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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.


New York Legal Ethics

1.5   Rule 1.5 Fees

1.5:100   Comparative Analysis of New York Rule

Primary New York References: DR 2-106 & 2-107, EC 2-17, 2-20
Background References: ABA Model Rule 1.5, Other Jurisdictions
Commentary:
NY Commentary: Simon's N.Y. Code of Prof. Resp. Annot. (1999 ed.) Canon 2, et seq.

1.5:101      Model Rule Comparison

New York Disciplinary Rules 2-106 and 2-107 contain the New York counterpart to the fee provisions in Model Rule 1.5. NY DR 2-106(A), which provides that "[a] lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee" differs slightly from Model Rule 1.5(a) which affirmatively requires that a fee be "reasonable." NY EC 2-17 provides that a lawyer "should not charge more than a reasonable fee" NY DR 2-106(B) identifies eight factors to assess the reasonableness of a fee which are substantially identical to the eight factors cited in Model Rule 1.5(a). Several of these same factors are also cited in NY EC 2-18.

The New York Code lacks a counterpart to Model Rule 1.5(b). However, NY EC 2-19 recognizes that "[i]t is usually beneficial to reduce to writing the understanding of the parties regarding the fee, particularly when it is contingent." NY DR 2-106(C)(2)(b), does require that a fee arrangement in a domestic relations case involving Part 1400 of the Joint Rules of the Appellate Divisions be in writing. This subsection also prohibits a lawyer from including a non-refundable fee clause in the written agreement.

ABA Rule 1.5(c)'s requirements that a lawyer provide the client in a contingent fee arrangement with a written statement, showing the basis for determining the fee and another written statement at the matter’s completion, showing how much is due the client and how that amount was calculated, are found in NY DR 2-106(D). In addition, NY EC 2-20 recognizes the use of contingent fee arrangements, but discourages them when the client is able to afford paying a reasonable fixed fee. In addition, Rule 1.5(c)’s prohibition of contingent fee arrangements otherwise prohibited by law is echoed in NY DR 2-106(C)(3). NY DR 2-106(C)(3)'s prohibition of contingent fees otherwise prohibited by any "law or rule of court" includes not only federal and state statutes and court rules but also the common law. Statutes regulating appropriate fees include those relating to the handling of Social Security appeals and workers compensation claims, which preclude fees in excess of a certain percentage of past benefits recovered. Violation of these and similar rules carries its own penalty. Such conduct also violates NY DR 2-106(C)(3).

NY DR 2-106(C)(2)(a), barring the use in domestic relations matters of fees contingent upon the securing of a divorce, or upon the amount of maintenance, support, equitable distribution or property settlement, is equivalent to ABA Rule 1.5 (d)(1) .

NY DR 2-106(C)(2)(b) & (c) do not have equivalents in the ABA rules. Subsection (C)(2)(b) requires a written retainer agreement signed by the lawyer and client in virtually every domestic relations case. The agreement must state the details of the fee arrangement and cannot contain a non-refundable fee clause. Subsection (C)(2)(c) prohibits fee arrangements in domestic relations matters based upon a security interest, confession of judgment, or other lien without prior notice to the client in a signed retainer agreement and the court’s approval after notice to the opposing party. This subsection also bars a lawyer from foreclosing on a mortgage placed on the marital residence while the spouse who consented to the mortgage remains the title holder and the residence remains the spouse’s primary residence. NY EC 2-20 likewise notes that contingent fee arrangements are rarely justified in domestic relations matters.

NY DR 2-106(C)(1) echoes the prohibition in ABA Rule 1.5(d)(2) against contingent fees for representing a defendant in a criminal case.

NY DR 2-107(A)(2) is almost identical to ABA Rule 1.5(e)(1). The only difference is that Rule 1.5(e)(1) requires a written agreement with the client for each lawyer assuming joint responsibility for the representation. NY DR 2-107(A)(2) only requires that a writing to that effect "be given to the client."

NY DR 2-107(A)(1) is equivalent to ABA Rule 1.5(e)(2).

NY DR 2-107(A)(3) is the New York counterpart to ABA Rule 1.5(e)(2).

The New York Code contains one extra provision: NY DR 2-107(B). This subsection allows payment to a former partner or associate pursuant to a separation or retirement agreement.

NY DR 2-106(E), which also has no equivalent in the ABA Model Rules or ABA Model Code, requires a lawyer to resolve fee disputes in domestic relation matters if Part 1400 of the Joint Rules of the Appellate Divisions is applicable, if the client so chooses. A related statute, 22 NYCRR §1400.7, allows a client to seek to resolve a fee dispute by binding arbitration pursuant to a fee arbitration program operated by the Chief Administrator of the Courts and subject to the approval of the justice of the Appellate Divisions.

