The Client-Lawyer Relationship · 10-16% of the exam
5.1.3Fee splitting with lawyers outside the firm (Rule 1.5(e))
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- Rule 1.5(e) — Fee splits with outside lawyers
Why
A client who hired one lawyer can end up paying several, and money moving quietly between firms gives a lawyer a reason to send a client somewhere other than where the client is best served. Inside one firm that worry falls away, because the firm answers for the work as a whole.
Plain English
Partners and associates at the same firm may share fees freely. When lawyers at different firms share a fee, all three Rule 1.5(e) conditions must be satisfied, including a written client agreement specifying each lawyer's exact share.
Rule
Rule 1.5(e) — Fee splits with outside lawyers
Intra-firm distributions: partners and associates may pool and divide fees freely; a firm may make payments to former members under a separation or retirement agreement. The three-part test does not apply.
Outside-firm fee splits — all three conditions required:
- The division is
- (a) in proportion to services each lawyer performed, OR
- (b) in some other proportion if each lawyer assumes joint responsibility for the representation.
- The client agrees to the arrangement — including the specific share each lawyer will receive — confirmed in writing.
- The total fee is reasonable.
- The division is
Reciprocal referral arrangements (Rule 7.2(b)(4), not Rule 1.5(e)): permissible if
- (a) the agreement is not exclusive and
- (b) the client is informed of the existence and nature of the agreement.
Comment [8] adds (c): the arrangement must not interfere with the lawyer's professional judgment as to making referrals or as to providing substantive legal services.
A referral with no services performed and no joint responsibility fails condition 1, so the referring lawyer may take no share of the fee — and Rule 7.2(b) separately governs paying anything of value for recommending a lawyer's services, subject to its own express exceptions (Chapter 21).
Example 1
Ex. 1
Marco referred a legal malpractice matter to a specialist at a different firm, negotiating a 20/80 percent fee division. Kim signed a written agreement, but the document stated only that two lawyers would share the fee, not each lawyer's specific percentage. The arrangement violates Rule 1.5(e): client consent must specify each lawyer's share. Search Kim's signed document for either percentage; neither one is in it.
Example 2
Ex. 2
Vera, a senior associate at the firm, handled a matter jointly with a junior associate at the same firm and negotiated a 70/30 fee division. A client asked whether Rule 1.5(e)'s three-condition test applied. It didn't. The three conditions govern splits between different firms; intra-firm distributions are not subject to Rule 1.5(e). Move Vera's junior associate to a different firm and the three-condition test the client asked about starts to apply.
The exam will tell you that two lawyers are sharing fees, then reveal both are at the same firm. The three-condition test doesn't apply; Rule 1.5(e) governs only outside-firm splits.
The exam will show you a client who signed a writing acknowledging a fee split. Insufficient. The writing must name each lawyer's specific share, not merely confirm a division exists.
The exam will ask whether a standing reciprocal referral arrangement itself must be memorialized in a client-signed writing about its existence. It need not be; but under Rule 7.2(b)(4) the client must be informed of the arrangement and it must not be exclusive.
Tip
Questions · 1
Q 01ch05-e04
Question 1 of 1 · Rule 1.5(e)
Alpha handles wind-farm leasing work and was consulted by Client about a royalty dispute with a turbine supplier. Alpha referred the matter to Beta, a trial lawyer at an unrelated firm, and the two agreed that Alpha would take fifteen percent of any fee and Beta eighty-five percent. Alpha stayed involved, reviewed every filing, and accepted joint responsibility for the representation in a letter to Beta. Client signed a short document stating that two lawyers at different firms would share the fee earned in the matter. The document said nothing about how much either lawyer would receive. The total fee ultimately charged was reasonable. Is the fee division proper?
Keys 1 to 4 choose.