Can a lawyer split a legal fee with a referring lawyer who did no work and took no responsibility on the case?

Plain-English summary

The committee addressed when lawyers may divide a legal fee among themselves, applying DR 2-107 of the Code of Professional Responsibility. At the outset it distinguished two things it called fee "splitting" (dividing a fee with a lawyer who performs no legal service) from fee "sharing" (dividing a fee with a lawyer who performs some legal service), and noted that dividing a fee with a non-attorney is absolutely prohibited. As to the question presented, it answered that splitting a fee with a referring attorney who does no work and assumes no responsibility is not allowed.

The committee laid out three categories. First, where a lawyer merely refers a client to another lawyer, does nothing further for the client, but expects or receives part of the fee, the division is absolutely prohibited under DR 2-107. Second, where a lawyer forwards a matter to another lawyer but retains the attorney-client relationship and ultimate responsibility (the committee's example was collection work for a vendor, bank, or lending institution), a reasonable, mutually understood division is legitimate, with the caveat that a "grey area" exists over whether the agreed split realistically matches the effort. Third, where a matter is referred for assistance and both lawyers share the work and responsibility with the client's consent, dividing the fee on the basis of work, skill, and ability is proper.

The committee illustrated the third category with a Kentucky client injured while driving through Alabama who, with consent, engages an Alabama lawyer to do the Alabama work while the Kentucky lawyer assembles proof of damages and researches applicable Kentucky law, and with a client whose matter falls in a semi-recognized specialty (taxation, labor, antitrust, patent) where the original lawyer, with consent, engages an expert. It stressed that the three categories cannot answer every question, that large "grey areas" lie between them, and that the controlling guide must always be the best interest of the client and the non-exploitation of the attorney.

Currency note

This opinion was issued in 1971 under the former Code of Professional Responsibility, before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. The rule it applied, DR 2-107 (division of fees among lawyers), is now Model Rule 1.5(e) and Kentucky's SCR 3.130(1.5)(e), which under current Kentucky law permits a division in proportion to services or, by written agreement with the client, where each lawyer assumes joint responsibility. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a lawyer pay or receive a fee just for referring a client?

A: No. The committee held that dividing a fee with a referring lawyer who does nothing for the client beyond the referral and assumes no responsibility is absolutely prohibited under DR 2-107.

Q: When is dividing a fee between lawyers proper?

A: When the forwarding lawyer retains the attorney-client relationship and ultimate responsibility, or both lawyers share the work and responsibility with the client's consent, and the total fee is reasonable.

Q: What standard governs the "grey areas" between those categories?

A: The committee said the controlling guide must always be the best interest of the client and the non-exploitation of the attorney; strict objective standards are not possible.

Q: Could a lawyer divide a fee with a non-lawyer?

A: No. The committee stated, without dispute, that dividing a legal fee with a non-attorney is absolutely prohibited.

Background and rules framework

The opinion applied DR 2-107 of the Code of Professional Responsibility, which permitted dividing a fee with a lawyer outside the firm only with client consent after disclosure, in proportion to services performed and responsibility assumed, and where the total fee was reasonable. The modern analog is Model Rule 1.5(e) (Kentucky SCR 3.130(1.5)(e)), governing division of fees between lawyers not in the same firm.

Citations and references

Rules of Professional Conduct:

• DR 2-107 (Code of Professional Responsibility, "Division of Fees Among Lawyers"); modern analog Model Rule 1.5(e)

See also

• KBA Ethics Op. E-221: Out-of-State Partnership and Forwarded-Accounts Fee Split
• KBA Ethics Op. E-39: Paying a Lending Institution for Closing Services

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-055.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-55
Issued: September 1971
This opinion was decided under the Code of Professional Responsibility,
which was in effect from 1971 to 1990. Lawyers should consult the current
version of the Rules of Professional Conduct and Comments, SCR 3.130
(available at http://www.kybar.org), before relying on this opinion.

Question:

May an attorney divide legal fees with a referring attorney where the latter
performs no legal service and assumes no responsibility?

Answer:

No.

References:

