Dividing a Fee Between Lawyers in Different Firms

A case moves from one firm to another, or two firms work it together, and one fee has to be split between them. The model rule permits this and attaches three conditions. Each is straightforward on its own, and the arrangement fails if any one is missing, which is more often a paperwork failure than a disagreement about the money.

Which arrangements the rule governs

The rule applies to a division of a fee between lawyers who are not in the same firm. Lawyers within one firm divide receipts however their partnership agreement provides, and no client consent is involved. The distinction turns on the defined meaning of firm, which reaches beyond a partnership to include lawyers in a legal services organization or a legal department, and which can be affected by how lawyers hold themselves out.

Office-sharing arrangements sit awkwardly here. Lawyers who share space, a receptionist and letterhead but practice separately may be treated as a firm for some purposes and not for others, and the answer affects both this rule and the imputation of conflicts. Where the question is close, the safer course is to comply with the division requirements rather than to argue afterwards that none applied.

Proportionality or joint responsibility

The first condition offers two routes. The division may be in proportion to the services performed by each lawyer, which is the ordinary co-counsel arrangement where each firm takes a share reflecting its contribution. Or each lawyer may assume joint responsibility for the representation, which is what makes a referral fee possible for a lawyer who will do no substantive work.

Joint responsibility is not a label. The comment explains it as financial and ethical responsibility for the representation as if the lawyers were associated in a partnership. That imports exposure for the handling firm's errors and the supervisory obligations that a partner owes, which means a referring lawyer who assumes it should be receiving reports, reviewing significant decisions, and remaining reachable by the client.

The client's agreement, and what must be disclosed

The second condition is the one most often mishandled. The client must agree to the arrangement, including the share each lawyer will receive, and the agreement must be confirmed in writing. Three elements are packed into that sentence: agreement, disclosure of the actual shares, and a writing.

Disclosure of the share means the numbers, not the existence of a split. A letter telling the client that another firm is involved and will be compensated does not satisfy the rule. Nor does a clause buried in a retainer authorizing the firm to associate counsel as it sees fit. The client is entitled to know what proportion of the fee each lawyer takes, because that is the information relevant to deciding whether to agree.

The writing may confirm an agreement obtained orally, in line with the general definition of confirmed in writing. What matters is that the confirmation follows within a reasonable time and records what the client actually agreed to. Obtaining the agreement after the recovery has arrived is not a confirmation of anything.

The total must still be reasonable

The third condition is a check on the whole. The total fee must be reasonable, measured against the same factors that govern any fee. Dividing a fee among more lawyers does not justify charging more, and a client should not pay a premium for the involvement of a firm that added nothing.

The reasonableness inquiry also looks at what the arrangement produced for the client. Where associating a second firm brought specialized capability the first firm lacked, the division is easy to defend. Where the second firm duplicated work already performed, the total can be unreasonable even though each firm's own hours were properly recorded. The client pays one fee for one matter, and the rule measures that fee as a whole rather than as the sum of two independent calculations.

In contingent matters this interacts with the requirements that a contingent fee agreement be signed and state its terms. Two writings are needed in a referred contingent case: the client's contingency agreement and the client's agreement to the division. They are frequently combined in one document, which is efficient and lawful provided each requirement is actually satisfied.

The money, the conflicts and the exit

A divided fee is paid from a recovery held in trust, and the trust rules apply in full to the portion owed to the other firm. Prompt notice, prompt delivery of undisputed amounts and segregation of anything in dispute all follow from the safekeeping obligations attached to client funds. A dispute between the two firms over the split does not entitle either to hold the client's share.

Two other rules press on these arrangements. Associating another firm brings that firm's conflicts into the matter, so a division agreement should follow a conflicts check rather than precede it, on the same footing as any former client conflict analysis. And a lawyer who assumes joint responsibility and then wishes to step away cannot simply stop answering: departure is governed by the rule on terminating a representation, which treats the referring lawyer as counsel to the client rather than as a party to a private arrangement between firms.