Can a Texas lawyer split a fee on a percentage basis with an out-of-state lawyer who forwarded the matter but is not licensed in Texas?

Plain-English summary

A, a Texas resident not licensed in Texas but licensed in another state (with no office there and not actively practicing), was asked by a friend in a third state to obtain representation for a third-state resident in a non-collection matter requiring Texas litigation over Texas realty and a Texas decedent's estate. A took the matter to a Texas attorney and sought a forwarder's fee of a percentage of any recovery. The inquiry asked whether the Texas attorney could ethically agree to divide the fee with A.

The Committee framed the question as the propriety of the Texas lawyer's dividing a fee, not of A's obtaining one. It explained that, for non-collection matters, Canon 31 allows fee division only with a lawyer based on division of service or responsibility, or with a forwarding lawyer, and that A sought a fee as a forwarding attorney rather than as one sharing the work. It read Canon 31 to contemplate that a forwarding attorney be authorized to act as an attorney where he is acting: if performing the function in Texas, he should be authorized in Texas; if in another state, authorized there, without needing a Texas license.

The Committee said it had no authority to decide whether A would be engaged in unauthorized practice, which is for the Unauthorized Practice Committee, noting that out-of-state attorneys are sometimes permitted to do what amounts to the practice of law in the state without a license. It concluded that, to the extent A is authorized to perform the activity in Texas, a forwarding fee may ethically be paid under Canon 31; to the extent he performs a legal function in Texas he is not authorized to do, a forwarding fee may not ethically be paid in a matter outside the second sentence of Canon 31. If the Unauthorized Practice Committee found A's conduct to be unauthorized practice, Canon 43 could be involved, because dividing legal fees with one not authorized to practice could be aiding unauthorized practice. The ruling was 9-0.

Currency note

This opinion was issued in 1961, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. 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 Treat this page as historical context, not current guidance.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: Can a Texas lawyer pay a forwarding fee to a lawyer not licensed in Texas?

A: Under this opinion, yes, if the forwarding attorney is authorized to act as such where he is acting; the Committee read Canon 31 to require that a forwarding attorney be authorized to act as an attorney at the place where he performs the function.

Q: Does the forwarder need a Texas license?

A: Not necessarily. The Committee said if the forwarder performs the function in another state he need only be authorized there, but if he performs it in Texas he should be authorized in Texas.

Q: What if the forwarder's conduct is unauthorized practice?

A: The Committee said that question is for the Unauthorized Practice Committee, but that if the conduct is unauthorized practice, dividing legal fees with him could implicate Canon 43 as aiding the unauthorized practice of law.

Background and rules framework

The opinion interprets former Texas Canon 31, on division of fees, and Canon 43, on aiding the unauthorized practice of law. The modern analogs are ABA Model Rule 1.5(e), on division of fees between lawyers, and Model Rule 5.5, on unauthorized practice and assisting it.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees; division of fees between lawyers), as the modern analog
• MR 5.5 (unauthorized practice of law; assisting), as the modern analog
• Texas Canons 31 and 43 (former canons)

See also

• TX Ethics Op. 269: Executor's Commission Plus Legal Fee
• TX Ethics Op. 293: Splitting Executor Commission
• TX Ethics Op. 276: Out-of-State Lawyer as Law Clerk

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-238/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_238.pdf

Original opinion text

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

QUESTION PRESENTED

A, who is resident in Texas but not licensed to practice law in the State of Texas but who has been licensed to practice law in another State but who has no office in that State and is not actively practicing there, is requested by a friend in a third State to obtain representation for a resident from a third State with respect to a non-collection matter requiring litigation in Texas with respect to Texas realty and a Texas decedent's estate. A then takes the matter to a Texas attorney and attempts to obtain for himself a forwarder's fee of a percentage of any recovery obtained in the matter. In this situation, would it be a violation of any one or more of the Texas Canons of Ethics for a Texas attorney to agree to divide with A on a percentage basis any fee resulting from such matter?

18 Baylor L. Rev. 317 (1966)

FORWARDING FEES
A forwarding fee may ethically be paid to an attorney not licensed to practice law in Texas, providing such attorney is authorized to perform the function of a "forwarding attorney" at the place where he is acting.

Canons 31, 43.

This inquiry relates to the propriety of the Texas attorney dividing a fee with A, rather than to the propriety of A obtaining a forwarding fee in such situation.

Canon 31 provides, as to non-collection matters (or, as to matters other than collections of liquidated commercial claims) that fees may be divided only with a lawyer based upon division of service or responsibility or with a forwarding lawyer. The inquiry indicates that A is seeking a fee as the forwarding attorney rather than as an attorney sharing the work and responsibility. It would seem that Canon 31 contemplates the "forwarding attorney" shall be one authorized to act as an attorney at the place where he is acting. In other words, if the attorney is performing this function of an attorney within Texas, he should be authorized to perform the function in Texas; if he is performing this function in another state, he should be authorized to so act in that state but it would not be necessary for him to be licensed or authorized to perform such function within the State of Texas.

This committee has no authority to consider whether A would be engaged in the unauthorized practice of law, for such matter must be answered by the Unauthorized Practice Committee. A is stated not to be licensed in Texas, but this is not necessarily controlling since out-of-state attorneys are in some instances permitted to perform what amounts to the practice of law within the state without being licensed, and whether the activity in question by A falls within such exception or not is a question for the Unauthorized Practice Committee.

To the extent that A is authorized to perform the activity in question in Texas and is doing so, a forwarding fee may ethically be paid to him under Texas Canon 31; and to the extent that A is performing a legal function in Texas which he is unauthorized to do, a forwarding fee may not ethically be paid to him in a matter which is not within the scope of the second sentence of Canon 31.

If it is determined by the Unauthorized Practice Committee that the conduct in question by A constitutes the unauthorized practice of law, Canon 43 may be involved where a lawyer aids such person to practice law without authority, for such aid could be in the form of dividing legal fees with one not authorized to practice law. (9-0.)

Tex. Comm. On Professional Ethics, Op. 238 (1961)