Saturday, November 28, 2015

Solo & Small Firm: The Ethics of Referrals – It Pays to Play

By Ashley V. Goodman

        Small firms and solo practitioners often focus their practice on a particular area of law. So what happens when a potential client concerned with a recent DUI arrest comes to a firm that specializes in consumer protection? The consumer protection firm refers the potential client to another firm that practices criminal law. Because turning away a potential client means turning away business, however, the referring attorney often requests a referral fee.

        There are other situations in which a referral may be warranted. Perhaps the case is larger than the firm can handle on its own. Perhaps the firm needs to associate local counsel. In any event, the firm enlists an outside attorney for assistance. Although referring cases is a common practice in our field, the law has historical abhorred lawyers entering into an attorney-client relationship for any reason other than finding the best attorney for that client’s needs. Thus, The Florida Bar has adopted regulations regarding “the brokering of cases.”

        The classic “referral fee” is a form of fee sharing or fee splitting. Attorneys who are not in the same firm may share or split fees only if the fee is reasonable and: (1) the division of fees is in proportion to the services performed by each lawyer; or (2) the lawyers have a written agreement with the client that: (a) provides each lawyer assumes joint legal responsibility for the representation and agrees to be available for consultation with the client; and (b) discloses that a division of fees will be made and the basis for that division. R. Regulating Fla. Bar 4-1.5(g). In injury or death cases in which any part of the fee is contingent, the special rules in Rule 4-1.5(f)(4)(D) apply.

         Generally, the payment of a referral fee to an attorney is made on a quantum meruit basis. Fla. Bar Op. 90-3 (Jul. 15, 1990). A larger fee may be appropriate, however, where it is shown that one attorney played a greater role in securing a total award. Garces v. Montano, 947 So. 2d 499, 504 (Fla. 3d DCA 2006). But if the referral was made because of a conflict of interest, the referring attorney is not permitted to receive any part of the fee for the services. Fla. Bar Op. 89-1 (Mar. 1, 1989).

         Notably, any fee sharing or fee splitting situation could affect liability for malpractice. The Third DCA certified the following question as one of great public importance nearly 20 years ago: “Where there is an express or implied agreement for the payment of a referral fee, but the attorneys have not executed the written agreement required by [Rule 4-1.5(g)], is the referring attorney civilly liable in the event of legal malpractice by the working attorney?” Noris v. Silver, 701 So. 2d 1238, 1241 (Fla. 3d DCA 1997). The Third DCA answered yes, the referring attorney is liable even though the agreement is not enforceable by the referring attorney, but the Florida Supreme Court still has not weighed in.

        In the end, professional referrals can be a principal cornerstone of our legal practice. Use them responsibly, and everyone wins.