Attorney Referral Fees in Arkansas - A Complete Guide

How to Ethically Share Fees With Other Arkansas Attorneys

Arkansas follows the Model Rule permitting the division of fees in proportion to work performed or if a referring attorney assumes joint responsibility. Attorneys should also references the comments within the Arkansas Rules of Professional Conduct as some include additional requirements.

Arkansas Rule

Arkansas Rules of Professional Conduct Rule 1.5(e) governs the division of fees. It states:

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

1. (1) the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation;
2. (2) the client is advised of and does not object to the participation of all the lawyers involved; and
3. (3) the total fee is reasonable.

Consent

The Rule 1.5 Comment adds an important requirement to client consent: Agreement to the division of fees must be in writing. While only contingent fee agreements require a signature, attorneys should consider making a signature a standard part of all division of fee agreements. A client signature is one of the easiest ways to show that the client was both informed and did not object.

Reasonable Fees

ARPC Rule 1.5(a) governs the factors to determine whether a fee is reasonable. It provides:

A lawyer’s fee shall be reasonable. A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:

1. (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
2. (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
3. (3) the fee customarily charged in the locality for similar legal services;
4. (4) the amount involved and the results obtained;
5. (5) the time limitations imposed by the client or by the circumstances;
6. (6) the nature and length of the professional relationship with the client;
7. (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
8. (8) whether the fee is fixed or contingent.

The Rule 1.5 Comment mentions that this is not an exclusive list, and reasonableness should be determined on a case-by-case basis. The comment notes that the purpose of Rule 1.5(a) is to prevent “only unreasonably high fees.”

Competency

The Rule 1.5 Comment includes an additional requirement for the division of fees: competency. When referring a matter to another attorney, the first attorney must believe the second attorney is competent to handle the matter.

ARPC Rule 1.1 states:

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

The Rule 1.1 Comment further defines what meets the competency standard. When an attorney makes a referral, they should either know or have reason to believe that another attorney either has or can acquire the skill and knowledge necessary to represent a client in the case at hand.

The comment also mentions competency in regards to the division of fees. Part of determining competency regarding referral fees is that an attorney “must reasonably believe that the other lawyers’ services will contribute to the competent and ethical representation of the client.”

The comment lists the following factors to consider when working with another attorney under Rule 1.5(e):

• A case’s specific circumstances
• An attorney’s education, experience, and reputation
• What services the nonfirm attorney will be undertaking
• The nature of the services assigned to the nonfirm lawyers
• The rules and ethics of the relevant jurisdiction, especially regarding the handling of confidential information

Ensuring the other attorney is competent to handle the matter relates to the next point, joint responsibility.

Joint Responsibility

Arkansas requires that all attorneys assume joint responsibility for the division of fees. Regarding joint responsibility, the Rule 1.5 Comment states:

Joint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership.

In addition, the Rule 1.1 Comment suggests that attorneys should consult not only with other attorneys to determine each person’s responsibilities but also with the client. In other words, part of advising a client includes verifying that the attorneys and client know the extent of each attorney’s responsibilities and obligations.

Conclusion

When Arkansas attorneys decide to use Rule 1.5 in their practice, they need to pay close attention to the requirements in not only the rules but also the comments. To meet the requirements under the ARPC, attorneys should assume joint responsibility, divide the fee in relation to work performed, inform the client in writing of the agreement, believe the other attorney is competent to handle the matter, and charge reasonable fees.