Fee Sharing - Forwarding Attorney Suspended
96 N.J.L.J. 1421
December 13, 1973
Appointed by the New Jersey Supreme Court
Fee Sharing -
Forwarding Attorney Suspended
An attorney has made inquiry as to whether a New Jersey lawyer may share a fee with a Pennsylvania attorney who forwarded several
negligence cases to him, the division to be in accordance with services rendered. During the pendency of the cases for trial, the forwarder was suspended from the practice of law.
Would the forwarder, at the conclusion of a use, be entitled to that portion of the fee based upon the services actually rendered by him prior to his suspension?
The Disciplinary Rules of the Code of Professional Responsibility of the American Bar Association, as amended by the Supreme Court of New Jersey, provide:
DR 2-107. Division of Fees Among Lawyers
(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 aerials:
(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.
(4) He complies with the provisions of R. 1:21-6 and R. 4:88-4 (relating to sharing of fees) of the Rules Governing the Courts of the State of New Jersey.
This question has not previously been answered by this Committee. The answer to a somewhat similar question, involving the
division of a fee with the estate of a deceased attorney, can be found in our Opinion 87, 88 N.J.L.J. 799 (1965). Drinker, Legal Ethics 186-7 (1953), says:
Canon 34 [now DR 2-1071 further provides that the division of fees for legal services between lawyers must be based exclusively on "a division of service or responsibility.
There was long at the bar a practice or custom whereby, when a lawyer, with authority from his client, forwarded a case to another lawyer for attention in the latter's jurisdiction, or merely recommended one, the forwarding lawyer was allowed one-third of the fee earned by his correspondent This was in the nature of a "Finder's Fee," and was payable irrespective of any real service performed or responsibility assumed by the forwarding lawyer.
It was obviously the purpose of Canon 34 [now DR 2-107] to condemn this, and such purpose should not be frustrated by construing the necessity of "responsibility" as being satisfied by the bare recommendation. The service and responsibility must, to be effective, relate to the handling of the case. Accordingly, it has been repeatedly held by the Committees that no right to a division arises from the mere recommendation....
When a claim is forwarded to another lawyer, the candor and fairness required under Canon 22 in dealings between lawyers, make it incumbent on one expecting a share of the associate's fee to advise him of this at the outset, the division between them or the basis thereof being agreed on in aid advance. Where he does not do so, unless the case is one where obvious service by the forwarder is required and performed after the forwarding, the associate is warranted in assuming that the forwarder will be compensated directly by the client for whatever responsibility or service he assumes or renders. Candor and fairness to the client also require the forwarder both to advise the client that he expects to share the correspondent's fee, and to advise his correspondent as to any doubt he may have of the client's ability and probable inclination to pay the latter for services requested, as well as to use every effort to induce the client to pay him; but in the absence of an agreement, the forwarder is not personally responsible therefor.
There is no "usual" basis for division, nor will the Committee undertake to fix the proportions in which fees should be shared, each case depending upon its own peculiar facts.
Wise, Legal Ethics 248 (2d ed. 1970), cites several American Bar Association decisions on the division of fees, one of which is particularly appropriate, i.e., that a disbarred attorney should not be employed in a law office, but his share of a fee may be paid to him if it is owing to him for work done prior to disbarment.
In Informal Opinion of the American Bar Association, 628, found in Opinions on Professions Ethics 153 (1967), the Committee held that: an attorney may pay a portion of his fee and reimburse expenses to attorneys who originally performed professional services on a case, but who were subsequently disbarred for reasons wholly unrelated to that case; under no circumstances, however, should fees be divided as to work performed, if any, after disbarment.
In the Digest of Bar Association Ethics, Opinions of the American Bar Foundations (1970 ed.), the following statements appear:
Opinion 1005, at page 121:
A lawyer has no duty to deal with the attorney for the opposing party after that attorney has resigned from the bar without arranging for a substitution of attorneys. Where one lawyer working on a contingent fee case resigns from the bar during the pendency of the suit, it would be improper for the remaining lawyer or lawyers in the case to share fees with him. Where an attorney on contingent fee files suit and is then disbarred, the new attorney hired by the client is not obligated to share any part of the fee with the disbarred attorney. Ill. Opinion 245 (December 28, 1964) Opinion 1892, at page 214:
An attorney awaiting a hearing on charges of unprofessional conduct, which may lead to disbarment, may recommend another attorney to his clients to be substituted for him. The substituted attorney may split fees with the original attorney provided that (1) the client approves, (2) the original attorney's conduct shall not have deprived him of the right to reasonable compensation, and (3) the original attorney's share shall be for services rendered. N.Y.Co.L.A. 685 (Opinion 278, 1930).
Opinion 3944, at page 432:
A lawyer may divide fees, or pay a so called "referral fee," with another lawyer only when there has been a division of service or responsibility. The subsequent disbarment of the referring attorney is immaterial if the referral was made before disbarment and if the disbarment was not caused by the manner by which the referring attorney obtained the case. Advanced costs should be reimbursed in any case 22 Ore. S.B.B. 8 (March 1962) (Opinion 108).
Opinion 4024, at page 442:
An attorney who has been substituted in a personal inky case for a disbarred attorney may pay the disbarred attorney part of his contingent fee as compensation for services rendered prior to the disbarment. Phila. (Opinion 59-8, September 9, 1959).
In the 1970 Supplement to the Digest of Bar Association
Ethics Opinions, it is stated in:
Opinion 5994, at page 131:
A lawyer taking a case over from a disbarred attorney may share his fee with the disbarred attorney for services the attorney performed before his disbarment, provided the services were not the ones which gave ground for his disbarment 6 Ariz. B.J. 39 (December 1970) (Opinion 240, April 16, 1968)
A lawyer who was substituted for another lawyer during the pendency of a matter because the other lawyer was disbarred may share his fee with the disbarred lawyer to the extent that the disbarred lawyer earned it before his disbarment. Fla. Ops. 364 (Opinion 66-20, April 4, 1966)
The inquiry states that the forwarding attorney was suspended from the practice of law, but does not state the actual cause of the suspension. If the cause of the suspension is based upon the manner or means by which the forwarder acquired the negligence cases in the first place, then reason and logic would deny the forwarder any right to any portion of the fee, even though limited to the work done and the responsibility assumed, prior to suspension. If, on the other hand, the forwarding lawyer obtained the cases in a natural way, without any taint in the procurement or handling, it would appear that there is no reason why he is not entitled to a fee in proportion to the legal services performed and responsibility assumed prior to his suspension; provided that the client consented to the employment of the other lawyer after a full disclosure that a division of fees would be made; that the total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client; and that the forwarder complies with the provisions of R. 1:21-6 and R. 4:884 (relating to sharing of fees) of the Rules Governing the Courts of the State of New Jersey.
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