CHAPTER 5 - 5-2 FEE SHARING

• Jurisdiction: United States

5-2 Fee Sharing

Lawyers not in the same firm may share legal fees as long as the client is advised in writing of the compensation sharing arrangement and does not object and the total fee is reasonable.²² An agreement to share fees should be disclosed in the fee agreement required by Rule 1.5(b).²³ Lawyers may not share fees with nonlawyers.²⁴ The fee sharing prohibition does not apply to compensation or retirement plans for employees, even though based in whole or in part on a profit-sharing arrangement.²⁵ Fees may be paid to a deceased lawyer's estate²⁶ or to the estate or representative of a deceased, disabled or disappeared lawyer where the lawyer purchased the practice.²⁷ Fees may be shared between a lawyer and his former firm after departure.²⁸ Fees may be shared with a suspended or disbarred lawyer for work done prior to losing their license.²⁹

Connecticut's rules on fee sharing are very liberal. Most states require that fees shared by attorneys bear some relation to their relative involvement in the case or work produced. Connecticut allows any fee sharing arrangement that may be agreed upon as long as the total fee is reasonable and the client does not object. Thus, it is quite common for attorney to refer matters such as personal injury cases and receive one third or more of the ultimate fee for the referral.

The statutory prohibition on paying for the referral of legal business does not apply to attorneys.³⁰ However, some laws, such as RESPA, contain anti-kickback provisions that effectively prohibit fee sharing.³¹ Thus, lawyers referring real estate matters do not expect referral fees. If a fee-sharing agreement is contemplated, the best practice would be to disclose this to the client in the fee letter. Referral arrangements can be an excellent source of income for a firm.

Rules 7.2(c)(4) and (5) allow a lawyer to enter into nonexclusive referral arrangements with lawyers and nonlawyers and give nominal gifts, not exceeding $50.00 in value, for referrals as long as such gifts are not given more than twice in any year and the client is informed of the arrangement.³² The limitation of no more than two $50.00 gifts for referrals in Rule 7.2 does not apply to fee sharing under Rule 1.5(e).³³

The CBA Committee on Professional Ethics has opined that it is permissible for a lawyer to accept referral fees from investment advisors and accountants for referrals of their clients.³⁴ Though it is prohibited for an attorney to share fees with or give...