How to Ensure You Receive Your Referral Fee After You Send a Case to Another Law Firm

Why Every Lawyer Should Be Marketing For Personal Injury Cases: Part 4

This is part of four in a 5-part series entitled, Why Every Lawyer Should Be Marketing For Personal Injury Cases.

Each state has its own rules when it comes to attorney referral fees. Make sure you follow the professional code of conduct in your state.

Attorney Referral Fees in California

The California rule for referral fees is one of a minority of states that permits a “pure referral fee,” i.e., California permits lawyers to be compensated for referring a matter to another lawyer without requiring the referring lawyer’s continued involvement in the matter. Most states follow Model Rule 1.5(e) that permits lawyers to divide a fee only to the extent that the referring lawyer is compensated in proportion for work actually done on the matter or if the referring lawyer assumes joint responsibility for the matter.

In Moran v. Harris (1982) 131 Cal.App.3d 913, the California Court of Appeal held that the payment of referral fees is not contrary to public policy. The court stated, “If the ultimate goal is to assure the best possible representation for a client, a forwarding fee is an economic incentive to less capable lawyers to seek out experienced specialists to handle a case. Thus, with marketplace forces at work, the specialist develops a continuing source of business, the client is benefited and the conscientious, but less experienced lawyer is subsidized to competently handle the cases he retains and to assure his continued search for referral of complex cases to the best lawyers in particular fields.” (Id. at 921-922.) The California rule for referral fees is codified in California Rule of Professional Conduct 1.5.1.

Your Responsibility, as the Referring Attorney

Make sure you are referring cases to attorneys you trust and attorneys who will be on top of getting the referral fee agreement signed. It really should be part of the intake process for the firm receiving the case. When the firm signing up the client has the client fill out the retainer documents, the referral fee agreement should all be part of the process and one of the documents the client signs along with the retainer, the HIPAA release and letter of designation. Relationships in the legal community are everything. The relationships are how most of us get the cases. It is your reputation on the line when a client comes to you, their trusted attorney, and asks you who else they can trust. Refer clients to attorneys you know will treat the client right, do everything possible to get the best result and communicate openly and regularly with you and the client.

The Responsibility of the Personal Injury Lawyer

The attorney who is referred the case should be updating the referral attorney at least monthly as to the status of the case. Ideally these updates also include some information as to potential case value, developments in the case and future court dates. Communication is key. There is no rule that prevents the referring attorney from contacting the referred client to see how the relationship is going and that the representation is matching expectations.

How to Ensure You Receive Your Referral Fee When the Case Settles

The quickest simplest way to ensure you get paid your referral fee is to get it in writing. California Rule of Professional Conduct 1.5.1 requires all referral fees to be in writing and that the referral fee must not affect the client’s recovery. The agreement must be signed by the client as well. A change from the old rule is that now the fee agreement must be disclosed to the client and executed at or near the time the attorneys enter into the agreement to divide the fee. The old rule (prior to November 1, 2018) only requires the agreement to be disclosed prior to the disbursement of the fees.

Having the fee split agreement signed early protects the client and allows the client to have all information to consider how this might effect the representation. This requirement also alleviates frequent awkward conversations between the attorneys and saves a lot of time between the attorneys and the client trying to get the issue resolved.

Other blog posts in this series:

Part One: How Any Lawyer in California Can Add a Passive Stream of Income to Their Existing Law Firm

Part Two: How to Leverage Your Existing Contact List to Increase Your Income

Part Three: Frequently Asked Questions About Personal Injury Cases (For Non-PI Lawyers)

Part Five: How to Settle a Personal Injury Case in Pre-Litigation

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Disclaimer: When collecting or paying referral fees, be sure to follow the Rules of Professional Conduct for your state. This blog is made available by the legal consulting firm, Law Prophet, LLC, for educational purposes. It provides general information and a general understanding of the law and business practices, but does not provide specific legal advice. By using this site, commenting on posts, or sending inquiries through the site or contact email, you confirm that there is no attorney-client or business relationship between you and the Law Prophet blog publisher. The blog should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.This blog is informational in nature and is not a substitute for legal research or a consultation on specific matters pertaining to you or your clients. Due to the dynamic nature of legal doctrines, what might be accurate one day may be inaccurate the next. As such, the contents of this blog must not be relied upon as a basis for arguments to a court or for your advice to clients and other attorneys without, again, further research or a consultation with a professional.