WISBAR 1994

If a lawyer raises the hourly rate on a referred case so the increase can be paid to the referring lawyer, must the client be told?

Short answer: The opinion concluded that yes, in every case the client must be told that the receiving lawyer's hourly fee was increased because of the referral. The committee treated the arrangement as a division of fees between lawyers in different firms not in proportion to services, so SCR 20:1.5(e) requires a written agreement, each lawyer's assumption of joint responsibility, the client's consent after being advised the joint arrangement raises the fee, and a total fee that is reasonable; SCR 20:1.4(b) independently requires the disclosure. It made no difference that the premium rate equaled the referring lawyer's usual rate.

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This page answers the general question as of 1994. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Disclaimer: Advisory only. Not binding precedent.

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-94-2 (1994) addressed a lawyer who increases his or her hourly fee on cases referred by another lawyer, with the differential paid to the referring lawyer as a referral fee. The question was whether the client must be advised of the increase, and whether the answer changes if the increased rate equals the rate the referring lawyer would have charged. The committee answered that in both cases the client must be advised of the increase.

The committee analyzed the arrangement under SCR 20:1.5(e) and SCR 20:1.4(b). Because the referral fee is tied to the hours the receiving lawyer bills rather than to services the referring lawyer performs, the committee treated it as a division of fees between lawyers in different firms other than in proportion to each lawyer's services. To be permissible under SCR 20:1.5(e), the committee concluded both lawyers must have a written agreement with the client by which each assumes joint responsibility for the representation, the client must consent to each lawyer's participation and be advised that the joint representation will produce a higher fee, and the total fee must be reasonable.

The committee reasoned that the fee increases because the receiving lawyer charges a premium to compensate for the referral, and that because legal services are not fungible it does not matter whether that premium rate is the same as the referring lawyer's usual rate; what matters is that the receiving lawyer charges more than he or she ordinarily would. SCR 20:1.5(e)(2) therefore requires disclosure of the resulting increase. The committee added that SCR 20:1.4(b) compels the same result, because clients are legitimately concerned about the basis for their fees and must have enough information to make an informed decision about whether to accept the referral.

Currency note

This opinion was issued in 1994, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct (the state's Ethics 2000 update). The fee-division and client-communication rules (SCR 20:1.5(e) and 20:1.4) have been revised since. 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: Does the client have to be told when the fee is raised to fund a referral fee?

A: Yes. The committee concluded the client must be advised of the increase in the receiving lawyer's hourly fee, under both SCR 20:1.5(e)(2) and SCR 20:1.4(b).

Q: Does it matter that the premium rate equals the referring lawyer's normal rate?

A: No. The committee concluded that because legal services are not fungible, what matters is that the receiving lawyer is charging more than usual because of the referral, so the increase must be disclosed either way.

Q: What did SCR 20:1.5(e) require for this kind of fee split?

A: The committee concluded both lawyers needed a written agreement with the client under which each assumed joint responsibility, the client's consent after being advised the arrangement raises the fee, and a total fee that is reasonable.

Background and rules framework

The opinion interprets SCR 20:1.5(e) / Model Rule 1.5(e) (division of a fee between lawyers who are not in the same firm), including the disclosure requirement the committee located in SCR 20:1.5(e)(2), together with SCR 20:1.4(b) / Model Rule 1.4(b) (a lawyer's duty to explain a matter enough for the client to make informed decisions). The committee read the referral arrangement as a non-proportional fee division that triggers both rules' disclosure requirements.

Citations and references

Rules of Professional Conduct:

Wis. SCR 20:1.5(e), 20:1.5(e)(2) / Model Rule 1.5(e) (division of fees between lawyers in different firms)
Wis. SCR 20:1.4(b) / Model Rule 1.4(b) (communication; explaining a matter)

Source

Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-94-2.pdf

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