The Ethics of Fee Divisions in Personal Injury Referrals

Many Arizona lawyers believe that it is unethical to receive a portion of the fee in a personal injury matter that they refer to another attorney.

That belief is erroneous. In 2003, the State Bar of Arizona amended ER 1.5 regarding the division of a personal injury fee to read as follows:

(e) A division of fee between lawyers who are not in the same firm may be made only if:

(1) each lawyer receiving any portion of the fee assumes joint responsibility for the representation;

(2) the client agrees, in a writing signed by the client, to the participation of all the lawyers involved; and

(3) the total fee is reasonable.

With respect to subsection (1), this does not mean that the referring lawyer must share in the work or do any of the work on the case. "Joint responsibility" means being legally responsible. If the attorney doing the work makes a mistake, the referring attorney is jointly liable to the client for any damages. Thus, it is important to refer the case to a competent attorney.

As for subsection (2), while the client’s knowledge and signed consent are necessary, the client does not need to be informed of how the fee will be divided.

Finally, regarding the reasonableness of fees as required by subsection (3), at Aiken Schenk we have never considered increasing the percentage of the contingency fee to cover a fee division. We appreciate the confidence shown by the referring attorney, and we share the fee based on that relationship.

Our goal is to serve the client’s need and to return to the referring attorney a satisfied client.

See: Further discussion of this topic