In Kentucky, may a lawyer referral service require member attorneys to document the total settlement in contingency cases, and may attorneys comply?

Plain-English summary

The Committee was asked whether the Kentucky Lawyer Referral Service (KLRS) could insert into its contract with member attorneys a term requiring them, in all contingency-fee cases, to submit (or allow the KLRS Director to review) documentation adequate to confirm the total settlement amount, and whether attorneys could comply. It answered "Yes" to both questions.

The opinion noted that KBA E-288 (1984) had allowed the KLRS to require participating lawyers to return 10% of any fee collected from a referred case to help defray the service's expenses, and that the KLRS had become concerned contingent fees were not being fully and fairly reported. The Committee concluded the KLRS may include a requirement of truthful reporting and verification, because a lawyer may not engage in dishonesty or make false statements (Rule 4.1), and the amount of a fee is ordinarily not privileged in an evidentiary sense. It added that if client consent is deemed necessary under Rule 1.6, that must be provided for in both the KLRS contract and the contract between the member attorney and the client. Where a settlement agreement requires confidentiality, the KLRS should be bound by it as well, and the Committee took the view that if a settlement can only be reached on condition of confidentiality, it should be sufficient for the lawyer to certify compliance with the 10% remittal requirement, given the sanctions available under Rule 4.1.

Currency note

The Kentucky Bar Association lists this opinion as modified by KBA E-428. It was issued in 1994, before the substantial 2009 revisions to Kentucky's Rules of Professional Conduct (SCR 3.130); the Kentucky Bar Association notes the rules are amended periodically. Subsequent rule amendments or later opinions, including E-428, may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules and KBA E-428 before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer referral service require members to prove their contingency settlement amounts?

A: Yes. The opinion concluded the KLRS may require truthful reporting and verification because a lawyer may not engage in dishonesty or make false statements under Rule 4.1, and a fee amount is ordinarily not privileged.

Q: Can a member attorney agree to that verification requirement?

A: Yes. The opinion answered "Yes" to both the service's authority to impose the term and the attorney's ability to comply.

Q: What happens when a settlement is confidential?

A: The opinion concluded the KLRS should be bound by any confidentiality term, and that where a settlement can only be reached on condition of confidentiality, the lawyer's certification of compliance with the 10% remittal should suffice, given the sanctions under Rule 4.1.

Background and rules framework

The opinion interprets KRPC 4.1 (truthfulness in statements to others; Model Rule 4.1) and KRPC 1.6 (confidentiality; Model Rule 1.6) as applied to a lawyer referral service's contractual reporting and verification requirements, building on the fee-remittal arrangement approved in KBA E-288.

Citations and references

Rules of Professional Conduct:

• MR 4.1 / KRPC 4.1 (truthfulness in statements to others)
• MR 1.6 / KRPC 1.6 (confidentiality; client consent)

Other opinions cited:

• KBA E-288 (1984): KLRS may require return of 10% of fees from referred cases
• KBA E-428: later opinion modifying this opinion

See also

• KBA Ethics Op. E-385: Legal-Aid Referrals
• AL Ethics Op. 1995-08: LRS Percentage-Fee Programs
• KBA Ethics Op. E-367: Gifts to Realtors

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-362.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-362
Issued: January 1994
Modified: by KBA E-428

The Rules of Professional Conduct are amended periodically. Lawyers should consult the
current version of the rules and comments, SCR 3.130 (available at
http://www.kybar.org), before relying on this opinion.

Questions:

May the Kentucky Lawyer Referral Service (KLRS) inset into its contract with
member attorneys the following term
"In all contingency fee cases, the member attorney must submit to the KLRS
Director (or allow the KLRS Director to review) documentation adequate to
confirm the total amount of the settlement," and may member attorneys comply
with it?

Answer:

Yes, to both questions.
OPINION

In KBA E-288 (1984) (reissued below) the Committee opined that the KLRS could
require participating lawyers to return 10% of any fee collected from a referred case to the KLRS
to help defray the expenses of the service. The KLRS has become concerned that contingent
fees are not being fully and fairly reported by some participating attorneys.
The KLRS may include a requirement of truthful reporting and verification of fees in
contracts with participating lawyers. A lawyer may not engage in dishonesty or make false
statements. Rule 4.1. Ordinarily, the amount of a fee is not privileged information in an
evidentiary sense. If the consent of the client and attorney is deemed necessary under Rule 1.6,
then it must be provided for in the KLRS contract and in the contract between the member
attorney and his or her client. We note however that if the settlement agreement requires
confidentiality, the KLRS should also be bound by such agreement. In the Committee's view, if
a settlement can only be reached on condition of confidentiality, it should be sufficient that the
lawyer certify to the KLRS his or her compliance with the (10%) remittal requirement, given the
sanctions available under Rule 4.1.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky
Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor
rule). The Rule provides that formal opinions are advisory only.