Attorney Referral Fees in Illinois - A Complete Guide

How to Ethically Share Fees With Other Illinois Attorneys

Illinois allows attorneys to use referral fees when the fees are either proportional to work performed or the lawyers assume joint responsibility. The state has issued additional guidance via ethics opinions.

Illinois Rule

Illinois Rules of Professional Conduct Rule 1.5(f) provides the requirements for when attorneys may divide feels. It states:

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.

Illinois requires both written notification and a client signature for all divisions of fees. The Rule 1.5 Comments provide additional requirements.

Reasonable Fees

A division of fees is no different than any other fee charged to a client in that it must be reasonable. IRPC Rule 1.5(a) states:

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

These factors are not exclusive. Determining a reasonable fee should be done on a case-by-case basis. Attorneys should consider the circumstances of each case.

Competency

The Rule 1.5 comments adds a competency requirement for referrals. It states:

A lawyer should only refer a matter to a lawyer whom the referring lawyer reasonably believes is competent to handle the matter. See Rule 1.1.

IRPC Rule 1.1 governs competence:

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 comment to Rule 1.1 provides additional advice on what defines competency. Competence does not mean a lawyer possesses the exact skills, experience, and knowledge necessary for a case at the time of a referral. Rather, an attorney must have the ability to gain the needed skills and knowledge over the course of representation.

The Rule 1.1 Comment also addresses competency when referring a matter to another attorney. Some of the factors to consider when determining competency for a division of fees:

• An attorney “must reasonably believe that the other lawyers’ services will benefit the client.”
• The referral will “contribute to the competent and ethical representation of the client.”
• Before providing a referral, attorneys should consider the circumstances, which can include:
  • The other attorney’s “the education, experience and reputation”
  • The type of services the other lawyer will provide
  • “The legal protections, professional conduct rules, and ethical environments of the jurisdictions in which the services will be performed, particularly relating to confidential information.”
• All involved attorneys should consult with both each other and the client about each attorney’s responsibilities and how the attorneys plan to divide the work.

This last point relates to the Rule 1.5(f) requirement of the client agreeing to the division in writing. By including each attorney’s responsibility within the case, attorneys can minimize miscommunication between attorneys and the client.

Ethics Opinions

Illinois has issued several ethics opinions on the division of fees. Below is a summary of two of the most relevant. These opinions are not binding.

Out-of-State Attorneys

A 2021 Ethics Decision, No 21-04, answers the question of whether an Illinois attorney can divide fees with an out-of-state attorney. The Committee found that an Illinois could split fees with an out-of-state attorney when the following conditions were met:

• The division complies with the Illinois Rules of Professional Conduct
• The division complies with the ethics rules of the other attorney’s jurisdiction

Note that the Comment to Rule 1.1, discussed above, provides advice on how to handle a competency determination when one attorney is not barred in Illinois.

In coming to its decision, the Committee cited previous ethics opinions on this topic. More than one opinion found a division of fees between attorneys of different jurisdiction benefits clients in helping them to hire competent counsel. Without allowing for referral fees, attorneys may decide to obtain pro hac vice admission to represent a client, which would generally not be more beneficial to a client. Clients benefit from attorneys who are knowledgeable about not only the area of law at issue but also the rules of the specific jurisdiction.

Discharged Attorney

Ethics Opinion No. 12-11, issued in 2012, looks into when an attorney who has been discharged by a client may enter into a referral fee arrangement with the client’s current lawyer. While the Committee acknowledged that the discharged attorney is entitled to be paid for work performed and services provided, the two attorneys may not enter into a division of fee agreement without a client agreeing to the division If a client does not agree to the division, the attorneys may not divide fees, and the discharged attorney may consider other avenues for payment.

The Committee pointed out that Rule 1.5(f) requires client agreement, and that nothing in the provided fact pattern indicated a need to create an exception to that requirement. This opinion also refers to Friedman v. Malevitis (1st Dist. 1999), an Illinois Appellate Court decision that dealt with a discharged attorney entering into a division of fees agreement without client consent. When the client’s current counsel declined to pay the agreed-upon fee, the discharged attorney filed suit.

The Court found for the successor attorney, stating “it is clear that Illinois public policy prohibits a discharged lawyer from receiving a percentage-based fee where said fee was not related to the value of services rendered, the client does not consent to the fee arrangement, and the discharged attorney has no responsibility for the pending litigation.”

Conclusion

Illinois allows attorneys to divide fees when the attorneys assume joint responsibility or base the division on work performed. The state allows attorneys to share fees with attorneys in other jurisdictions, provided the relevant ethics laws are followed.