REPORT . . . LAWYERS PROFESSIONAL RESPONSIBILITY BOARD
By
Michael Hoover, Administrative Director
Minnesota Office of Lawyers Professional Responsibility
Reprinted
from Bench & Bar of Minnesota (November
1979)
We regularly receive
complaints and ethics inquiries about the division of fees among lawyers. DR 2-107(A), Code of Professional
Responsibility, provides as follows:
“(A) A lawyer
shall not divide a fee for legal services with another lawyer who is not a
partner in or associate of his law firm or law office, unless:
(1) The
client consents to employment of the other lawyer after a full disclosure that
a division of fees will be made.
(2) The
division is made in proportion to the services performed and responsibility
assumed by each.
(3) The
total fee of the lawyers does not clearly exceed reasonable compensation for
all legal services they rendered the client.”
So-called referral
fees are a recurring problem. We are
occasionally told that some lawyers engaged in personal injury practice, for
example, regularly agree to pay referring lawyers one-third of any attorneys’
fees collected in referred cases. Since
many personal injury cases involve a one-third contingent fee, such an
agreement, in essence, provides that the referring lawyer would receive one-ninth
of any recovery.
Such agreements are
often made without the consent of the client and are improper under DR
2-107(A)(1), which prohibits a division of fees unless there is client consent
after a full disclosure.
Even if the client
consents after full disclosure, there are usually two additional problems with
referral fees. First, if the referring
lawyer does no more than interview the client and refer the matter to another
lawyer, a division such as that described above is not in proportion to the
services performed and responsibility assumed by each of the lawyers, and,
therefore, violates DR 2-107(A)(2).
Second, in most cases, if the lawyer can receive a substantial portion
of the attorneys’ fees simply for referring the case and doing little more, the
total fee then is theoretically excessive, in violation of DR 2-107(A)(3).
There are, no doubt,
some cases in which the work of the referring lawyer is an important factor in
the recovery. In such cases, the
referring lawyer has an appropriate and ethically permissible claim to
compensation. The division of fees
between him and the lawyer to whom the case is referred must, however, comply
with DR 2-107.
The second recurring
problem is posed by the association or employment by an attorney of another
lawyer in an on-going case. In a
probate or real estate matter, for example, another attorney may be employed to
do title or tax work. The services
performed by the second attorney often result in an actual saving to the client
because of the attorney’s relative expertise in a narrow area. In some cases, the employment of another
attorney may not only be laudable, but may be mandated by DR 6-101(A)(1), of
the Code, which provides:
“(A) A lawyer
shall not:
(1) Handle
a legal matter which he knows or should know that he is not competent to
handle, without associating with him a lawyer who is competent to handle it.”
Even where the
employment of another lawyer is desirable or necessary, there must still be
compliance with DR 2-107(A). There
have, unfortunately, been cases in which another lawyer outside the firm
retained by the client has worked on the matter without disclosure to the
client. The failure to make such
disclosure is contrary to DR 2‑107(A)(1), which requires consent to
the employment of the other lawyer and full disclosure of the division of fees.
We have, and will
continue to enforce, the provisions of DR 2-107, in accordance with the
guidelines set forth in this article.