June 14, 1996
Where a valid referral fee agreement exists between two lawyers and the referring lawyer is subsequently suspended from the practice of law prior to the conclusion of the referred case, the receiving lawyer may pay the suspended lawyer only quantum meruit for the proportion of work performed by the suspended lawyer prior to suspension.
References: MRPC 1.5(e); RI-19, RI-30; MCR 9.119(F); MCPR DR 2-107(A).
Two lawyers made a valid referral fee arrangement in 1986. The referring lawyer has been continuously suspended or disbarred from the practice of law since March 10, 1988. The referred case has now concluded, and the receiving lawyer asks how to calculate the referral fee, if any.
Since the referral arrangement was made prior to October 1, 1988, the arrangement was subject to the former Michigan Code of Professional Responsibility, which states at MCPR DR 2-107(A):
"A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm or law office, unless:
"(1) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
"(2) The division is made in proportion to the services performed and responsibility assumed by each.
"(3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client." Emphasis added.
We assume that the referral arrangement was properly made, and that the client consented. MCPR DR 2-107(A)(2) clarifies how the fee must be split. Since the referring lawyer was suspended as of March 10, 1988, and could not have "performed services" or "assumed responsibility" beyond that date, only the period of time prior to the date of discipline is in issue.
The issue of paying referral fees to disciplined lawyers has been twice explored by this Committee in RI-19 and RI-30. The Committee concluded pursuant to MCR 9.119(F) that a suspended lawyer may be compensated on a quantum meruit basis for legal services rendered prior to the effective date of the suspension. MCR 9.119(F), adopted in June 1, 1987, precludes the payment of any portion of the referral fee earned during the period of suspension. This result is consistent under these facts with MCPR DR 2-107(A), since during the period of discipline the referring lawyer could have performed no work for which proportionate payment would be due. A quantum meruit calculation for legal services rendered prior to discipline would be equal to a proportionate share of work performed prior to discipline.
MRPC 1.5(e) effective October 1, 1988, eliminated the requirement of continuing participation by the referring lawyer and proportionate payment. It does require that the client be advised of and not object to the division and that the total fee 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."