Can a lawyer share fees with, and pay for translation and paralegal work by, a foreign law consultant who refers non-English-speaking clients, and pay a referral fee?

Plain-English summary

A Washington lawyer worked with a licensed foreign law consultant (FLC) who advises clients on the law of his home country and sometimes refers those clients to the lawyer for Washington-law matters. The FLC also proposed providing translation and paralegal services to the lawyer for a fee, with the client consenting and the lawyer paying the FLC out of fees received and recording the FLC's time as a separate, un-marked-up billing entry. The lawyer asked whether he could compensate the FLC.

The committee concluded the lawyer may accept the referral and retain the FLC, provided the client remains liable for the FLC's cost, the FLC's activities stay consistent with APR 14, and any fee sharing complies with RPC 1.5(e). It analyzed three situations. First, where the FLC performs legal services as a foreign law consultant under APR 14(d), fee sharing is permitted because an FLC is a foreign-licensed lawyer, not a "nonlawyer," so RPC 5.4(a) is not implicated (citing Informal Opinion 2006); the division must satisfy RPC 1.5(e)'s proportionality-or-joint-responsibility, written client agreement, and reasonable-total-fee requirements, though an FLC cannot assume joint responsibility for a Washington matter without engaging in unauthorized practice. Second, where the FLC acts as a paralegal, legal assistant, or translator, it is a nonlawyer professional and may be paid like any third-party cost, with the client ultimately responsible, informed of the charge, agreeing in the engagement letter, and no mark-up absent the client's express agreement (citing ABA Formal Opinion 00-420); the lawyer must supervise under RPC 5.3 and guard against unauthorized practice under RPC 5.5. Third, a pure referral fee is not permitted: Washington treats pure forwarding and referral fees as fee splitting (citing Informal Opinion 2189, Belli v. Shaw, McNeary), and RPC 7.2(b) bars giving anything of value for recommending the lawyer's services.

In practice

Under the Washington rules as they stood at the time of the opinion, the committee sorted the FLC's roles by the nature of the work. The opinion holds that an FLC doing foreign-law work is treated as a lawyer for fee-sharing purposes, so the lawyer may divide fees under RPC 1.5(e) and APR 14, but the FLC cannot take joint responsibility for a Washington-law matter without unauthorized practice. When the FLC instead does translation or paralegal work, the lawyer pays it as a pass-through, client-borne cost with disclosure and no unauthorized mark-up, while supervising under RPC 5.3 and policing the APR 14 line under RPC 5.5. A payment that is in substance a fee for the referral itself is prohibited by RPC 7.2(b) and the fee-splitting rule.

Common questions

Q: Can a Washington lawyer share legal fees with a foreign law consultant?

A: Yes, for foreign-law work consistent with APR 14, because the committee treated an FLC as a foreign-licensed lawyer rather than a "nonlawyer," so RPC 5.4(a) is not implicated; the division must meet RPC 1.5(e)'s requirements.

Q: Can the lawyer pay the FLC for translation and paralegal services?

A: Yes, as a third-party cost. The committee said the client must remain ultimately responsible, be informed and agree (preferably in the engagement letter), and there can be no mark-up absent the client's express agreement.

Q: Can the lawyer pay the FLC a referral fee for sending clients?

A: No. The committee concluded a pure referral fee is prohibited by RPC 7.2(b) and treated as fee splitting under Washington law.

Q: Can the FLC take joint responsibility for the Washington matter to justify the fee split?

A: No. The committee said an FLC cannot exercise joint responsibility for a Washington legal matter because that would exceed APR 14 and constitute the unauthorized practice of law.

Background and rules framework

The opinion interpreted Washington RPC 1.5(e) (Model Rule 1.5, division of fees between lawyers), RPC 5.4(a)-(b) (Model Rule 5.4, sharing fees with and partnership with nonlawyers), RPC 5.5 (Model Rule 5.5, unauthorized practice), RPC 5.3 (Model Rule 5.3, supervision of nonlawyer assistants), and RPC 7.2(b) (Model Rule 7.2, anything of value for recommendations), together with Admission to Practice Rule (APR) 14 governing foreign law consultants. It read an FLC as a foreign-licensed lawyer for fee-sharing purposes while a nonlawyer when performing paralegal or translation work.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / Washington RPC 1.5(e) (division of fees between lawyers)
• Model Rule 5.4 / Washington RPC 5.4(a), (b) (fee sharing and partnership with nonlawyers)
• Model Rule 5.5 / Washington RPC 5.5 (unauthorized practice)
• Model Rule 5.3 / Washington RPC 5.3 (supervision of nonlawyer assistants)
• Model Rule 7.2 / Washington RPC 7.2(b) (anything of value for recommendations)

Other authorities:

• Washington Admission to Practice Rule (APR) 14 (foreign law consultants)

Cases:

