Opinion 93-3
(April 1993)

This is the Committee's opinion regarding informing a referring attorney as to the status of his referrals, and paying referral fees to an attorney who is either prosecuted or convicted of criminal charges and/or disbarred or sanctioned for unethical conduct.

The facts as presented to the Committee involve a situation where an attorney was referred two cases, which an independent investigation and evaluation revealed to be legitimate. After the referring attorney was being criminally prosecuted by the U.S. Attorney's Office for manufacturing evidence, creating fictitious claims, suborning perjury, and other acts designed to create personal injury cases or to raise the value of other personal injury cases.

The Committee will answer the attorney's questions in reverse order of how they were presented.

The first issue raised by the inquirer is whether the attorney is ethically prohibited from paying referral fees to a referring attorney who is either convicted, not convicted, disbarred, or sanctioned but not disbarred. The inquirer also questions whether the referral fee may be paid prior to the criminal trial.

Rule 5.4(a) states:

A lawyer or law firm shall not share legal fees with a nonlawyer....

Rule 1.5(e) states:

(e) A lawyer shall not divide a fee for legal services with another lawyer who is not in the same firm unless:

(1) the client is advised of and does not object to the participation of all the lawyers involved, and

(2) the total fee of the lawyers is not illegal or clearly excessive for all legal services they rendered the client.

Rule 5.4 of the Rules of Professional Conduct prohibits the sharing of legal fees with a non-lawyer. Moreover, fees may not be divided with a lawyer who is under a legal or ethical impediment to representing the client. See ABA Informal Opinion 1088 (1968); New Jersey Opinion 549 (1984). These ethical considerations are intended to prevent an attorney from continuing to earn legal fees after disbarment or suspension.

However, the rules do not prevent payment of fees earned prior to suspension or disbarment. Percentage referral fees have been approved in Pennsylvania. See Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility Informal Opinion, May 16, 1986; Reardon v. DeBlasio & Meagher, 1 Law. Man. Prof. Conduct 200 (N.Y. Sup. Ct. 1984) (permitting percentage division of fee regardless of actual contribution by each attorney where there was a previous express contract). As fee splitting under Pennsylvania Rule of Professional Conduct 1.5(e) does not require work to be done by the referring attorney, the referral fee is earned when the case is referred. As long as the attorney is in good standing when the referral is made, and the requirements of Rule l.5(e)(1)&(2) are met, no ethical problem exists. See Philadelphia Bar Association Professional Guidance Committee Opinion 89-26.

Assuming that the attorney and the referring attorney have a contractual agreement regarding the referral fee or an implied contractual agreement from a previous course of dealing, it is the opinion of this Committee that there is no ethical impediment for the attorney to pay the referral fee to the referring attorney in accordance with the terms of the contract. It is irrelevant whether or not the referring attorney is convicted, not convicted, disbarred, or sanctioned but not disbarred.

The other issue is whether the attorney is ethically prohibited from informing the referring attorney as to the status of the cases referred.

It is the Committee's opinion that there is no affirmative ethical duty for the inquirer to keep the referring attorney advised as to the status of the case. Should the inquirer so choose, he should first be certain to obtain the permission of the client before doing so pursuant to Rule 1.6. In addition, should the referring attorney be suspended or disbarred after that consent is given, the inquirer should so inform the client and make sure the client still agrees to any further disclosures to the referring individual.

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.