March 23, 1994
A Michigan lawyer may pay an out-of-state law firm a referral fee for recommending the lawyer's services to an out-of-state resident in a divorce case that will take place in a Michigan court, as long as the terms of the referral fee comply with the ethics rules of both jurisdictions.
References: MRPC 1.0, 1.5(e), 5.4, 7.2(c).
A Michigan lawyer has been contacted by an out-of-state law firm, none of whose members are licensed to practice law in Michigan, to handle a divorce case for out-of-state residents which has been filed by the out-of-state resident's spouse, a Michigan resident, in Michigan state courts. The lawyer asks whether a referral fee may be paid to the out-of-state firm?
With few exceptions, a lawyer may not give a person anything of value for recommending the legal services of the lawyer. MRPC 7.2(c). Fee splitting represents one of the exceptions to this general proposition. Fee splitting occurs when a fee is divided among lawyers who are not members of the same law firm. It is only permissible where the client is advised of and does not object to the participation of all other lawyers involved. Further, the total fee must be reasonable. MRPC 1.5(e) states:
"(e) A division of a fee between lawyers who are not in the same firm may be made only if:
"(1) the client is advised of and does not object to the participation of all lawyers involved; and
"(2) the total fee is reasonable."
Implicit in MRPC 1.5(e) is the assumption that all of the lawyers involved in the division of the fees are in fact lawyers as contemplated by the Michigan Rules of Professional Conduct. The question that must be asked is whether these rules contemplate that out-of-state lawyers, not authorized to practice law in Michigan, are nevertheless lawyers for purposes of MRPC 1.5(e). Absent such a conclusion, the Michigan lawyer may not share legal fees with the out-of-state law firm pursuant to MRPC 5.4 and 7.2(c).
The Michigan Rules of Professional Conduct do not define the term "lawyer." The closest thing to a definition is in the commentary to Rule 1.0 where it states:
"A lawyer is a representative of clients, an officer of the legal system and a public citizen having special responsibility for the quality of justice."
An out-of-state lawyer wishing to handle a client's matter before Michigan courts may be admitted pro hac vice through Rule 15, Sec 2, Supreme Court Rules Concerning the State Bar of Michigan. Rule 15, Sec 2 exists to allow an out-of-state lawyer to actually practice before the Michigan courts or one of its administrative tribunals. That is not the case here.
If one purpose of MRPC 1.5(e) is to assist clients in obtaining competent counsel, then that purpose is served in this scenario. To declare that the out-of-state lawyers are not lawyers for purposes of MRPC 1.5(e) would have the unhappy effect of inhibiting out-of-state residents from acquiring legal services from qualified Michigan lawyers. Out-of-state lawyers would have less incentive to assist their out-of-state clients in engaging Michigan lawyers. Out-of-state residents, separated by distance, and lacking the practical ability to identify Michigan lawyers would be at a distinct disadvantage in securing competent legal services for matters before Michigan courts or administrative tribunals.
Although the Michigan lawyer is allowed to pay a referral fee under MRPC 1.5(e), the ethics of the out-of-state lawyer accepting the referral fee depends upon the ethics rules which bind the out-of-state lawyer. The terms of the referral fee must comport with the ethics rules of both jurisdictions.