January 18, 1995
It is not unethical for a lawyer to contact a person previously referred by the lawyer to another firm upon learning that the handling lawyer at the receiving firm has departed the receiving firm for other employment for the purpose of soliciting retention of the referring lawyer.
Communication with a person previously referred to another firm for the purpose of soliciting retention of the referring lawyer may not suggest that the receiving lawyer is disqualified from representing that person because the receiving lawyer has left the employ of the receiving firm or because the receiving lawyer refuses to pay a referral fee to the referring lawyer.
A lawyer who receives fees which are subject to a claim for a referral fee by another lawyer must notify the other lawyer of receipt of the fees, provide an accounting of the fees received, and keep the disputed fees in a segregated trust account pending resolution of the dispute.
References: MRPC 1.5(e), 1.15(b), 4.1, 7.1, 7.3; R-7, RI-49, RI-74, RI-86, RI-124, RI-158; Shapero v Kentucky Bar Ass'n, 486 US 466, 108 S Ct 1916, 100 L Ed 2d 425 (1988).
A lawyer has referred numerous social security disability claimants to another law firm in return for a one-third referral fee. The claims were generally handled by a particular associate at the receiving firm.
The associate has recently joined another firm, taking several files involving claimants referred by the inquirer. The associate has refused to pay any referral fees to the inquirer and the inquirer has in turn refused to refer any additional claimants to the associate. Additionally, the associate has requested the inquirer to take back several of the client files. The inquirer has requested an accounting from the associate regarding fees received on files originally referred by the inquirer and subsequently collected by the associate.
The inquirer desires to obtain an accounting from the associate of fees collected and to be collected on files originally referred by the inquirer, and to send written communications to the clients of the associate whom the inquirer has referred, informing them of the associate's refusal to pay a referral fee, that the associate no longer desires to handle their matter, and proposing that the clients retain the inquirer to substitute for the associate.
The jurisdiction of the Committee is limited to addressing ethics issues arising under the Michigan Rules of Professional Conduct. The Committee does not address issues of law and makes no comment on the legal enforceability of any referral fee arrangements between the inquirer and the receiving law firm or the associate, nor does the Committee make any comment on the legal consequences of the inquirer's proposed course of conduct.
Although the facts provided the Committee are incomplete on this issue, it is assumed that the affected clients were advised of but did not object to the original referral fee arrangements, and that the referral fee arrangement is otherwise ethical. MRPC 1.5(e); RI-124. Since the inquirer claims entitlement to a portion of the fees collected and to be collected by the associate on matters referred by the inquirer, the associate is obligated to account to lawyer A regarding the receipt of such fees, and to hold the disputed portion of such fees in a separate trust account pending resolution of their disputes. MRPC 1.15(b) and (c); R-7.
The inquirer's proposed communications to the clients of the associate raise several potential problems. This would appear to stem from a misunderstanding regarding "ownership" of the subject files and the clients' right to select counsel of their choice. The client retains at all stages of any proceeding the right to select counsel of their choice and to discharge counsel at any point. When a lawyer departs a law firm for another firm, a client may choose to stay with the prior firm, retain the departing lawyer's new firm, or retain any other lawyer. Any agreements which purport to restrict the right of the client to make this choice are unethical. RI-86. It is thus not up to either the inquirer or the associate to decide which of them, if either, will handle the files going forward.
On the issue of representation going forward, the Committee's opinions express a policy in favor of fully informing clients of their options and choices when a handling lawyer departs a firm for another. RI-49, RI-86; MRPC 1.4(b). Thus, a communication which is not false, fraudulent, misleading or deceptive from the inquirer informing the affected clients of the inquirer's availability to handle their matters would not be unethical, especially in view of the prior relationship between the inquirer and the affected clients. MRPC 4.1, 7.1, 7.3; RI-74; Shapero v Kentucky Bar Ass'n, 486 US 466 108 S Ct 1916; 100 L Ed 2d 475 (1988).
On the other hand, the associate's ability to continue to serve the affected clients is not impacted by the fee dispute with the inquirer. This Committee has previously opined that a lawyer may not refuse to make a referral because of the receiving lawyer's refusal to pay a referral fee. RI-158. Thus the associate could not be disqualified from representing the clients based on the refusal to pay the inquirer a referral fee. For the inquirer to raise the issue of this dispute with the associate in the proposed communications with the affected clients could be misleading or deceptive and lead the clients to believe that this somehow restricts the associate's ability to continue to represent them.
As to the fee dispute between the inquirer and the associate, the associate is obligated to account to the inquirer for all fees collected on matters originally referred by the inquirer, and to hold the disputed portion of such fees in a segregated trust account pending resolution of that dispute. Because of the existence of a prior professional relationship between the clients and the inquirer, it would not be unethical for the inquirer to contact the affected clients for the purpose of informing them of the inquirer's availability and/or desire to represent them going forward. The inquirer may not, however, raise the issue of the fee dispute with the associate or otherwise suggest in such communications that the clients may not select the associate, or any other lawyer, to handle their matter.