Thursday, April 28, 2016

ABA issues new ethics opinion on splitting fees under Model Rule 1.5(e)

EThe Standing Committee on Ethics and Professional Responsibility of the ABA recently issued a new ethics opinion reviewing the details on splitting fees under Model Rule 1.5(e).  You can read and download the opinion here.  (Remember the the opinions are available free for a limited time.)

The opinion is fine.  I don't think there is really anything in it that we didn't know already.  Here is the summary:  "Rule 1.5(e) allows lawyers who are not in the same firm to divide a fee under certain circumstances. A lawyer who refers a matter to another lawyer outside of the first lawyer’s firm and divides a fee from the matter with the lawyer to whom the matter has been referred, has undertaken representation of the client. Fee arrangements under Model Rule 1.5(e) are subject to Rule 1.7. Unless a client gives informed consent confirmed in writing, a lawyer may not accept a fee when the lawyer has a conflict of interest that prohibits the lawyer from either performing legal services in connection with or assuming joint responsibility for the matter. When one lawyer refers a matter to a second lawyer outside of the firm and the first lawyer either performs legal services in connection with or assumes joint responsibility for the matter and accepts a referral fee, the agreement regarding the division of fees, including client consent confirmed in writing, must be completed before or within a reasonable time after the commencement of the representation."

You can read more on the Opinion at Lawyer Ethics Alerts Blog, Professional Liability Matters, The ABA Journal, and Lawyers for the Profession.

Interestingly, the Court of Appeals in Illinois recently issued an opinion on the splitting fees that illustrates how the ABA's opinion could be applied.  In Naughton v. Pfaff,  a referring attorney sought to recover under an oral fee-sharing agreement with another attorney, alleging that the receiving attorney breached his fiduciary duty by failing to obtain the client's signed consent. The Court held that both attorneys have a non-delegable ethical obligation to ensure that the client agrees in writing to a fee division. Absent the client's signed consent, the attorneys' agreement violated the Rules of Professional Conduct and thereby precluded recovery.  These are the consequences of not getting client consent, which the ABA Opinion explains should be done before the beginning of the representation.  Go here for a discussion of the case.

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