Ethics and the Division of Attorney's Fees

• Publication year: 2019
• Author: Zachary M. Frost

Ethics and the Division of Attorney's Fees

Zachary M. Frost, Esq. Freemont, California

The California Rules of Professional Conduct (CRPC) address when division (or sharing) of attorney's fees is appropriate and when it is not. Effective November of 2018, the Rules were amended, supplanting former Rules 4-200, 1-320, and 1-600(A) with current Rules 1.5, 1.5.1., and 5.4. While Rule 1.5 speaks to the reasonableness of an attorney's fee, 1.5.1 addresses the division offees between attorneys, and 5.4 deals with division of such fees with nonattorneys (more particularly, an attorney's financial and other "arrangements" with nonlawyers). One sure way to avoid running afoul of such Rules is simply to never share or divide fees. This is, unfortunately, many times impractical, and, sometimes, impossible to do. Therefore, with that reality in mind, this article presents the relevant Rules and law for ethically navigating the splitting of fees for the practitioner.

Rule 1.5

Rule 1.5 is relatively straightforward. It expressly states that an attorney's fee cannot be unconscionable or illegal. It then enumerates factors to be considered in determining the unconscionability of an attorney's fees (for example, whether the attorney engaged in fraud in negotiating or setting a fee, the amount of the fee received in relation to the services performed, whether the client gave informed consent to the fee, and so on).

Rule 1.5.1: Fee Splitting Between Attorneys

If the fee agreement between the attorney and client is lawful and proper, a question may arise as to the propriety of sharing that fee with others. Rule 1.5.1 sets out the general rule that attorneys may not divide a fee for legal services with attorneys who are not members of the same law firm. The Rule then lists the requirements for permissible exceptions to that rule:

• The attorneys enter into a written agreement to divide the fee;
• The affected client consents to the division of the fee, in writing, after a full written disclosure to the client of the fact of the division, the attorneys involved in the division, and the terms of the division; and
• The total fee charged the client is not increased by virtue of the fee division.

Rule 5.4: Fee Splitting Between Attorney and Nonattorney

The rules discussed so far seem fairly straightforward and easy to follow, assuming the fee division is for a proper and lawful purpose. Such clarity, however, is disrupted when the division occurs between an attorney and a nonattorney. Rule...