The recent California Rules of Professional Conduct (“CRPC”), effective November 1, 2018, introduced some needed clarity regarding fee splitting amongst lawyers who are not in the same firm.
Prior Rule 2-200(A) prohibited an attorney from splitting a fee with another attorney who is not in the same firm unless the client has consented in writing and the total fee charged is neither increased solely by the fee splitting nor is unconscionable. Rule 2-200(B) permitted gifts as long the gifts were purely gratuitous.
Current Rule 1.5.1 (Fee Divisions Among Lawyers) improves upon prior Rule 2-200(A) by specifying when the client’s consent must be obtained. Old Rule 2-200(A) permitted the referred attorney to apprise the client of the fee arrangement at the end of the representation when it was time to cut checks. Current Rule 1.5.1(a)(2) requires the referred attorney to obtain the client’s written consent at the outset of the fee splitting arrangement, “either at the time the lawyers enter into the agreement to divide the fee or as soon thereafter as reasonably practicable, after a full written disclosure to the client.”
The requirement that “the total fee charged by all lawyers cannot be increased solely by reason of the agreement to divide fees[,]” carried over from the old rule into the new rule. Current Rule 1.5.1 also requires that the lawyers themselves enter into a written agreement to divide the fee.
A single or multiple writings may satisfy the requirements for the agreement between the lawyers as well as between the attorney and the client. Comment to CRPC 1.5.1.
A key difference between the CRPC and ABA Model Rules (“MR”) was and continues to be that a pure referral fee is permissible in California without requiring that the referring attorney either be paid in proportion to the actual work completed or accept joint responsibility for the representation as required by MR 1.5(e)(1).
Thus, in contrast to a recent Ohio case where a referral fee was impermissible because the referring firm neither performed any work nor assumed joint responsibility, the pure fee splitting arrangement would likely be permissible in California because the client provided written consent to the fee splitting arrangement at the outset of the referred attorney’s representation. (Columbus Bar Ass’n v. Chodosh, Ohio 2019) 125 N.E.3d 878, 880.
Los Angeles County Bar Association Professional Responsibility and Ethics Committee (“LACBA”) in Formal Opinion No. 467 identified some concerns with the old rule that informs best practices today.
LACBA noted that a client may have concerns about whether an attorney is really recommending another attorney because that attorney is the best for the case or whether the referred attorney will provide lesser service because his or her fee is reduced by the referral fee.
The referred attorney should address all of these concerns in the client’s agreement, along with the fact of the division of fees, identity of the lawyers dividing the fee and the terms of the division, as required by Rule 1.5.1(a)(1-2).
About the author:
Shawn McCall is a forensic psychologist, and attorney who is developing a deeper understanding of the law as well as expand his ability to participate in the legal community.