The rules seem fairly straightforward: according to Rule 1.5(e) of the Massachusetts Rules of Professional Conduct, a lawyer can accept a referral fee if the total fee is reasonable, the client is notified of the arrangement, and that client gives written consent in advance. The referring attorney must also believe that the attorney to whom they are referring the matter is competent to handle it, regardless of the area of practice.
In Massachusetts personal injury cases, the referring attorney is typically paid one-third of the fees earned by the attorney handling the case, no matter the result. In a break from the ABA Model Rules, referring attorneys in Massachusetts do not have to contribute to the case in any way and bear no responsibility for the outcome of the matter. For personal injury claims, where fees are contingent on the outcome, this means that referring attorneys would certainly be highly motivated to refer clients to an experienced lawyer with a proven track record of success.
Client Consent
The Rules require the client to consent in writing before any fee is shared with a referring attorney. Most often, this fact is included in a contingent fee agreement (CFA) by listing the name of the attorney who will share in the legal fee. If the client does not provide consent then no such referral fee can be paid.
Avoiding the Perception of Bias
Obtaining written consent from the client can sometimes feel awkward since the referring attorney must make it clear that they will earn a fee for referring the client elsewhere. The referral arrangement might lead a client to question the referring attorney’s impartiality, and full transparency will be key. Explaining why the referral is necessary and the reasons for choosing a particular attorney will go a long way to helping clients feel at ease. Also, in cases of personal injury, the notion that the referring attorney will be profiting from a client’s misfortune can be off-putting, especially when that client is a friend or family member. In such situations, we’ve seen some attorneys choose to share the fee or pass the entire sum on to their clients.
When is a Referral Fee NOT Allowed?
The SJC is very clear that an attorney may not accept a referral fee in a situation where they are unable to take the case because of a conflict. Sometimes, however, the issue of conflict is not as straightforward as it may seem.
For example, in the case of an automobile accident that resulted in injuries for both the driver and the passenger, both parties might require representation. The attorney for the driver may be tempted to refer the passenger to another attorney and expect a referral fee. However, if there is even a slight possibility that the driver could have a claim brought against them, the driver’s attorney may not accept a referral fee since they would have been conflicted out of taking that case.
Best Practices Regarding Referral Fees
Receiving the Referral
- During the initial intake, ask the client how they came to contact your law firm. The client may not always be aware that they were referred by an attorney and they may not understand the significance of this fact.
If the client is unsure, ask them to seek out this information, if possible. - Once a referred case has been accepted and the client has provided consent by way of the CFA, best practice includes sending referring counsel a letter confirming the referral arrangement and the percentage agreed upon as the referral fee.
- Once the case resolves, request a W9 from referring counsel. Once received, send referring counsel a letter enclosing the referral fee.
- Make sure to alert referring counsel as to any confidentiality provisions contained in any settlement agreement, so they do not inadvertently violate any such provisions.
Making the Referral
- When referring a client to an attorney, ensure that counsel is well suited to handle the case through trial, if needed.
- Track the statute of limitations of the referred case to ensure that the case has been settled or suited before the applicable deadlines.
We Welcome Your Referrals
At Parker Scheer, we are known for the personal attention we give our clients and for our aggressive advocacy on their behalf. We are proud that our referring attorneys often send multiple cases our way and are grateful for the trust and confidence they place in us. We have paid millions of dollars in referral fees over the years and look forward to the opportunity to represent your clients in matters of personal injury.
