Opinion 99-1
(March 1999)

The inquirer requests an opinion on the following facts: Attorney S represented a union. Plaintiffs A & B were involved in a car accident with a member of that union who was driving his employer's vehicle. It was clear at the time that suit had to be brought against both the union member and his employer. When A & B approached Attorney S for representation in that matter, Attorney S advised that he could not represent them due to a conflict of interest. However, Attorney S referred the matter to the inquirer with an agreement for payment of a referral fee. In addition, in his letter of referral to the inquirer, Attorney S listed a series of conditions for the referral which included most notably that S would stay actively involved in the case, maintaining all client contact, and in fact being listed as "of counsel" on the pleadings for the case. The inquirer accepted the referral, but none of S's conditions was ever met, and between the time of the referral and the case's conclusion, S in fact was disbarred. The inquirer asks about the ethical propriety of paying a referral fee to the disbarred attorney, and if in fact Attorney S, or the successor firm to his firm, is entitled to a referral fee.

As an initial matter, it would appear that attorney S's conflict of interest is subject to Rule 1.7(b) which states that "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 interest, unless: (1) The lawyer reasonably believes the representation will not be adversely affected; and (2) The client consents after full disclosure and consultation. When representation of multiple clients in a single matter is undertaken the consultations shall include explanation of the implications of the common representation and the advantages and risks involved."

The generic question arises whether an attorney who is conflicted out of a representation and who subsequently refers the matter to another attorney may receive a referral fee. This question was addressed by the Committee in Opinion 91-12 (June 1991) , wherein the Committee stated, in part, that "[i]f a referral fee is to be accepted by you, your personal economic interest (i.e., in maximizing the recovery for the referred client, thereby obtaining the largest possible referral fee), is directly adverse to your client's interests in maximizing recovery from all available sources." Although, in the instant matter involving Attorney S, the potential litigant-union member is not seeking to recover funds, attorney S's economic interest in the referred client(s) (A and B) would be adverse to the defense position of the union member and perhaps the Union itself.

With respect to the question whether a disbarred attorney may be entitled to a referral fee, Rule 5.4 (e) is applicable. Rule 5.4 of the Rules of Professional Conduct prohibits the sharing of legal fees with a non-lawyer. Further, fees may not be divided with a lawyer who is under a legal or ethical impediment to representing the client. See Professional Guidance Committee Opinion 94-23 ("legal fees may not be divided with a firm that is under a legal or ethical impediment to representing a client"); Professional Guidance Committee Opinion 89-26 (citing ABA Informal Opinion 1088 (1968); New Jersey Opinion 549 (1984)). This Committee previously has ruled that so long as a referral was rendered at the time the referring attorney was a member in good standing, the referring attorney remained entitled to the referral fee. In Opinion 89-26, the Committee stated as follows:

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 1.5(e) (1) & (2) are met, no ethical problem exists.

Thus, as a general matter, in the absence of a conflict of interest, Attorney S would be entitled to a referral fee at the time the matter is settled. Such an outcome presupposes, however, that there had been full compliance with Rule 1.5 (e) (1) & (2). Under the facts presented, however, the conflict of interest precludes Attorney S from accepting a referral fee, the timing of his disbarment not withstanding. The same conflict precludes Attorney S's successor firm from accepting a referral fee as well.

In the course of Opinion 91-12, the Committee noted that the referral fee issue where there is a conflict of interest previously had been addressed in Opinion 89-23. 

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.