Can a lawyer take personal injury referrals from an accounting firm and let the firm collect its own contingent fee from the same client's recovery?

Plain-English summary

A lawyer proposed an arrangement with an accounting firm in which the firm would send the lawyer its personal injury referrals. The lawyer would charge a contingent fee of no more than 25 to 27 percent, while the accounting firm would enter a separate contingency agreement of seven or eight percent for accounting services such as financial planning and counseling about the recovery. The committee noted the client might not need or want those accounting services.

The committee held the arrangement violated two disciplinary rules. First, DR 2-103(B) bars a lawyer from compensating or giving anything of value to a person or organization to recommend or obtain employment, except for permitted referral fees to another lawyer. By limiting the legal fee below the customary maximum and leaving room for the accounting firm's separate fee, the lawyer was effectively compensating the firm in connection with the referral, a conclusion the committee called inescapable where the client had not sought accounting services. Drawing on N.Y. State 698 and similar opinions, the committee treated the separate fee as a pretext for paying for referrals.

Second, the committee held the arrangement violated DR 3-102(A)'s prohibition on splitting fees with non-lawyers. Because the accounting firm's fee was for services the client did not seek and appeared to represent a portion of the contingent fee that would otherwise go to the lawyer, it functioned as fee splitting. The committee compared it to N.Y. State 705 (1997), where a non-attorney company signing up clients and passing them to lawyers "with a fee skimmed off the top" was unethical fee splitting and improper solicitation.

Currency note

This opinion was issued in 2000, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Why was the arrangement treated as paying for referrals?

A: The opinion held that capping the legal fee below the customary maximum so the accounting firm could collect its own fee gave the firm something of value in connection with the referral, which DR 2-103(B) prohibits, especially where the client never sought the accounting services.

Q: Does it help that the two fees together stayed within the contingent-fee maximum?

A: The opinion said keeping the combined fees within the maximum helped avoid an excessive-fee problem under DR 2-106(A), but did not cure the DR 2-103(B) and DR 3-102(A) violations.

Q: Why was this also fee splitting with a non-lawyer?

A: The opinion concluded the accountant's fee, for unsought services, appeared to be a portion of the lawyer's contingent fee redirected to a non-lawyer, which DR 3-102(A) bars.

Background and rules framework

The opinion interpreted DR 2-103(B) (giving value to obtain employment or reward a recommendation) and DR 3-102(A) (sharing legal fees with a non-lawyer) of New York's former Code of Professional Responsibility, with reference to DR 2-107 (division of fees between lawyers) and DR 2-106(A) (excessive fees). The Model Rule analogues are Rule 5.4 (professional independence; fee sharing with non-lawyers) and Rule 7.2 (payment for recommendations). New York replaced the Code with the Rules of Professional Conduct in 2009; the DR numbers cited here are historical.

Citations and references

Rules of Professional Conduct:

• MR 5.4 (sharing fees with non-lawyers)
• MR 7.2 (payment for recommending a lawyer's services)
• NY DR 2-103(B), (D); DR 2-107; DR 3-102(A); DR 2-106(A)

Other opinions cited:

• N.Y. State 698 (1998): lawyer may not arrange for a medical consultant to refer clients and then retain the consultant
• N.Y. State 705 (1997): non-attorney company signing up clients and skimming a fee is fee splitting and improper solicitation
• N.Y. State 572 (1985): lawyer should reduce a fee so a consultant's separate fee plus the legal fee is not excessive
• Nassau County 98-10 (1998): lawyer may not discount fees for clients referred by real estate brokers

See also

• NY State Bar Op. 741: Reciprocal referral and solicitation arrangements
• NY State Bar Op. 731: Paying employees to steer clients to a lawyer-owned title agency
• NY State Bar Op. 733: Sharing legal fees with non-lawyer employees
• NY State Bar Op. 906: Sharing legal fees with a non-profit organization

Source

• Landing page: https://nysba.org/opinion-727/