Throwback Thursday: Referral Fees

Every now & then, I run a column where I link to a post from the past.

“Every now & then” is defined as “whenever it’s Thursday, I am lazy have writer’s block, but need to post something.”

Not sure what your calendar says, but on mine, it’s every now & then.

Really, this isn’t a “throwback.” It’s a reminder.

I continue to run across lawyers who don’t realize that the Vermont Rules of Professional Conduct prohibit straight referral fees. So, I’m re-posting Referral Fee? Think Twice.  It links to, and expands upon, my primer on Referral Fees.

Please feel free to share this post.  I don’t want lawyers to stumble into a violation.

Plus, it makes me laugh to think about the days when mix tapes were my most valuable possessions.  Don’t forget to come back tomorrow for the #fiveforfriday trivia quiz!

Throwback Thursday

Throwback Thursday: Crowdfunding

Earlier this week, I received my first inquiry on the ethics of crowdfunding litigation.  It reminded me of a blog I posted in January 2016.

The post is HERE and it’s on, you guessed it, the ethics of crowdfunding litigation.  Given the inquiry, I thought I’d revisit the post.

 

Crowdfunding

I’m aware that January 2016 isn’t much of a “throwback.”  But that’s okay.  At GW Law, I was the quarterback on O.P.P., the first law school team to win the “grad school” division of GW’s IM flag football league.  We advanced to the Final Four where we were utterly smoked in the semis by the team that won the “staff” division. In any event, back then I wasn’t known for throwing deep; pinpoint accuracy was my thing.   So, a throwback of a mere 14 months might not be much of a throw, but the topic is relevant. So, I consider it the equivalent of an 11-yard out that keeps the chains moving.

Back to the Basics: Contingent Fees

Sometimes a column must get back to the basics and discuss legal ethics without reference to music, tv, movies or sports.

As a result of a few seminars I’ve taught over the past few weeks, I’d like to get back to the basics of contingent fees.

Rule 1.5(a) prohibits lawyers from agreeing to, charging, or collecting unreasonable fees and expenses.  Contingent fees, and expenses in contingent fee cases, are subject to the rule.

In addition, Rule 1.5(c) states that a contingent fee agreement:

  • MUST be in a writing that is signed by the client;
  • MUST state the method by which the fee is to be determined, including:
    • the percentage that will accrue to the lawyer in the event of settlement, trial or appeal;
    • the litigation & other expenses that will be deducted from any recovery; and,
    • whether such expenses will be deducted before or after the contingent fee is calculated.
  • MUST clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party.

Upon the conclusion of a contingent fee matter, a lawyer:

  • MUST provide the client with a written statement showing the outcome of the matter and, if there is a recovery, the remittance to the client and the method by which it was determined.

Lawyers are NOT allowed to agree to, charge, or collect:

  • a contingent fee in a criminal case;
  • a fee that is contingent upon the securing of a divorce; or,
  • a fee that is contingent upon the amount of spousal maintenance or support, or property settlement in lieu thereof, in a domestic relations matter.

However, lawyers may use contingent fees in domestic relations matters that involve the collection of:

  • spousal maintenance or support due AFTER a final judgment has been entered; or,
  • child support and maintenance arrearages due AFTER a final judgment has been entered, provided that the court approves the reasonableness of the fee agreement.

In other words, contingent fees are okay in some POST-JUDGMENT divorce & custody matters.

So, there you have it.  The basics of contingent fees.

Of course, speaking of “back to the basics,” this is not one of those columns sans reference to music, tv, movies or sports.  Who could forget the Barden Bellas and their version of Back to the Basics in Pitch Perfect 2?

Pitch Perfect 2

 

 

Referral Fee? Think twice.

Vermont’s Rules of Professional Conduct do not allow straight referral fees.

If you didn’t know that, don’t worry, you’re not alone.

About a year ago, I blogged on referral fees.  The post is HERE.  A quick summary:

  • Scenario: Client asks Lawyer for help in an area that Lawyer doesn’t practice.  Lawyer refers Client to Attorney.  Lawyer and Attorney do not work in the same firm. Lawyer wants to be paid for the referral.  Under what circumstances, if any, can Attorney ethically pay Lawyer for the referral?
  • Conclusion: Rule 1.5(e) is Vermont’s rule on dividing fees between lawyers who do not work together. The rule authorizes a division of fees Lawyer and Attorney if:
    1. the division is in proportion to the services performed by both Lawyer & Attorney, or, both Lawyer & Attorney assume joint responsibility for the representation;
    2. Client agrees to the arrangement, including the share that both Lawyer and Attorney will receive, and the agreement is confirmed in writing; and
    3. the total fee is reasonable.

The original post goes into much more detail.

The question that often arises is “what does joint responsibility for the representation mean?”  Comment [7] to Rule 1.5(e) makes it clear that lawyers can divide fees based on “the proportion of services they render or if each lawyer assumes responsibility for the representation as a whole.”  It goes on to indicate that “[j]oint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership.” (emphasis added).

In April, the ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 474.  The opinion reaches the same conclusion as my original post. It also endeavors to shed some light on “joint responsibility for the representation.”  Finally, the ABA opinion reminds us that the referring lawyer is subject to the conflict rules and must avoid conflicts of interest as if representing the client.

The ABA Journal summarized Formal Opinion 474 here.

Caution