• Belli v. Shaw, 29 Wn. App. 875, 631 P.2d 980 (1981), aff'd, 98 Wn.2d 569, 657 P.2d 315 (1983), pure forwarding/referral fees treated as fee splitting
• McNeary v. American Cyanamid Co., 105 Wn.2d 136, 712 P.2d 845 (1986), application of the fee-splitting rule
• In re Ireland, 706 P.2d 352 (Ariz. 1985), charging for services without disclosed agreement

Other opinions cited:

• WSBA Informal Opinion 2189 (2008) (pure referral fees between lawyers prohibited)
• WSBA Informal Opinion 2006 (2002) (partnership with a foreign lawyer does not violate RPC 5.4(b))
• WSBA Informal Opinions 2114 (2006), 1522 (1993) (referral fees to foreign counsel; "joint responsibility")
• ABA Formal Opinions 00-420 and 88-356 (billing contract-lawyer and agency costs)

See also

• WA Ethics Op. 2189: pure referral fees between lawyers
• WA Ethics Op. 2169: limited-scope legal services to a brokerage's customers

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1647

Original opinion text

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

Advisory Opinion: 2201
Year Issued: 2009
RPC(s): APR 14, RPC 1.5(e), 5.4(a), 5.4(b), 5.5, 5.3
Subject: compensation to foreign law consultant for translation, paralegal services; referral fees

ISSUE: Whether the inquiring lawyer may compensate a foreign law consultant (“FLC”) who is retained to provide translation and paralegal services for non-English-speaking clients the FLC refers to the inquiring lawyer?

B. BRIEF ANSWER: The inquiring lawyer may accept the referral from the FLC and may retain the FLC to provide translation and paralegal services. The client must remain liable for the cost and expense of the FLC. The activities of the FLC must be consistent with APR 14, and the sharing of fees must comply with RPC 1.5(e).

C. STATEMENT OF THE FACTS: A properly licensed FLC consults with clients in Washington regarding the laws of his home country. On occasion, the FLC’s clients have questions or need help with Washington laws. The FLC proposes the following:

1. When one of the FLC’s clients poses a question regarding Washington law that is within the focus of the inquiring lawyer’s practice, the FLC will refer the client to the inquiring lawyer.

2. The FLC will be available to provide translation and paralegal services to the inquiring lawyer for a fee, when necessary and deemed appropriate by the inquiring lawyer. The FLC also will remain available to provide FLC services to the extent they are necessary. The inquiring lawyer will receive the client’s consent to contract with the FLC to provide whatever services are necessary.

3. The inquiring lawyer plans to pay the FLC out of fees received from the client. When the FLC performs translation or paralegal services, the inquiring lawyer will record the FLC’s time as a separate billing entry and will not mark up the costs.

4. The FLC and the inquiring lawyer are now and would remain completely independent entities.

D. ANALYSIS: Whether the inquiring lawyer may share fees collected from the client with the FLC depends, in large part, on the types of services performed by the FLC.

1. Acting As A Foreign Law Consultant.

The inquiring lawyer may share fees with the FLC when he performs legal services for the client consistent with Admission to Practice Rule ("APR") 14(d). As background, this committee previously opined in Informal Opinion 2006 (2002) that a partnership with a foreign lawyer does not violate Washington RPC 5.4(b) because a foreign lawyer is not a "nonlawyer" for purposes of the rule. By definition, FLCs are foreign-licensed lawyers(1), and partnerships include the sharing of legal fees(2). As such, RPC 5.4(a), which prohibits the sharing of legal fees with a "nonlawyer", is not implicated by the sharing of fees with an FLC. The inquiring lawyer must comply with RPC 1.5(e), which provides in part(3):

(i) the division is in proportion to the services provided by each lawyer or each lawyer assumes joint responsibility for the representation;

(ii) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and

(iii) the total fee is reasonable.

So long as the FLC is advising or consulting about foreign law consistent with APR 14, the division of fees is in proportion to the services provided by the FLC, the client agrees to the arrangement (confirmed in writing) and the total fee for both the FLC and the inquiring lawyer is reasonable, the inquiring lawyer may properly share legal fees with the FLC. An FLC cannot, however, exercise joint responsibility for the representation of a client on a Washington legal matter because doing so would be outside the authority of APR 14 and therefore constitute the unauthorized practice of law(4).

2. Acting As A Paralegal/Other Assistant

Where the FLC is hired to act as a paralegal, legal assistant or translator for the client, the FLC is acting as a non-lawyer professional. As such, the inquiring lawyer may compensate the FLC as any third party cost would be paid. This is permissible because there is no difference between such third-party costs and that for other third-party costs, including copy services, and court reporters.

The client, however, must be ultimately responsible for such costs. The inquiring lawyer must inform the client about the fees to be paid to the FLC and describe the services. The client should initially agree to the third-party cost in the engagement letter, and the inquiring lawyer should include the cost to the client on any subsequent bills. Absent an express agreement by the client (preferably in writing), a mark-up on third-party costs is impermissible(5).

