The Ethics of Referral Fees

Ellen Lockwood, ACP, RP

Ellen Lockwood, ACP, RP

Canon 5 of the Code of Ethics and Professional Responsibility of the Legal Assistants Division of the State Bar of Texas states:

A legal assistant shall not solicit legal business on behalf of an attorney.

Rule 7.03(b) of the Texas Disciplinary Rules of Professional Conduct states in part:

A lawyer shall not pay, give, or offer to pay or give anything of value to a person not licensed to practice law for soliciting prospective clients for, or referring clients or prospective clients to, any lawyer or firm . . .

In addition, Comment 1 of Rule 5.04 of the Texas Disciplinary Rules of Professional Conduct states:

The provisions of Rule 5.04(a) express traditional limitations on sharing legal fees with nonlawyers. The principal reasons for these limitations are to prevent solicitation by lay persons of clients for lawyers and to avoid encouraging or assisting nonlawyers in the practice of law. (Emphasis added.)

These rules do not mean you cannot refer someone to an attorney. On the contrary, most of us have been approached by friends and acquaintances to recommend an attorney.1 The difference is that you cannot solicit or seek out business for an attorney. Solicitation may be face-to-face, written, or by phone. Solicitation by nonlawyers is not allowed in Texas because of the high likelihood that it will be done improperly and that attorneys will use nonlawyers to circumvent the solicitation rules for attorneys. Solicitation differs from advertising in several ways. Advertising is generally directed a larger groups of people, not individuals. Advertising requires the person viewing the ad to take the initiative in contacting the attorney. Advertising is not done in person so there is little chance of being coerced. Attorneys also have strict rules to follow regarding solicitation of clients. In fact it is against the law in Texas for anyone to solicit an accident victim or the victim’s family for business. Specifically:

A person who has possession of crime victim or motor vehicle accident information that the person obtained or knows was obtained from a law enforcement agency may not use the information to contact directly a person who is a crime victim or who was involved in a motor vehicle accident or a member of the person’s family for the purpose of soliciting business from the person or family member and may not sell the information to another person for financial gain. Tex. Bus. & Com. C. § 35.54(b) (Vernon 2003)

Canon 2 of the Code of Ethics and Professional Responsibility of the Legal Assistants Division of the State Bar of Texas states:

A legal assistant shall not perform any of the duties that attorneys only may perform or do things which attorneys themselves may not do.

Paralegals therefore have an additional ethical prohibition to soliciting clients for attorneys since attorneys are prohibited from most solicitations. I recently saw an advertisement asking paralegals and other nonlawyers for referrals to a legal insurance company and offering to pay for those referrals. The contact number was an attorney’s office. I brought it to the attention of the State Bar and they are investigating whether this situation violates Rule 5.04 of the Texas Disciplinary Rules of Professional Conduct. If you work for an attorney who advertises or otherwise solicits clients you would be wise to familiarize yourself with Section VII of the Texas Disciplinary Rules of Professional Conduct. Otherwise, it is best to avoid anything that could be considered solicitation of clients. As always, the further you are from the ethical line, the safer you will be.

Ellen Lockwood, CLAS, is the Chair of the Professional Ethics Committee of the Legal Assistants Division, a position she has held since 1997. She is Treasurer of LAD and a past president of the Alamo Area Professional Legal Assistants in San Antonio.