Tip of the Month

Tip for July 2016

Know and Comply with Rules of Professional Conduct regarding Referral Fees

Some states do not permit attorneys to receive or pay referral fees even to other attorneys for the referral of clients and their legal matters. Many states do permit referral fees, but only if the attorneys comply with the requirements of the applicable rules of professional conduct, which often require that the client signs a writing disclosing the sharing of the fee, that the basis of the sharing of the fee is the referral, the amount to be received by the referring attorney and the identity of the attorney. In many states, attorneys are not permitted to enforce oral referral fee agreements. In Illinois, for example, the appellate court recently held that a referring attorney's failure to ensure that client signed a written fee-sharing agreement precludes him or her from recovering on an oral fee-sharing agreement with the attorney to whom case was referred. Naughton v. Pfaff, 2016 IL App (2d) 150360 (March 31, 2016). Take the time to know what your state permits and what is required for an enforceable referral fee agreement.