Code DR 2-107
OPINION

Over the years customs and practices have developed which are constantly
changing and being shaped by the demands of our progressively ever-changing society.
One of these customs and practices concerns the division of fees among attorneys. Such
customs and practices vary from area to area, state to state and in the Nation as a whole.
Because of this variance and because of the responsibility of the attorney to his client this
article is being written and published by direction of the Board of Governors of your Bar
Association.
We are dealing here only with the division of fees among attorneys. Without
dispute or argument the division of legal fees with a non-attorney is absolutely prohibited.
With ever increasing frequency, especially in this area of broad travel, nationwide
and worldwide commerce, as affects even the smallest communities, with the complexity
of our modern technology the questions often arise:
When is the division of legal fees among attorneys proper and when is it
improper? If it is proper, how should the fee be apportioned?
Fee apportionment can take the form of splitting or sharing and this subject,
because of its vital importance to the attorney, to the client, and to the attorney-client
relationship, is dealt with at length in the Code of Professional Responsibility, DR 2-107,
“Division of Fees Among Lawyers” 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 render the client.
(b) This disciplinary rule does not prohibit payment to a former partner or
associate pursuant to a separation or retirement agreement.
The lawyer in the course of his practice is confronted with many different
situations relating to the division of legal fees. For the purpose of this article and this
article only we refer to fee splitting as those situations which involve the division of legal
fees with an attorney who performs no legal service, and fee sharing which involves the
division of legal fees with another lawyer who performs some legal service. Such
situations may fall in these three broad categories:
(1)

The client is referred to another lawyer. The referring attorney does nothing in
reference to the client’s interest other than the referral, but expects and/or receives a
portion of the ultimate fee. This, of course, is absolutely prohibited under the Code
of Professional Responsibility referred to above.

(2)

A legal matter is referred to or forwarded to another attorney for attention. The
forwarder retains the relation of attorney and client and retains the ultimate
responsibility to the client both as to communication and as to the performance of
the legal services required. So long as the division of the legal fee is reasonable and
understood between the attorneys and the original forwarding attorney and his
client, so there is no misunderstanding regarding this division of the fees, such
sharing is perfectly legitimate and proper.

(3)

A legal matter is referred to or forwarded to another attorney for assistance. Both
attorneys share work and share responsibility. The legal fee is divided between
them on the basis of work, skill and ability. Of course, this presupposes that the
matter is referred to the other attorney with the consent of the client as in the
preceding paragraph (2). Such a division is proper.

The first situation most often occurs where a popular attorney attracts through
personal or political associations or otherwise a number of cases which he is unable or
unwilling to handle and he “farms out” the client to other attorneys and receives a fee for
doing so although he takes no further responsibility in the case. Naturally in almost every
conceivable instance this must be done with the consent and knowledge of the client and
after such referral the client’s relationship is with the new attorney. Accordingly, any legal
fee division with the original attorney for the referral would be absolutely forbidden and in
violation of the Code of Professional Responsibility.
The second situation referred to, most often relates to collections in commercial
matters where an attorney has a standing relationship with a vendor, bank or lending

institution in securing and supervising legal services on behalf of the client, and in doing
so maintains their records, follows up on the matter, does the prompting that may be
necessary in the situation and secures and forwards documentation and assists in the
production of witnesses as may be necessary. Naturally, a “grey” area arises in this
situation as to whether the division of legal fees which is usually preagreed upon bears a
strict, realistic relationship to the amount of the effort involved. While such a situation
can be abused it is generally regarded as reasonable and proper so long as the
apportionment is not unreasonable.
The third situation usually involves securing with the consent of the client the
services of another attorney who can be either local, particularly expert in a field, or distant.
Most practitioners experience this frequently. For instance, a Kentucky client is injured
while driving through Alabama. The client goes to his Kentucky lawyer who with the
consent of the client and at his request engages an Alabama lawyer. The Alabama lawyer
does the necessary Alabama work. The Kentucky lawyer assembles the necessary
information as to proof of damages, local medical information, perhaps researches such
Kentucky law as would be applicable, and may or may not attend the trial assisting the
Alabama attorney, if necessary. The sharing of fees based on the responsibility assumed,
the amount of effort, time and work involved, and the skill and ability of respective
counsel, is proper and appropriate.
Similarly, a client may have a difficult matter in the field of taxation, labor law, or
antitrust law, patent law or otherwise. These areas are semi-recognized specialties in which
the attorney may not, in justice to his client, be capable of offering adequate or complete
representation. He, with the consent of the client, may engage the services of another
attorney he considers expert in a particular field. The services of the original attorney may
be required to the extent that he is capable of rendering assistance. The sharing of legal fees
in this instance, likewise based on responsibility, effort, time and work involved and skill
and ability required, is appropriate and proper.
Obviously, these three basic subdivisions of legal fee apportionment situations
cannot answer all the questions and cannot cover all possible situations. Between each lies
a large grey area, and the ethical judgment of the attorneys involved as to what is
reasonable and proper must be the key. Development of strict, objective standards is
obviously impossible in these areas.
The rule and guide controlling the ethical judgment of the attorney in these grey
areas should forever be the best interest of the client and the non-exploitation of the
attorney.
With these considerations in mind, it is believed that if there has been any question
in the minds of the Bar of this Commonwealth as to the propriety of the sharing of legal
fees that these guidelines and the Code of Professional Responsibility will be of assistance
to them in the future to the end that the client receives the best legal service and the
attorney receives adequate compensation for his efforts.

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.