There are some related rules in the New York Court’s Rules and Regulations. For example, 22 NYCRR § 691.20(a) requires contingent fee retainer agreements in certain suits to be filed within thirty days after the retainer agreement is executed. 22 NYCRR § 691.20(b) requires contingent fee lawyers to file closing statements even if there is no recovery in all matters falling under subsection (a) of that Rule. 22 NYCRR § 691.20(c) provides that such closing statements remain confidential unless there is a written order of the presiding justice of the Appellate Division. 22 NYCRR § 691.20(d) requires an attorney to deposit the proceeds of a contingent fee matter recovery in a special account and remit the client’s portion within a certain number of days. 22 NYCRR § 691.20(e) sets the maximum percentages allowed on contingent fee arrangements in the Second Department. 22 NYCRR § 603.7(e) is the corresponding rule in the First Department. 22 NYCRR § 806.13 is the corresponding rule in the Third Department. And 22 NYCRR § 1022.31 is the equivalent rule in the Fourth Department.

22 NYCRR §§ 1400.1-1400.5 relates to legal fees in domestic relation matters.

Additionally, Judiciary Law § 474-a sets the upper limit of allowable contingent fees in medical, dental, or podiatric malpractice cases.

1.5:102      Model Code Comparison

NY DR 2-106(A) is virtually identical to the Model Code provision, except that the Model Code’s rule applies only to a "clearly" excessive fee. NY DR 2-106(B) is identical to the Model Code provision. NY DR 2-106(C) is more detailed than the Model Code provision, which prohibits contingent fees in criminal matters but does not address contingent fees in domestic relations matters. NY DR 2-106(D) has no ABA Mode Code equivalent. NY DR 2-106(E) also has no counterpart in the ABA Model Code.

1.5:200   A Lawyer's Claim to Compensation

Primary New York References: DR 2-106 & 2-107, EC 2-17, 2-20
Background References: ABA Model Rule 1.5, Other Jurisdictions
Commentary: ABA/BNA § 41:101, ALI-LGL §§ 50-54, Wolfram §§ 9.1-9.6
NY Commentary: Simon's N.Y. Code of Prof. Resp. Annot. (1999 ed.) Canon 2, et seq.

Relevant Cases

Quantum Meruit: In Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 556 N.Y.S.2d 239 (1990), the court held that under NY DR 2-106(A), a lawyer who is discharged without cause is entitled to recover in quantum meruit for the fair and reason able value of the services rendered. On the other hand, if the discharge is for cause, the lawyer has no right either to compensation or to a retaining lien, regardless of the terms of the retainer agreement.

Factors in Calculating Quantum Meruit Recovery: A lawyer’s level of skill is one of several factors taken into account in computing the quantum meruit value of a lawyer’s services. In re O’Leary, 45 A.D.2d 725, 356 N.Y.S.2d 640 (2d Dept. 1974). See also Sargent v. N.Y. Central & H. R. R. Co., 209 N.Y. 360, 103 N.E. 164 (1913) (holding that fee provided in the attorney-client contract is the upper limit on a quantum meruit recovery).

1.5:210      Client-Lawyer Fee Agreements

Relevant Cases:

Oral Fee Agreements: The failure to comply with the statute of frauds may result in the forfeiture of fees. See Rosenthal v. Kingsley, 674 F. Supp. 1113 (S.D.N.Y. 1987) (invalidating oral legal services contract, performance of which could not be completed in one year).

Unenforceable Agreements: Recovery of fees on an otherwise unenforceable agreement is possible where the lawyer is not responsible for the fee agreement’s unenforceability. An example of this is when the lawyer has died. See Sargent v. N.Y. Central & H. R. R. Co., 209 N.Y. 360, 103 N.E. 164 (1913).

1.5:220      A Lawyer's Fee in Absence of Agreement

[The discussion of this topic has not yet been written.]

1.5:230      Fees on Termination [see 1.16:600]

Cross References

See 1.16:600.

Relevant Disciplinary Rules

NY DR 2-110(A)(3) requires a lawyer who withdraws from employment to refund any part of the advance payment of a fee that has not been earned.

Relevant Ethical Considerations

NY EC 2-32 requires a lawyer to refund the client any fees (s)he did not earn upon termination of employment.

Relevant Ethics Opinions

Refund of Unearned Prepaid Fees Required Upon Termination by Client: N.Y. City Bar Op. 1996-5 (1996): A lawyer wants to provide prepaid legal services, to people involved in a particular industry. A participating client would sign a retainer agreement and pay an "initiation/retainer fee" of about $1,000. Sixty days after the initial payment, the client would begin paying $500 in advance per month to cover specified legal services. Clients could terminate the relationship at any time, but clients who terminated the program more than 5 days after paying the initiation fee would forfeit the initiation fee and would have to pay a new initiation fee to rejoin the program. Also, clients who terminated the program more than 10 days after paying in advance for a month's services would forfeit the entire monthly payment. This fee structure is improper. The financial penalty provisions compromise each client's absolute right to terminate the attorney-client relationship. The proposed agreement must therefore be reformed to provide that the client will receive a refund of all unearned fees at termination. Under DR 2-110(A)(3), a withdrawing attorney must "refund promptly any part of a fee paid in advance that has not been earned." Neither the forfeiture of the initiation fee or the monthly fee "can be justified as compensation for the administrative costs of opening a file for the client and setting up necessary computer records . . . . These costs are properly chargeable to overhead, and are not directly billable to the client."

