An Ethics Roadmap for Lawyer Referrals

Illinois Rules of Professional Conduct 1.5(e), 5.4(a), and 7.2(b) are important places to look for guidance about referral ethics.

As this month's cover story makes clear, referrals are important to many Illinois lawyers. Here are the key ethics rules you'll need to consult before heading down the referral road.

A good place to start is Illinois Rule of Professional Conduct 1.5. Rule 1.5(e) allows referrals and a division of fees if three requirements are met: (1) the division is in proportion to the services performed by each lawyer, or if the primary service performed by one lawyer is the referral of the client to another lawyer and each lawyer assumes joint financial responsibility for the representation; (2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and (3) the total fee is reasonable.

As the cover story notes, you should be careful to whom you refer cases. Comment [7] to Rule 1.5 provides that "joint financial responsibility for the representation entails financial responsibility for the representation as if the lawyers were associated in a general partnership. See In re Storment, 203 Ill. 2d 378 (2002). A lawyer should only refer a matter to a lawyer whom the referring lawyer reasonably believes is competent to handle the matter. See Rule 1.1."

If the lawyer to whom you refer a case misses a deadline or mismanages the case, you could face a malpractice suit. If you're worried about assuming malpractice liability for another lawyer's work, you can either work with the lawyer as co-counsel (assuming you're competent to handle the subject matter) or simply refer the matter to another lawyer but not seek a referral fee.

It is also important to remember that except in very limited circumstances, a lawyer may not share fees with a non-lawyer. IRPC 5.4(a). Despite this rule, 11 charges were made to the ARDC in 2016 for improper division of legal fees or partnership with a non-lawyer (see https://www.iardc.org/AnnualReport2016.pdf).

Be wary of for-profit referral services

As if this weren't enough, IRPC 7.2 adds another element. It states that "(b) A lawyer shall not give anything of value to a person for recommending the lawyer's services except that a lawyer may: (1) pay the reasonable costs of advertisements or communications permitted by this Rule; (2) pay the usual charges of a legal service plan or a not-for-profit lawyer referral service; (3) pay for a law practice in accordance with Rule 1.17; and (4) refer clients to another lawyer or a nonlawyer professional pursuant to an agreement not otherwise prohibited under these Rules that provides for the other person to refer clients or customers to the lawyer, if (i) the reciprocal referral agreement is not exclusive, and (ii) the client is informed of the existence and nature of the agreement."

Essentially, Rule 7.2 allows you to advertise your services or firm, and permits you to use others to do so if you keep these strict requirements in mind. Be very careful and dutiful when using any service, online or otherwise, to advertise your firm. You cannot pay a service to funnel business to your firm if the service recommends your services. You also cannot pay a service to channel professional work to your firm, unless it falls within the exceptions of Rule 7.2(b)(1)-(b)(4) (see above). As Comment [5] to Rule 7.2 states, a communication contains a recommendation if it endorses or vouches for a lawyer's credentials, abilities, competence, character, or other professional qualities.

Note, however, that using a non-profit lawyer referral service to get clients is permissible under Rule 7.2(b)(2). An example is the Illinois State Bar Association's Lawyer Referral Service, which typically makes approximately 1,000 referrals a month (see www.isba.org/resources/lawyerfinderforms for details).

Authorized lawyer referral services must be consumer-oriented and provide unbiased referrals to lawyers in certain fields in which the lawyer has knowledge. The services typically have complaint procedures for the consumer and requirements for lawyers using the service to carry malpractice insurance. You as the lawyer have a duty to ensure that the referral service you use complies with the Illinois Rules of Professional Conduct.

BaIley E. Felts is assistant counsel for the ISBA.

bfelts@isba.org