June 30, 1994
A lawyer may not receive a referral fee in a matter in which the lawyer serves as personal representative, regardless of whether the referral was made prior to the lawyer being appointed personal representative.
References: MRPC 1.5(e), 1.7(b); R-10; RI-176; MCR 8.303(B), 8.303(F); MCLA 700.5; MSA 27.5005.
A lawyer was the guardian ad litem for a beneficiary whose brother was killed in a house fire that the beneficiary survived. The beneficiary's and decedent's aunt became the beneficiary's guardian after the guardian ad litem was terminated. The aunt asked the lawyer about filing a wrongful death suit. The lawyer provided general information about proceeding with a wrongful death suit, but when the aunt decided to pursue the wrongful death action the lawyer referred the aunt to another attorney who filed suit. The aunt subsequently asked the probate court to appoint the referring lawyer as the personal representative of the decedent's estate.
The referring lawyer asks whether a referral fee may be accepted for referring the wrongful death matter, since the referral arose out of a prior relationship between the aunt and the lawyer and since the referral was made prior to the lawyer being appointed personal representative.
"The jurisdiction of the Committee on Professional and Judicial Ethics is limited to expressing its written opinion concerning the ethical propriety of the inquirer's own prospective conduct." RI-176. The Committee does not answer inquiries concerning past conduct. Hence, the Committee is not addressing the ethical propriety of the referral or the appointment of the referring lawyer as personal representative.
The question to be answered by the Committee concerns the referring lawyer's prospective conduct, i.e. whether a personal representative may receive a referral fee for referring a matter involving the estate before becoming the personal representative and arising out of a prior relationship with the estate beneficiary.
The facts do not indicate whether the referring lawyer and the wrongful death counsel have already agreed to a referral fee amount, nor whether the referral fee is a percentage of the wrongful death recovery. Any division of fees between lawyers not in the same firm is controlled by MRPC 1.5(e), which states:
"A division of a fees 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 the lawyers involved; and
"(2) the total fee is reasonable."
Before accepting a referral fee, the referring lawyer should determine whether there is a conflict between the lawyer's pecuniary interests and the fiduciary duties of the lawyer as personal representative. For example, the lawyer's pecuniary interests are surely implicated if the referral fee is contingent upon the outcome of the wrongful death suit.
As personal representative the inquirer has fiduciary duties toward and must pursue the best interests of the estate, and not personal pecuniary interests. A personal representative has authority to hire legal counsel, as well as other advisors, to assist the personal representative in fulfilling fiduciary duties to the estate. As personal representative, the inquirer is the "client" of the wrongful death counsel, R-10, and not merely a referrer of business. As personal representative the inquirer must determine the fee arrangement and enter into and sign a written fee agreement. See MCR 8.303(B); MCR 8.303(f); MCLA 700.5; MSA 27.5005. If that fee arrangement determines not only the fee of the wrongful death counsel, but also determines the amount of the referral fee, a conflict of interest may arise. MRPC 1.7(b) states:
"A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:
"(1) the lawyer reasonably believes the representation will not be adversely affected; and
"(2) the client consents after consultation . . . ."
The fiduciary duties of the personal representative and the lawyer's personal pecuniary interest conflict. In addition, although the referral may have been originally made with the consent of the aunt, it is the personal representative, i.e., the referring lawyer, who holds fiduciary responsibility for preserving estate assets and filing an accounting with the court and who must consent to the referral fee when paid. The personal representative cannot, consistent with fiduciary duties, approve the payment of a referral fee to himself or herself in addition to the fees which would ordinarily be approved for the personal representative with regard to the estate matters.
Consequently, under the facts and circumstances of the present inquiry, the referring lawyer may not ethically receive a referral fee in a matter in which the inquirer serves as personal representative, regardless of whether the referral was made prior to the lawyer being appointed personal representative.