Can a lawyer join a preferred-provider program that takes a cut of the lawyer's discounted fees and bills the client?

Plain-English summary

The inquiry asked whether participating in a preferred-provider program constitutes inappropriate fee sharing. A third-party administrator of self-insured workers' compensation claims proposed a program in which participating attorneys and other service providers would discount their fees by ten percent. The administrator would receive the attorney's bill, accumulate and summarize it with other providers' bills, apply the ten percent discount, and submit a single monthly bill to the client. The administrator would charge its clients thirty percent of the ten percent in reduced fees, which the clients would pay directly to the administrator.

The committee concluded that an attorney's participation in the proposed program does not meet the minimum standards set in the Rules of Professional Conduct, directing the inquirer specifically to RPC 5.4(a) and 7.2(c).

Currency note

This opinion was issued in 1997, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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. Washington's cited rules correspond to ABA Model Rules 5.4 (professional independence of a lawyer) and 7.2 (advertising, including payment for recommending a lawyer's services).

Common questions

Q: Can a lawyer join the preferred-provider program described?

A: The committee concluded that participation does not meet the minimum standards of the Rules of Professional Conduct.

Q: Which rules did the committee point to?

A: The committee directed the inquirer specifically to RPC 5.4(a) (division of fees with a nonlawyer) and RPC 7.2(c).

Q: What was the arrangement?

A: Participating lawyers discounted their fees by ten percent, and the administrator charged clients thirty percent of that discount, paid directly to the administrator.

Background and rules framework

The opinion applied RPC 5.4(a) (the prohibition on sharing legal fees with a nonlawyer, corresponding to ABA Model Rule 5.4) and RPC 7.2(c) (corresponding to ABA Model Rule 7.2 on advertising and payment for recommending a lawyer's services) to a billing arrangement in which a third-party administrator captured a percentage of lawyers' discounted fees. The committee treated the arrangement as failing the minimum standards rather than analyzing it clause by clause.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 5.4 (professional independence of a lawyer); Washington RPC 5.4(a)
• ABA Model Rule 7.2 (advertising); Washington RPC 7.2(c)

See also

• WA Ethics Op. 1716: Giving Part of a Fee to Charity
• WSBA Ethics Op. 1132: Lawyer-Intermediary Fee Sharing

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=803

Original opinion text

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

Advisory Opinion: 1730
Year Issued: 1997
RPC(s): RPC 5.4(a); 7.2(c)
Subject: Division of fees with nonlawyer; preferred provider program which receives a percentage of required discount of attorneys' fees

Your question was whether an attorney's participation in a "preferred provider program" constitutes inappropriate fee sharing. "XYZ, Inc." is a third party administrator of self-insured workers' compensation claims. This company wishes to provide its clients with a "preferred provider program" pursuant to which attorneys and other service providers who participate would agree to discount their fees by ten percent. The company would receive the attorney's bill for services rendered to the client, accumulate and summarize that bill and the bills of other service providers, apply the ten percent discount, and then submit a single monthly bill to the client. The company would charge its clients thirty percent of the ten percent in reduced fees, which sum the clients would pay directly to the company.

The RPC Committee decided that participation of an attorney in the proposed "preferred provider program" does not meet the minimum standards set forth in the Rules of Professional Conduct. The Committee directs you specifically to RPC 5.4(a) and 7.2(c).