When Can Texas Lawyers Share Fees?
By Laura Popps
Although it is ethically permissible for lawyers from different firms to share or divide legal fees, when this is acceptable and how it works has garnered considerable confusion. Let’s take a look at how a Texas attorney may ethically split fees with a lawyer from another firm.
The first thing to note is that in Texas, a pure referral fee is not allowed.[1] Meaning, a lawyer may not share in a legal fee simply by referring a case to another lawyer. Although some lawyers continue to believe that referral-only fee arrangements are permissible, Texas Disciplinary Rule of Professional Conduct 1.04(f) provides only two circumstances in which an attorney may split fees on a case with a lawyer outside of his or her firm.
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The first way is if the fee division is in proportion to the professional services provided by each lawyer. This contemplates that “each lawyer is performing substantial legal services on behalf of the client with respect to the matter.”[2] In this scenario, each lawyer sharing in the fee must perform legal services beyond simply being hired by the client and forwarding the case to another lawyer. In addition, there must be “a reasonable correlation” between the value of the services provided and responsibilities assumed, and the portion of the fee received.[3]
The second way a fee may be divided between lawyers from separate firms is when each lawyer assumes “joint responsibility” for the representation.[4] Joint responsibility involves ethical, and potentially financial, responsibility for the representation.[5] In assuming joint responsibility, the referring lawyer must make reasonable efforts to ensure that the client receives adequate representation. This includes reasonably investigating the client’s matter and referring it to a lawyer the referring lawyer reasonably believes is competent to handle it. A referring lawyer must also continue to monitor the case throughout the representation, ensure the client is kept reasonably informed, and assist the handling lawyer when necessary.[6]
The ABA has observed that a fee division based on joint responsibility necessarily assumes that the referring lawyer has undertaken representation of the client.[7] In practical terms, this means the referring lawyer must be able to stand in the same ethical position as the handling lawyer. For example, if the referring lawyer has a conflict of interest that would prevent that lawyer from representing the client, the lawyer likewise cannot assume joint responsibility for the matter and may not share in the fee on that basis.[8]
In both scenarios, attorneys must obtain the client’s written consent, in advance, to the fee arrangement. The written agreement must include the identity of all lawyers or law firms who will participate in the fee-sharing agreement, whether fees will be divided based on the proportion of services performed or by lawyers agreeing to assume joint responsibility for the representation, and the share of the fee that each lawyer or law firm will receive or, if the division is based on the proportion of services performed, the basis on which the division will be made.[9] Finally, the total fee must comply with Rule 1.04(a), meaning it must not be unconscionable.[10]
In Texas, a lawyer may not enter an agreement for a pure referral fee. Rather, lawyers from different firms may divide fees based on the proportion of professional services performed or the assumption of joint responsibility for the representation, as long as the client gives informed written consent. Attorneys should take care to ensure compliance with Rule 1.04, as arrangements that fall outside its requirements may expose lawyers to fee forfeiture or disciplinary consequences—even where the referral itself was well-intentioned.
Laura Popps defends Texas attorneys in disciplinary proceedings, advises lawyers on professional responsibility matters, and works with firms to strengthen ethical compliance and internal practices. A former prosecutor, Laura has been Board Certified in Criminal Law by the Texas Board of Legal Specialization since 1999. She then served for ten years as Regional Counsel at the State Bar of Texas’ Office of Chief Disciplinary Counsel before founding her own firm.
Laura can be reached at laura@poppslaw.com or (512) 865-5185.
[1] See Tex. Disciplinary R. Prof’l Conduct 1.04 (f); id. at cmt. 14; Tex. Comm. on Prof’l Ethics, Op. 688 (2020) (“The adoption of Rule 1.04(f) abolished the pure referral fee–a fee paid to a referring lawyer simply because he referred the case and not because the referring lawyer performed work on or assumed any joint responsibility for the matter.”).
[2] Tex. Disciplinary R. Prof’l Conduct 1.04, cmt. 12.
[3] Id.
[4] Tex. Disciplinary R. Prof’l Conduct 1.04(f).
[5] Tex. Disciplinary R. Prof’l Conduct 1.04, cmt. 13.
[6] Id.
[7] ABA Formal Op. 474 (2016).
[8] Tex. Comm. on Prof’l Ethics, Op. 688 (2020).
[9] Tex. Disciplinary R. Prof’l Conduct 1.04 (f).
[10] Id.