ABA issues Formal Opinion 474 about sharing fees with non-firm counsel

The American Bar Association Standing Committee on Ethics and Professional Responsibility has issued Formal Opinion 474 that details under what circumstances lawyers may divide a fee when one lawyer refers a matter to another lawyer outside the firm.

Model Rule Rule 1.5(e) allows lawyers who are not in the same firm to divide a fee under certain circumstances. Under the rule, a lawyer who refers a matter to another lawyer outside of the first lawyer’s firm and divides a fee from the matter with that lawyer has also undertaken representation of the client.

The expanded guidance for Formal Opinion 474 stipulates that unless a client gives informed consent in writing, a lawyer may not accept a fee when the lawyer has a conflict of interest that otherwise prohibits the lawyer from either performing legal services in connection with or assuming joint responsibility for the matter.

Also, when a lawyer refers a matter to a second lawyer outside of the firm and the first lawyer either performs legal services in connection with or assumes joint responsibility for the matter and accepts a referral fee, the agreement regarding the division of fees, including written client consent, must be completed before or within a reasonable time after the commencement of the representation.

The ABA Standing Committee on Ethics and Professional Responsibility periodically issues ethics opinions to guide lawyers, courts and the public in interpreting and applying ABA model ethics rules to specific issues of legal practice, client-lawyer relationships and judicial behavior.

Formal Opinion 474 and other ABA ethics opinions are available on the ABA Center for Professional Responsibility website.

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