Are Referral Fees Legal in Iowa? Attorney Fee Split Rules

How to Ethically Share Fees With Other Iowa Attorneys

Iowa allows attorneys to divide fees with lawyers outside of the attorney’s firm when they either assume joint responsibility or split the fee proportional to work completed.

Iowa Rule

Attorneys can find the requirements for a division of fees in Iowa Rules of Professional Conduct Rule 32: 1.5(e). The rule provides:

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 each lawyer assumes joint 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.

Attorneys must inform clients of the proportion each lawyer will receive and obtain client agreement to the division in writing.

The comment to Rule 32: 1.5 adds more context to what constitutes joint responsibility, stating that it “entails financial and ethical responsibility” similar to when lawyers are associated in a partnership. If lawyers agree to split the fee proportional to work completed, however, Iowa does not require joint responsibility.

Reasonable Fees

A division of fees must meet the requirements of IRPC Rule 32: 1.5(a), which explains how to determine if a fee is reasonable. The rule states:

A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses, or violate any restrictions imposed by law. 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 or contingent.

The comment adds that these factors are not exclusive. What is reasonable is determined on a case-by-case basis. Not all of the listed factors will be relevant in each situation.

Competency

The commentary to Rule 32: 1.5 adds a competency requirement for a division of fees. IRPC Rule 32: 1.1 governs competency and 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.”

Competency can be either due to the attorney’s current skill and knowledge or based on their ability to prepare for a case and gain the necessary skill and knowledge. While some cases may require the skills of a general practitioner, at other times an attorney may need expertise in a specific area of law to meet the competency requirement.

Scope of Representation

The Rule 32: 1.1 Comment, when discussing referrals, references Rule 32: 1.2, which focuses on scope of representation. All involved attorneys should ensure that all involved parties are aware of the extent of each attorney’s work and how work will be allocated. This is especially true when a division is based on services provided.

Conclusion

Iowa attorneys may divide fees when the division is based on work completed or the attorneys assume joint responsibility. The referring attorney must believe the other attorney is competent to handle the matter.