Advisory Opinion:
2159
Year Issued:
2007
RPC(s):
RPC 1.5(e)
Subject:
An agreement between an attorney and a contract attorney for bonuses that will not be considered fee splitting
ISSUE
Is a compensation arrangement between a law firm and an independent contract attorney that is not a member of that firm, considered a division of fees between attorneys for purposes of RPC 1.5(e), wherein the contract attorney’s compensation consists of a defined share of a gross fee originating from the contract work?
BRIEF ANSWER
Yes. Any compensation that is directly tied to or dependent upon the client’s payment of a gross fee may be considered a division of fees for purposes of RPC 1.5(e)(1).
INQUIRY
The inquirer is an independent contract attorney that contracts with another firm (“hiring attorney”). She works under the supervision of the hiring attorney and is paid an hourly fee for her work.
The hiring attorney has offered to give bonuses to the inquirer if any of the contracted cases eventually settle favorably. These cases are worth several million dollars for which the inquirer essentially performs all of the work.
The inquirer is interested in additional compensation arrangement that does not trigger RPC 1.5(e)(1). She does not want to assume joint responsibility for the work performed and the hiring attorney is not interested in splitting the fee in proportion to the work performed.
APPLICABLE RULE
Rule 1.5(e)(1) (Division of a Fee)
DISCUSSION
“A division of a fee between lawyers who are not in the same firm may be made only if: (i) the division is in proportion to the services provided by each lawyer or each lawyer assumes joint responsibility for the representation; (ii) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and (iii) the total fee is reasonable.” RPC 1.5(e)(1)
An independent contract attorney may contract with a law firm on a fixed dollar or hourly basis without triggering RPC 1.5(e)(1) provided the attorney does not receive a share of the gross fee a client pays the law firm. See e.g. Informal Opinion 2127 (2006). However, any compensation that is directly tied to or dependent upon the client’s payment of a gross fee may be considered a division of fees for purposes of RPC 1.5(e)(1). See e.g. Colorado Bar Assoc. Formal Ethics Opinion 105 (1999).
A law firm may provide an independent contract attorney with additional compensation in the form of discretionary bonuses or a share of firm-wide net profits. Furthermore, an independent contract attorney is free to renegotiate his or her rate to more accurately reflect the nature of the effort expended on assignments. However, we believe that any bonus agreement that ties the right to and amount of the bonus to the outcome could trigger the “division of fee” requirements of RPC 1.5(e)(1).
The committee does not opine about the issue of the inquirer’s malpractice liability in the contract relationship.
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