Attorney Referral Fees in Virginia - A Complete Guide

How to Ethically Share Fees With Other Virginia Attorneys

Since 2004, Virginia has operated as a pure referral fee state. The 2004 revisions to the Virginia Professional Rules of Conduct eliminated the need for attorneys to assume joint responsibility or divide a fee proportional to work completed.

Virginia Rule

The guidelines for referral fees can be found in Virginia Rules of Professional Conduct Rule 1.5(e). The rule states:

“(e) A division of a fee between lawyers who are not in the same firm may be made only if:

• (1) the client is advised of and consents to the participation of all the lawyers involved;
• (2) the terms of the division of the fee are disclosed to the client and the client consents thereto;
• (3) the total fee is reasonable; and
• (4) the division of fees and the client’s consent is obtained in advance of the rendering of legal services, preferably in writing.”

Attorneys familiar with the Model Rules should be aware that Virginia has taken a piecemeal approach to adopting the rules. Regarding the division of fees, the Virginia rules differ in key aspects, including not adopting part of the rule and comment.

Writing

While not required, attorneys should obtain client consent in writing when possible. A written and signed document provides evidence that attorneys informed the client and the client agreed to the terms.

The Rule 1.5 Comment further highlights the benefit of providing a client with a document outlining the division terms and obtaining a client signature. It states:

“A written statement concerning the fee reduces the possibility of misunderstanding. Furnishing the client with a simple letter, memorandum, receipt or a copy of the lawyer’s customary fee schedule may be sufficient if the basis or rate of the fee is set forth.”

The comment also points out that attorneys have a duty to inform clients and not simply expect clients to ask questions.

No Joint Responsibility or Proportionate Work Requirement

Virginia does not require attorneys to assume joint responsibility or base a fee split on work performed. Two ethics opinions, although not binding, support this view.

A 1992 Ethics Opinion, based on the previous division of fee rules, found that referral fees should be based on work completed. A note accompanying the opinion, from the Legal Ethics committee, notes the subsequent change to the rules and states that a “referring attorney may charge a fee for referring a case to another lawyer without further participation in the client’s matter.”

Legal Ethics Opinion 1739, issued in 2000, reaffirmed that Virginia does not require joint responsibility. Rule 1.5(e), according to the Committee, “encourages a lawyer to fulfill other ethical obligations to a client by referring the client to another attorney if he or she believes they lack the required competence or if there is a conflict.”

The opinion’s conclusion, however, does indirectly suggest what responsibilities an attorney does have: “Thus, a fee division under Rule 1.5(e) is not proper if the referring attorney simply makes a referral without assessing the client’s legal matter and without determining whether a referral is appropriate or necessary.”

This comment closely parallels the requirement in other jurisdictions that attorneys, when making a referral, must believe the other attorney is competent to handle the matter at hand. While ethics opinions are not binding and Virginia does not explicitly require competency, attorneys should consider both when making referrals.

Reasonable Fees

VRPC Rule 1.5(a) defines what is a reasonable fee. It states:

(a) A lawyer’s fee shall be reasonable. 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.

While Virginia adopted the model rule, the accompanying comments to Rule 1.5(a) were not incorporated into the VRPC. The language of Rule 1.5(a), absent additional guidance from the state, should be treated as a starting point in determining reasonableness and not an exhaustive list.

Conclusion

The Committee that revised the Virginia Rules of Professional Conduct, in their commentary, highlighted that one of the reasons for adopting of Rule 1.5(e) and dropping the joint responsibility and proportionate work requirements was to encourage attorney referrals. Attorneys in Virginia can benefit from these rules as long as they obtain client consent and charge reasonable fees. While not required, attorneys should provide clients with a document and obtain a client signature as part of their referral process.