September 20, 1973
Ethics Opinon 1973-12
SUBJECT: SPLITTING FEES; LAWYERS REFERRAL SERVICE
If it is unethical for lawyers to split fees without informing clients, is it unethical for the Lawyers Referral Service to refer clients to lawyers without telling the clients that the Lawyers Referral Service is splitting fees with the lawyers, and the percentage of that division? If ethics require that the fees be divided between lawyers proportionately to the work done by each, then should ethics also require that the Lawyers Referral Service commission be divided only to the extent that it is necessary to pay Lawyers Referral Service services and not to also pay for non-L.R.S. bar expenses?
It would not be proper for the L.R.S. to withhold from the client information regarding the commission payment by the lawyer to the lawyer referral service. There is no requirement however, that the actual percentage of the division be divulged to the client. Such a service can charge fees which reasonably cover the operating costs of the referral service.
OPINIONS AND RULES
Under DR 107(A)(1), the client should consent to the employment of the attorney only after a full disclosure that a division of fees will be made.
DR 103(C) provides in part that an attorney:
"May request referrals from a lawyer referral service . . . and may pay its fees incident thereto."
A.B.A. Opinion No. 291 sheds some additional light on what the fees "incident thereto" are intended to be. The Opinion provides that:
"Registrants may be required to contribute to the expense of operating it by a reasonable registration charge or by a reasonable percentage of fees collected by them."
The lawyer referral service should fully disclose to the client that fees will be divided; however, there is no requirement that it must disclose the actual percentage.
The above Disciplinary Rule and Opinion suggest that a lawyer referral service can charge fees which are reasonably expected to cover the operations of the referral service. To charge a fee or percentage in excess of the costs of operating the service would seem to be in violation of both the Opinion and the Rule.
The Lawyers Referral Service of San Diego receives fifteen percent of the fee charged by the attorney to whom they refer the case. A determination of whether this percentage is used to cover overhead or whether the excess goes to the San Diego Bar Association should be made before the second question can be fully answered.
This opinion is advisory only. It is not binding upon the State Bar, the Board of Governors, its agents or employees.
EDITOR'S NOTE: This Opinion was reviewed on July 30, 1976 and found to be valid.
Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.