations should be disinterested and informed (SCR 20.06(3)(c)). It concluded that by paying any fee for referrals, even one not labeled a referral commission, a lawyer is seeking to influence another to recommend his or her employment, and that the conduct is impermissible.

Currency note

This opinion was issued in 1984, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it analyzes conduct under the former Code. Fee sharing with nonlawyers is now analyzed under SCR 20:5.4 / Model Rule 5.4, and payment for referrals under SCR 20:7.2 / Model Rule 7.2. 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: Could the firm pay an insurer's subsidiary a percentage of the fees earned on referred cases?

A: No. The committee concluded the percentage-of-fees charge was in substance a division of fees with a nonlawyer, prohibited by SCR 20.19.

Q: Did relabeling the charge as a cost-recovery fee rather than a referral commission change the result?

A: No. The committee concluded that paying any fee for referrals, even one not intended as a referral commission, is seeking to influence another to recommend the lawyer's employment and is impermissible.

Q: How could a lawyer properly obtain referrals at the time of this opinion?

A: The committee noted the Code permitted a lawyer to request referrals from a lawyer referral service operated, sponsored, or approved by the bar (SCR 20.09(3)).

Background and rules framework

The opinion interpreted the former Code's prohibition on sharing legal fees with a nonlawyer (SCR 20.19) and its limits on requesting recommendations of employment (SCR 20.09(3), 20.06(3)(c)). Those subjects are now addressed by SCR 20:5.4 / Model Rule 5.4 (professional independence and fee sharing) and SCR 20:7.2 / Model Rule 7.2 (referrals).

Citations and references

Rules of Professional Conduct:

  • Wis. SCR 20.19 / Model Rule 5.4 (fee sharing with a nonlawyer) (former Code provision)
  • Wis. SCR 20.09(3), 20.06(3)(c) / Model Rule 7.2 (recommending employment; referrals) (former Code provisions)

Statutes:

  • Wis. Stat. sec. 757.295(3) (1981-82)

Cases:

  • In re Lebowitz, 7 A.D.2d 240, 414 N.Y.S.2d 735 (1979), fee sharing with a nonlawyer

Other opinions cited:

  • Wisconsin Formal Opinion E-79-4; Memorandum Opinion 3/67C
  • ABA/BNA Lawyer's Manual on Professional Conduct, at 41:801-02

See also

Source

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