June 2, 1997
Once a valid referral agreement is in place a lawyer may ethically represent a new client against another party represented by the law firm receiving the referral. Under these circumstances, the referral fee agreement is still enforceable.
References: MRPC 1.5(e), 1.7(b); RI-116.
Lawyer A a sole proprietor and experienced in representing union members, refers a personal injury case to law firm B which includes union-side labor lawyers and personal injury lawyers. Lawyer A expects to be paid a referral fee at the conclusion of the litigation. Law firm B accepts the referral and files the personal injury action against various tortfeasors. During the pendency of the litigation, lawyer A is retained by client C, a union member of another union that is one of law firm B's clients and is known to attorney A to be a client of law firm B. Lawyer A files suit against law firm B's union client on behalf of client C. Thereafter, law firm B successfully settles the personal injury case which has been referred by lawyer A to law firm B. The inquirer asks:
What is the ethical obligation of the law firm B to pay, or not to pay, attorney A a referral fee generated by the personal injury case referred by A to law firm B?
What other ethical obligations, if any, does law firm B have with the respect to the lawsuit brought on by attorney A on behalf of client C against another client of law firm B?
What are the ethical obligations of lawyer A in requesting the payment of a referral fee from law firm B during the pendency of client C's claim against a current client of law firm B?
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." Emphasis added.
Under the facts presented, the fee arrangement between lawyer A and law firm B was made prior to the lawsuit involving client C and another client of law firm B. In RI-116, this committee opined that an attorney may not refer a potential client to another lawyer and accept a referral fee after discovering a conflict of interest.
Therefore, it must be determined whether are not a conflict of interest exists. Under MRPC 1.7(b) which states in part:
"(b) 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 . . . ."
In the facts before this committee, the referral arrangement was in place before any potential conflict of interest arose. Therefore, MRPC 1.7(b) would not nullify the referral fee agreement. For these reasons, the referral fee agreement would be enforceable.
Lawyer A's representation of client C against another client of law firm B in an unrelated matter would not effect the enforceability of the referral agreement. This committee is of the opinion that a subsequent unrelated lawsuit does not in any way affect the enforceability of a valid fee sharing agreement.