This type of case is, unfortunately, quite common in Illinois. A lawyer refers a case to another lawyer who handles the case and obtains a recovery. The referring lawyer then seeks a portion of the legal fee. The lawyer who received the referral disputes the claim noting that no referral fee agreement was signed.
The referring lawyer, Richard Naughton, then files suit against the lawyer who allegedly received the referral, here Bruce Pfaff.
Rule 1.5 of the Illinois Rules of Professional Conduct requires that any fee-splitting agreement between lawyers be documented in writing. Because Naughton did not obtain a written referral agreement, he was not eligible to collect a referral fee.
Two provisions of Rule 1.5 are pertinent:
(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party. Upon conclusion of a contingentfee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.
Subsection (e) provides:(e) A division of a fee between lawyers who are not in the same firm may be made only if:(1) the division is in proportion to the services performed by each lawyer, or if the primary service performed by one lawyer is the referral of the client to another lawyer and each lawyer assumes joint financial responsibility for the representation;(2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and(3) the total fee is reasonable.
In Naughton, the court followed the reasoning of a similar case from the 1st Appellate District, Donald W. Fohrman & Associates, Ltd. v. Marc D. Alberts, P.C., 2014 IL App (1st) 123351 that held that the provisions of Rule 1.5 are mandatory and are designed to protect clients.
In sum, if you refer a case you should not expect to receive compensation unless you have a signed referral agreement with the lawyer who accepts the referral. This rule is appropriate because it makes matters clear for the client who can read the agreement and see who can make a fee claim against him. Further, by requiring a written agreement, the lawyer who wishes to collect a fee must accept professional responsibility for the matter. If an oral agreement is enforced, it becomes easy for the referring lawyer to collect a fee yet avoid professional responsibility if there is a breach of duty.
Edward X. Clinton, Jr.