Opinion #133. Lawyer Referral Service Fee Remittances and Questions Pertaining Thereto

Issued by the Professional Ethics Commission

Date Issued: June 18, 1993

QUESTION

Bar Counsel, at the request of the Maine State Bar Association, has requested an advisory opinion concerning two questions relating to changes the Bar Association is considering in connection with its Lawyer Referral and Information Services Program. The questions presented are as follows:

Question 1

Is it proper for a lawyer referral service to ask a referral service attorney to disclose fees charged to person referred by service in order to determine usual and reasonable fees or dues paid by attorney to fund service?

Question 2

Is it proper for a member of a referral service to remit a percentage of fee earned from client referred by service? Said remittance would be used to fund service.

OPINION

In Opinion No. 99, issued on September 6, 1989, the Commission opined that the Maine Bar Rules would not be violated by Bar Association Referral Service requirements that a client referred to a lawyer by the Referral Service pay a service fee of $15.00 to the Referral Service and that the lawyer to whom the client was referred by the Referral Service contribute $15.00 to the Referral Service to help fund that Referral Service. In that Opinion, the Commission concluded that the first fee, paid by the referred client, was not an impermissible sharing of legal fees by the referral lawyer; and that the second fee, paid by the referral lawyer, was permissible under Maine Bar Rule 3.9(f)(2) (permitting the payment by a lawyer of “usual and reasonable fees” charged by a bar association referral service).

For the reasons stated below, the Commission is of the opinion that both of the changes now proposed by the Bar Association’s Referral Service, as indicated by the two questions here presented, are permissible under the Maine Bar Rules.

The first question presupposes that instead of establishing a fixed referral charge for all cases, the Bar Association will adopt a sliding scale of referral charges in specific dollar amounts related to the total fee charged to the client by the referral attorney [example: referral fees of $X, $Y or $Z, etc., based on the amount of the fee charged to the client by the referral lawyer in any particular case]. In order to determine the amount of the referral service fee that would apply to any such case, the total fee would necessarily have to be disclosed to the Referral Service, or be disclosed at least to the extent of indicating the applicable dollar range within which the fee fell.

It is the opinion of the Commission that such limited disclosure of fees does not violate Maine Bar Rule 3.6(l)(1) (which requires the preservation of client “confidences” and “secrets”) because a sliding scale of referral fees of the type described above is a “usual and reasonable” basis for establishing referral fees. That such an arrangement is a “usual and reasonable” way of funding a bar association referral service, within the meaning of Maine Bar Rule 3.9(f)(2), is evident from a 1990 survey by the American Bar Association’s Standing Committee on Lawyer Referral and Information Services. See A.B.A. Characteristics of Lawyer Referral Programs 1990 Survey Results. That survey notes that of 97 bar association referral services surveyed, a significant number of those surveyed require referral lawyers to pay the referral service a portion or percentage of his/her earned fee in a referred matter. Accordingly, referral fees based on such a sliding scale are permitted by Maine Bar Rule 3.9(f)(2) (allowing payment of “usual and reasonable” fees charged by a bar association lawyer referral service).

Since the limited disclosure of fees at issue here is necessary to determine the amount of the referral fees permitted by Maine Bar Rule 3.9(f)(2), the Commission construes that Rule as controlling the scope of Rule 3.6(1)(l) under the circumstances presented. As so construed, the Bar Rules do not prohibit disclosure to the Bar Association Referral Service of the amount of the fee charged to a client by a referral attorney for the purposes of determining the amount of the Referral Service’s referral charge. In so opining, the Commission assumes that as a matter of institutional policy, the Bar Association Referral Service maintains confidentiality of records of which clients have been referred to which attorneys, and that the Referral Service would similarly maintain confidentiality of the amounts of the fees that have been charged to individual clients by referral lawyers.[1]

With regard to the second question presented, the Commission is of the view that it would be permissible for the Bar Association Referral Service, for the purpose of funding the Referral Service, to charge referral lawyers a percentage of the fee earned by the referral lawyer from the referred client. That manner of determining referral fees would appear to be “usual and reasonable” within the meaning of Maine Bar Rule 3.9(f)(2). See A.B.A. Survey, supra. The Commission also notes that the American Bar Association Committee on Professional Ethics has twice opined that a bar association referral service may require referral attorneys to assist in financing such a referral service either by payment of a flat fee or by a sliding scale based on the fees derived by the referral lawyers from clients referred to them, whether that scale is based on fixed charges or on a reasonable percentage of fees collected by referral lawyers from referred clients. A.B.A. Formal Opinion No. 291 (August 1, 1956); A.B.A. Informal Opinion No. 1076 (October 8, 1968).

In sum, for the reasons stated above, it is the opinion of the Commission that the proposed changes in the Maine Bar Association Lawyer Referral Service Program as indicated in the two questions presented here are permissible under the Maine Bar Rules.


FOOTNOTE

[1] The Commission also assumes that these arrangements are disclosed by the Referral Service to prospective clients.


Enduring Ethics Opinion