Scruples. Rewarding Referrals from Non-Lawyers

• Author: Michael Downey
• Pages: 64-64

Scruples

Published in Litigation, Volume 48, Number 1, Fall 2021. © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be

copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 64

MICHAEL DOWNEY

The author is a legal ethics lawyer at Downey Law Group LLC in St. Louis, Missouri.

“If Accountant sends me clients,” Paradox

asked Ethox, “is there some way I can repay

Accountant? I know there is a limit on pay-

ing for referrals.”

“Yes,” Ethox answered, “ABA Model Rule

7.2(b) generally prohibits a lawyer from ‘pay-

ing anything of value for recommending the

lawyer’s services.’ But there are several ways

you can show your gratitude.”

“Like how?” Paradox inquired.

“Well, first, Rule 7.2(b)(5) expressly al-

lows a lawyer to give nominal gifts of grati-

tude, as long as they are not intended or ex-

pected to be compensation for the referral.”

“What is a nominal gift?” Paradox pressed.

“Rule 7.2 does not provide a lot of guid-

ance,” Ethox admitted. “But the comment

advises the gift should be no ‘more than

a token item,’ such as a holiday or hospi-

tality gift. So you could probably give a

bottle of wine, or some cookies or steaks,

something like that.

“Game tickets are probably also OK,”

Ethox continued, “but not Super Bowl or

World Series tickets. That would probably

be going too far.”

“Can the size of the gift vary,” Paradox

pressed, “based on the size of the referral?”

“That would probably be OK,” Ethox re-

sponded. “But even if Accountant sent you

a really good new client, the gift would still

need to be nominal, a token of appreciation.

You want to avoid anything that might look

like a payment for the referral or a sharing

of attorney fees with a non-lawyer.”

“What about referring work back to

Accountant? Are reciprocal referral arrange-

ments OK?” Paradox asked.

“Reciprocal referral arrangements with

non-lawyers are allowed,” Ethox said, “but

according to Rule 7.2(b)(4) and comment 8,

you must adhere to four safeguards.”

“What are those safeguards?” Paradox

asked.

“First, the lawyer must remain free to ex-

ercise independent professional judgment,”

Ethox answered. “This includes, for example,

that a referral cannot be conditioned on the

lawyer using the referring professional, even

on the matter referred to the lawyer.”

“So if Accountant sends me work but in-

sists I hire Accountant as an expert, that

would be a problem?” Paradox asked.

“Yes, exactly.” Ethox continued. “Second,

you must tell the client about the referral

relationship. Often a simple warning is fine,

that you have worked with Accountant in

the past and often refer each other clients.”

“Absolutely,” Paradox confirmed. “In fact,

I have hired Accountant myself.”

“Then you should probably tell the client

that as well,” Ethox said, “because it may be

material that you are referring your client to

your own accountant.”

“Fine,” Paradox agreed.

“Third,” Ethox said, “the referral ar-

rangement cannot be mandatory or exclu-

sive. You should refer a client to Accountant

only when you think Accountant would

be a good match for your client. Likewise,

Accountant should refer legal work to you

only when Accountant thinks you are a

good lawyer for the job. If either of you

think a client would be better served using

someone else, you need to be free to refer

the client to another professional.”

“I only want to refer clients when it seems

appropriate,” Paradox confirmed. “That

would protect my relationship with my cli-

ents, and also with Accountant.”

“That is a good way to see it,” Ethox

encouraged Paradox. “Finally, comment

8 advises lawyers not to have referral ar-

rangements of indefinite duration. Do not

agree to refer people indefinitely, or keep

referring people to Accountant, without

periodically stepping back and ensuring

the referral arrangement is still appropri-

ate and makes sense.”

“OK,” Paradox said, “I can do that. But do

we need to follow the same principles when

referring work to other lawyers?”

“Rule 7.2(b) is not expressly limited to

referral relationships with non-lawyers,”

Ethox answered. “But referral relationships

among lawyers are often different, because

Rule 1.5(e) allows fee sharing, with certain

restrictions.”

“This is great,” Paradox thanked Ethox. “I

am glad I can send Accountant a thank-you

gift—and new clients in the future, as long

as we comply with Rule 7.2(b).” q

REWARDING REFERRALS

FROM NON- L AW Y ERS