|Lawyers from other states, and sometimes even California lawyers, are
astonished that California permits "bare naked referrals." In other words, a
California attorney is permitted to collect a referral fee for merely turning a case over
to another lawyer. The referring lawyers need not participate in the matter in any way and
can still collect a fee as long as the attorneys comply with certain formalities.
rationale for permitting these referrals is intertwined in the fundamental core value of
our Rules of Professional Conduct, i.e., client protection. If client protection is the
ultimate goal, then the client is better served if the attorney refers the case to the
most skilled practitioner in the field.
presumption is that, since the lawyer will only recover if the client does, then the
referring lawyer will select the best lawyers to guarantee their personal interest.
Referral fees result in the consumer receiving the best representation possible. Moran v.
Harris (4th Dist. 1982) 131 Cal.App.3d 913.
The formalities mandating compliance are expressed within the parameters of Rule of
Professional Conduct 2-200(A). The client is required to consent to the fee division in
writing after a full explanation of the fee division and its terms. Further, the total fee
charged may not be increased due to the referral fee (2-200(A)(2)), and the fee may not be
considered unconscionable according to Rule of Professional Conduct 4-200.
The referral fee rule lacks any triggering time requirement. Therefore, the consent may
be obtained from the client at the onset of the case, midway, or when the funds are
received. The client may be more inclined to agree to the split when the funds are being
distributed, but it is far better practice to obtain the client's consent at the outset.
The concept becomes more complex when the attorney referred-to fails to honor or obtain
the client's consent. Remember that after the referral, the client is essentially a party
represented by counsel, potentially triggering the anti-contact rule, or Rule 2-100,
Communication With a Represented Party.
Conceivably, the referring lawyer could not contact the client. If the attorney
referred-to fails to or refuses to obtain the client's consent, then the referral fee
agreement between the lawyers is unenforceable on public policy grounds. In one subsequent
civil action, the civil court maintained that "it would be absurd to allow an
attorney to enforce an unethical fee agreement by court action, even though the attorney
potentially is subject to professional discipline for entering into the contract."
Scolinos v. Kolts. (1995) 37 Cal.App.4th 635.
In the real-law world, this is ordinarily not a problem. Top trial lawyers willingly
comply with the rule, and a lucky lawyer will unexpectedly receive a sizable check in the
mail based upon a long-forgotten referral or a remote case. The obvious reason is that
these skilled practitioners want to guarantee future referrals in this win-win situation.
Diane Karpman represents attorneys before the
State Bar. She can be reached at email@example.com
or at 310/887-3900.