ABA Formal Opinion 16-474: half (or more) of a pretty good opinion

Last week, the ABA Standing Committee on Ethics and Professional Responsibility issued its latest formal opinion – Opinion No. 16-474 addressing the topic of “referral” fees under the ABA Model Rules and, specifically, the intersection of Model Rule 1.5(e) and conflicts requirements under Model Rule 1.7.   Along the way, the opinion also stakes out a position on timing in terms of when the necessary written agreement required under Rule 1.5(e) must be created.

In its evaluation of the intersection of the conflicts rules and 1.5(e)’s requirements, the ABA opinion does a spot-on job of explaining why a lawyer who is going to share a fee, even under the assumption-of-joint-responsibility prong (i.e. something that without the assumption of responsibility would be pure referral fee prohibited under the ethics rules), has to recognize that they are representing the client and, therefore, can’t be involved in the arrangement without also being in compliance with the conflicts rules.

Though really just nitpicking, I do wish the opinion had taken the opportunity to explicitly address a relevant, related topic that I hear lawyers ask about from time-to-time (and that I think, and am happy to be corrected if wrong, the ABA has not previously addressed in a formal opinion) — if you have a conflict preventing taking on a prospective client, is it somehow unethical to give that person a referral to other competent counsel.  Absent truly extraordinary circumstances, if all the lawyer is doing is making a referral to another lawyer of the matter – without any component of fee sharing — then the answer should be that no conflict problem is created at all, and Formal Opinion 474 would have offered a nice opportunity to drive that point home through juxtaposition with any one of the three variations on The Flower Shoppe hypo offered up.

The logic that the opinion offers as to the “timing” question regarding when a writing must be created appears to have two parts to it.

The first is to stress the use of future tense in the text of the rule and in paragraph [7]  of the Comment.  (Rule 1.5(e)(2) – “including the share each lawyer will receive” & Cmt. [7] – “the client must agree to the arrangement, including the share that each lawyer is to receive”)  That logic only goes so far, however.  The language that the opinion stresses to make its point is a part of a rule that speaks separately about the act of the client agreeing to the arrangement and the act of the arrangement being memorialized in a writing.  Thus, placing so much emphasis on the use of “will receive” and “is to receive” isn’t a shatterproof construct beyond proving that a written memorialization that happened after the fee was paid out would be stretching it.

The second piece of the puzzle is the notion — supported by some case law citations in a footnote of the opinion –that the creation of a written agreement to indicate that the lawyer had undertaken joint representation is a meaningless act if it only happens after the representation has come to an end.  That also is a position that is not 100% true.  Given that many courts have allowed litigants to settle a case and then file suit against their lawyers for malpractice – claiming that but for a lawyer’s error, they could have gotten a better outcome — even an 11th hour written agreement to be jointly responsible for the outcome could be a quite meaningful financial commitment by a lawyer.  Further, the opinion stresses only one side of the coin – an arrangement based on assumption of joint responsibility.  If two lawyers and a client are late in papering up a fee sharing agreement based on proportional work performed, then there seems even less reason to insist that Rule 1.5(e) be read to take a later is not better than never approach.  It is also worth noting that even in the absence of such a writing, there are courts that have indicated that the lawyers involved may still be held to their agreement on sharing of fees.  See generally Daynard v. Ness Motley Loadholt Richardson & Poole, P.A., 178 F. Supp. 2d 9 (D. Mass. 2001).

Obviously, the better practice is for the written memorialization of the fee sharing arrangement to be created promptly in connection with the agreement itself, but as with many issues there ought to be some recognition that there is a difference between handling something in a way that is less than ideal and a declaration that conduct is unethical because the agreement, including the confirmation in writing of client consent, “must be completed before or within a reasonable time after the commencement of the representation.”

 

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