JI-150
November 8, 2021
SYLLABUS
A judge may accept a referral fee earned prior to assuming the bench provided the judge disqualify herself or himself from all matters involving the law firm or lawyer to which the case was referred until final payment is made, with very limited exceptions.
References: MCJC 2, 5C; J-4, JI-37, JI-118, RI-19, RI-30, RI-270, C-228, CI-890, CI-1079; MCR 2.003
TEXT
A number of judges have inquired as to whether or not the judge may accept a referral fee after assuming the bench if the referral was made before the judge assumed the bench. The follow-up question is what are the requirements regarding notification and disqualification? Ethics Opinion CI-1079 provides that it is ethical for a judge to receive a referral fee after taking the bench if it was earned before taking the bench. The committee has determined that the outcome of the opinion is accurate and has drafted this opinion to update the analysis to include the current Judicial Canons, ethics opinions, and changes regarding when referral fees are earned.
Referral fees are earned at the time the referral was made, unless as part of the referral agreement the referring attorney is required to participate in the matter. Ethics opinions RI-270, RI-30, & RI-19. As such, unless the referral agreement required the now-judge to assist in the case, then the referral fee was earned by the now-judge prior to assuming the bench. The rules of professional conduct do not prevent a judge from receiving compensation for legal services provided before the judge took the bench, see Ethics Opinion JI-118. Additionally, a judge may receive a “bonus” from his or her prior law firm, which was earned before the judge took the bench, but paid after assuming the bench, JI-37. As stated in C-228:
"To deny a newly-elected judge just compensation for valued service performed while a practicing lawyer would be inequitable and would tend to discourage qualified persons from accepting judicial office. Similarly, consideration must be given to the client who is compelled to employ the services of a new lawyer during the pendency of a case."
As to the follow-up inquiry, the Committee believes that Canon 2 and MCR 2.003(C)(1)(b) require disqualification on any matter involving the law firm or lawyer from whom the referral fee is owed until full payment of the referral fee. Once final payment is made, the lawyers may appear before the judge. See CI-890. If the referral fee is de minimis, not subject to contingency or discretion of the judge or the payor, and neither the amount nor the terms of payment are in dispute, then the judge must provide notice to the parties, but is not required to disqualify himself or herself pursuant to Ethics Opinion J-4. However, if this were the scenario, the referral fee would likely have been paid prior to the judge assuming the bench.
CONCLUSION
A judge may accept a referral fee earned prior to assuming the bench provided the judge disqualify herself or himself from all matters involving the law firm or lawyer to which the case was referred until final payment is made, with very limited exceptions.