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96 N.J.L.J. 1421
December 13, 1973
ADVISORY COMMITTEE ON PROFESSIONAL ETHICS
Appointed by the New Jersey Supreme Court
OPINION 273
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.
(B) This Disciplinary Rule does not prohibit payment to
a former partner or associate pursuant to a
separation or retirement agreement, or professional
corporation stock valuation agreement.
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)
Opinion 6435, at page 187:
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)
CONCLUSIONS
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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