Attorney Referral Fees in Delaware - A Complete Guide
How to share fees with other attorneys ethically.
As a pure referral fee state, Delaware allows attorneys to divide fees without regard to the amount of work completed, and attorneys do not need to accept joint responsibility.
Delaware Rules
Delaware Rules of Professional Conduct Rule 1.5(e) states that: A division of fee between lawyers who are not in the same firm may be made only if:
- the client is advised in writing of and does not object to the participation of all the lawyers involved;
- the total fee is reasonable.
Written Agreement
Delaware requires that attorneys inform clients, in writing, of the division of fees and all involved attorneys. While a signature is required only in cases of a contingent fee, attorneys should consider always requiring a signature as proof of receiving a client’s consent.
Rule 1.5(b) also requires that attorneys inform clients of fees and the scope of representation “before or within a reasonable time after commencing the representation.” While not explicitly listed as part of a division of fees, similar to requiring a signature, attorneys would benefit from using this timeline.
Reasonable Fees
Delaware follows the ABA Model Rules regarding what constitutes a reasonable fee. The DRPC offers eight factors to help determine whether a fee is reasonable, although they are not exclusive and a fee’s reasonableness depends on the circumstances.
Where Delaware differs from the ABA Model rules is that attorneys do not assume joint responsibility or base a referral fee on work performed.
Division of Fees for an LLC
While Ethics Committee opinions are not binding, they do provide guidance for attorneys. Opinion 2007-1 looked at whether an LLC formed in Pennsylvania by an LLP also based in Pennsylvania and qualified to practice law in Delaware could share profits with all partners of the LLP under Rule 1.5(e). The Ethics Committee found that, in this situation, a sharing of fees would be permitted.
The Ethics Committee found that Rule 1.5(e) would not be violated because:
- Members of the LLC, the sole member of the LLP, who planned to practice in Delaware were attorneys who already were or would become members of the Delaware Bar
- All partners of the LLP were attorneys licensed in one or more jurisdictions If any member of either the LLP or LLC was not an attorney, they would likely have been in violation of Rule 1.5(e).
The Ethics Committee highlighted that any fee-sharing agreement must fully comply with notifying clients and assessing reasonable fees. In addition, the Committee suggested that fee- sharing agreements should comply with Delaware Supreme Court Rule 12(d).
Bona Fide Office
Rule 12(d) requires attorneys to have a bona fide office in Delaware that is more than “more than a mail drop, a summer home which is unattended during a substantial portion of the year or an answering, telephone forwarding, secretarial or similar service.” An office qualifies when:
- An attorney is in the office for a “substantial and scheduled” time on a weekly basis during traditional office hours
- The attorney or someone acting on the attorney’s behalf is in the office and available to answer questions during normal office hours
Based on this ethics opinion, attorneys who plan to fee share should ensure that the other attorney would satisfy Rule 12(d).
DSBA Attorney Referral System
One thing Delaware attorneys should keep in mind is that clients may confuse attorney referral fees with the state bar’s attorney referral system. While the state bar does not directly refer potential clients to attorneys, they do operate a referral system that allows individuals to enter information into an online service. Attorneys can then choose to contact potential clients. Clients may then meet with attorneys for a 30-minute initial consultation for $35.
This differs from the attorney referral system when attorneys specifically recommend another attorney to a client. Attorney referral fees are not capped at $35, and attorneys should be prepared to explain the difference if necessary.
Conclusion
Attorneys in Delaware can share fees regardless of the amount of work provided to the client. When attorneys charge a referral fee, they must inform the client in writing and ensure that the fee is reasonable.
While not required, attorneys should also consider always obtaining a signature as part of the written agreement, obtaining consent in a timely manner, and ensuring that all involved attorneys meet Delaware Supreme Court Rule 12(d).