When an FLC performs translation or paralegal services, however, both the inquiring lawyer and the FLC need to take steps to protect against the FLC engaging in the unauthorized practice of law. Washington RPC 5.5 provides, in pertinent part:

(a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.

(b) A lawyer who is not admitted to practice in this jurisdiction shall not:

(1) except as authorized by these Rules or other law, establish an office or other systematic and continuous presence in this jurisdiction for the practice of law; or

(2) hold out to the public or otherwise represent that the lawyer is admitted to practice law in this jurisdiction.

In addition, Washington RPC 5.3 provides, in pertinent part:

(a) a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the persons conduct is compatible with the professional obligations of the lawyer; [and,]

(b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the persons conduct is compatible with the professional obligations of the lawyer;

• • *.

Comment [1] to RPC 5.3 explains the lawyer’s responsibilities when supervising nonlawyer assistants:

Lawyers generally employ assistants in their practice, including secretaries, investigators, law student interns, and paraprofessionals. Such assistants, whether employees or independent contractors, act for the lawyer in rendition of the lawyer’s professional services. A lawyer must give such assistants appropriate instruction and supervision concerning the ethical aspects of their employment, particularly regarding the obligation not to disclose information relating to representation of the client, and should be responsible for their work product. The measures employed in supervising nonlawyers should take account of the fact that they do not have legal training and are not subject to professional discipline.

An FLC may provide legal advice and legal services consistent with APR 14(d), but the FLC engages in the unauthorized practice of law when he or she goes beyond the rule. Any inquiring lawyer will need to take special care to ensure the FLC does not cross the line when performing translation or paralegal services.

3. Referral Fees

The inquiring lawyer also appears to be considering whether it is permissible to provide some type of referral fee to the FLC. Washington case law has applied prior, similar versions of the "fee splitting" rule to prohibit the payment between lawyers of pure "forwarding" and "referral" fees, recognizing that payment of such fees is in substance a fee-splitting arrangement. See, e.g., Informal Opinion 2189 (2008); Belli v. Shaw, 29 Wn. App. 875, 881-82, 631 P.2d 980 (1981), aff'd, 98 Wn.2d 569, 577-78, 657 P.2d 315 (1983); McNeary v. American Cyanamid Co., 105 Wn. 2d 136, 139-42, 712 P.2d 845 (1986). A pure referral fee would also be prohibited by RPC 7.2(b), which prohibits a lawyer from giving "anything of value to a person for recommending the lawyer’s services."

E. CONCLUSION: The inquirer should be advised that s/he may accept the referral from the FLC and may employ the FLC to provide translation and paralegal services, with the caveat that the client must remain liable for the cost and expense of the FLC. The activities of the FLC must be consistent with APR 14, and the sharing of fees must comply with RPC 1.5(e).

Footnote: 1 See APR 14(b)(1)(i); ABA Formal Op. 01-423 (in accord). See also New York Ethics Op. 658, 1994 WL 120191 (1994) (recognizing that that the New York rules provide that an FLC "has all the rights and obligations of members of the New York bar, including the right of ‘affiliation in the same law firm with one or more members of the bar of this state.’ The affiliation may take the form of becoming a ‘partner in any partnership * * * which includes members of the bar of this State * * *.’"

2 See RCW 25.05.005(6), which defines "partnership" as an association of two or more persons to carry on as co-owners of a business for profit formed under RCW 25.05.055, predecessor law, or comparable law of another jurisdiction.

3 See Informal Opinion 2114 (2006), in which this Committee opined that a Washington-licensed lawyer may provide a Canadian attorney a referral fee paid out of the recovery of a wrongful death damages case so long as there is compliance with RPC 1.5(e)(2).

4 See Informal Opinion 1522 (1993) (stating that "joint responsibility" as used in RPC 1.5(e)(2) refers to legal liability to see that the client’s work is competently performed).

5 See ABA Formal Op. 00-420 (stating that "[w]hen legal services of a contract lawyer are billed to the client as an expense or cost, in the absence of any understanding to the contrary with the client, the client may be charged only the cost directly associated with the services, including expenses incurred by the billing lawyer to obtain and provide the benefit of the contract lawyer’s services"); ABA Formal Op. 88-356 (paying service fee to a temporary lawyer agency based on a percentage of lawyer’s wages did not constitute illegal fee-splitting under Rule 5.4(a) or a violation of Rule 5.4(c)); In re Ireland, 706 P.2d 352, 256 (Ariz. 1985) (charging for secretarial services not expressly provided for in fee agreement violated disciplinary rule prohibiting excessive fees; lawyer may do so if client is informed that they are employed on this credit and with that knowledge permits the employment to continue).