So, I made a number of comments on a thread on a private Facebook group among lawyers about how co-counsel fees are paid to referring lawyers. I thought I would write about it.
Co-Counsel Ethics Rule
If a lawyer asks another lawyer to work with them on a case, they can share a contingency fee under Ethics Rule 1.5(e). This provides:
- (e) A division of 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 each lawyer assumes joint responsibility for the representation;
- (2) the client agrees to the association and the agreement is confirmed in writing;
- and (3) the total fee is reasonable
Working With Multiple Lawyers
Burger Law works with other lawyers and partners with them to get great results for our clients. When we do, we always make sure that the referring lawyer keeps the client as their contact. When we pay co-counsel fees, we tell the client about it. We usually work under the referring lawyers' contingency fee agreement - but sometimes work under our agreement as well.
The question on the Facebook thread was “Do I pay the fees myself and then pay the referring lawyer or pay it out of my trust account?" The answer is the latter. We always pay the referral fees out of the lawyer’s trust account for a number of reasons. First, it ensures that the lawyer is paid and that the lien is resolved. It is really beneficial to the client.
We also sometimes have a prior lawyer who handled a case for a period of time and then we took it over. If we pay the lawyer directly from the trust account that ensures the client's obligation under Missouri attorneys lien statutes are satisfied. In addition, paying the lawyer referral fee from the trust account ensures that the money is not taxable income to my firm. We issue 1099’s to other counsel at the end of the year.
If you are one of my clients or a referring attorney, I thought you might be interested in learning how this works.