Can a retired, inactive lawyer's retirement agreement with the former firm include a percentage 'referral fee' on fees generated?

Plain-English summary

A lawyer who had recently moved to inactive member status on retirement asked whether his retirement agreement with his former firm met the Rules of Professional Conduct. The agreement provided post-retirement compensation in several forms, potentially including a monthly salary, a membership fee, expense-account reimbursement, a fee for personal services as a consultant, a referral fee based on a percentage of fees generated, and 30 percent of net accounts receivable on dissolution.

The committee concluded that, to the extent the agreement required payment to the inquirer of money or other value for recommending legal services, performance of the agreement violated RPC 7.2. That was the effect of section 2.b, which provided for a "referral fee." Portions that acted solely to make retirement-benefit payments did not violate the RPCs.

The committee added that sections 2.a, 2.c, and 4 might comply with the RPCs so long as they were retirement payments, or compensation for future services that could be performed by a non-lawyer and did not involve referral of cases. As to the compensated advisory consulting services, the committee concluded they were ethically permissible (and the conflict provisions of RPC 1.8 would not apply) to the extent they did not violate RPC 7.2 and did not involve an equity interest funded by the sharing of legal fees held by a non-lawyer, so long as the inquirer did not practice law and the services were rendered to his firm and did not directly involve its clients.

Currency note

This opinion was issued in 2001, 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 Treat this page as historical context, not current guidance.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.

Common questions

Q: Can a retirement agreement pay a retired lawyer a percentage "referral fee" on fees generated?

A: No. The committee concluded that, to the extent the agreement required paying value for recommending legal services, it violated RPC 7.2; that was the effect of the "referral fee" in section 2.b.

Q: Do straight retirement-benefit payments to a retired lawyer violate the rules?

A: The committee said portions of the agreement that acted solely to make retirement-benefit payments, or paid for future services a non-lawyer could perform that did not involve referral of cases, did not violate the RPCs.

Q: Can the retired lawyer be paid for consulting services to the firm?

A: The committee said compensated advisory consulting services were ethically permissible, and RPC 1.8's conflict provisions would not apply, so long as they did not violate RPC 7.2, did not involve an equity interest funded by sharing legal fees with a non-lawyer, and the inquirer did not practice law and the services went to the firm rather than directly to its clients.

Background and rules framework

The opinion applies Washington RPC 7.2 (advertising; the limits on giving anything of value for recommending a lawyer's services; corresponding to Model Rule 7.2) to the agreement's percentage "referral fee." It also addresses RPC 1.8 (conflicts of interest and prohibited transactions with a client; Model Rule 1.8), concluding those conflict provisions did not apply to the consulting services given the stated conditions. The opinion reflects Washington's pre-2006 rule numbering.

Citations and references

Rules of Professional Conduct:

• Model Rule 7.2 / Washington RPC 7.2 (advertising; giving value for recommending services)
• Model Rule 1.8 / Washington RPC 1.8 (conflicts of interest; prohibited transactions with a client)

See also

• WSBA Ethics Op. 1297: Lawyer in a Paid Referral Package
• WSBA Ethics Op. 1511: Division of Fees With a Lawyer Referral Service
• WSBA Ethics Op. 1947: For-Profit Lawyer-List Website

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1188

Original opinion text

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

Advisory Opinion: 1948
Year Issued: 2001
RPC(s): RPC 1.8; 7.2
Subject: Retirement agrement between inactive retired lawyer and his former law firm

The inquirer asks whether, in light of his recent post-retirement change to inactive member status, the performance by his firm and him of his retirement agreement meets ethical standards set forth in the Rules of Professional Conduct (RPC). The agreement in question provides for the firm to pay post-retirement compensation in several forms to the inquirer, potentially including monthly salary, membership fee, expense account reimbursement, fee for personal services as a consultant, and a referral fee based on a percentage of fees generated, as well as 30 percent of net accounts receivable upon dissolution.

The committee opined that to the extent that it required payment to the inquirer of monetary or other value for recommending legal services, the performance of the agreement in question violates RPC 7.2. This would be the effect of section 2.b of the agreement, which provides for the payment of a "referral fee". Portions of this agreement that act solely to provide for the making of retirement benefits payments to the inquirer do not violate the RPCs. Section 2.a and c, and 4, so long as they are retirement payments or compensation for future services that can be performed by a non-lawyer and do not involve referral of cases, may be in compliance with the RPCs. With regard to the compensated advisory consulting services, to the extent that they are not precluded as conduct violative of RPC 7.2 and do not involve an equity interest funded by the sharing of legal fees which is held by a non-lawyer, they are ethically permissible and the conflict provisions of RPC 1.8 would not be applicable so long as the inquirer does not practice law and these services are rendered to his firm and do not directly involve its clients.