Refund of Advanced Fees Required Upon Lawyer's Retirement: Nassau County Bar Op. 95-9 (1995): A lawyer plans to retire. Currently, he is handling various pending litigation matters in various stages of pretrial preparation. What may or must he do? "The ethical obligations of a retiring lawyer are no different from those of any other withdrawing lawyer." Under DR 2-110(A)(1), a lawyer who plans to retire has no absolute right to withdraw, but must obtain permission to withdraw from each tribunal before which a matter is pending. Under DR 2-110(A)(2), the lawyer "may not withdraw from employment in pending litigation matters until taking steps to the extent reasonably practicable to avoid foreseeable prejudice to the rights of the clients." If he must retire due to "exigent circumstances . . . the lawyer should seek assistance from other lawyers, or from a bar association, or from a lawyer's assistance committee." Under DR 2-110(A)(3) and EC 2-32, the lawyer must promptly refund any fees that he has received but not yet earned as of the time of his retirement.

Refund of Advanced Fees Upon Lawyer's Withdrawal: NYSBA Comm. on Prof. Ethics, Op. No. 570, 1985 WL 57057 (June 7, 1985): Legal fees paid in advance are not client funds and need not be deposited in a lawyer’s trust account, but a lawyer must promptly refund any unearned portion of the advance fees if the lawyer withdraws before the fees are earned.

Non-Refundable Minimum Fees: NYSBA Comm. on Prof. Ethics, Op. No. 599, 1989 WL 252368 (March 16, 1989): With only a few narrow exceptions, NY DR 2-110(A)(3) bars an attorney from charging a non-refundable minimum fee.

Relevant Cases

Recovery Rules Following Discharge with or without Cause: In Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 556 N.Y.S.2d 239 (1990), the court held that under NY DR 2-106 (A), a lawyer who is discharged without cause is entitled to recover in quantum meruit for the fair and reasonable value of the services rendered. On the other hand, if the discharge is for cause, the lawyer has no right either to compensation or to a retaining lien, regardless of the terms of the retainer agreement.

Refund Due on Withdrawal: In In re Hogan, 75 A.D.2d 395, 429 N.Y.S.2d 510 (4th Dept. 1980), a lawyer neglected two estate matters by failing to prepare or file estate tax returns. The lawyer essentially withdrew from the matters and thereby violated NY DR 2-110(A)(3) by not refunding a portion of his legal fee which was paid in advance but was never earned.

Minimum Fees Refundable Upon Termination: In re Cooperman, 83 N.Y.2d 465, 633 N.E.2d 1069, 611 N.Y.S.2d 465 (1994): Nonrefundable retainer agreements violate DR 2-110(A)(3). However, minimum fees and general retainers are still permissible as long as any unearned portion of the fee is refunded if the attorney-client relationship ends before the work is completed.

1.5:240      Fee Collection Procedures

Relevant Ethics Opinions

Assignment of Fees Earned to Factor for Collection: Nassau County Bar Op. 96-9 (1996): The inquiring attorney, Attorney A, completed legal services for a County and submitted a claim for $1,000 in legal fees. The County typically takes several months to pay a claim, but the attorney needs funds immediately. Another lawyer, Attorney B, is willing to "factor" the claim by paying $750 immediately and additional payments later (up to a total of $900), depending on how long the County takes to pay the bill. If the County disputes the amount of the fee, Attorney B retains the right to veto any "discount" that Attorney A offers to the County. The County will not be asked for its consent to this arrangement. The Committee sees nothing per se improper in assigning fees already earned to another attorney, provided Attorney A takes certain "precautionary measures." For example, under DR 2-106(A) and EC 2-23, Attorney A "must maintain control over whether the County is sued in connection with the fees" (though Attorney A need not necessarily be the plaintiff if the County is sued for the fees). Therefore, the proposed factoring agreement must be changed to provide that "the ultimate decision as to settlements or discounts" remains with Attorney A. (However, the agreement may provide that Attorney A will reimburse Attorney B for the amount of any discount that Attorney A agrees to give the County.)

"Credit Plan" with Company which Finances and Collects Fees: N.Y. City Bar Op. 1995-1 (1995): A law firm may enter into a "credit plan" with a credit company that finances the payment of legal fees and collects fees directly from clients provided the arrangement contains certain safeguards. Thus, under DR 2-106(A) and EC 2-23, "any financing plan for legal services should include a mechanism pursuant to which the attorney can prevent the credit company from collecting a fee that has become excessive or otherwise improper." The mechanism might include the client's right to demand arbitration before a bar committee, or the client's right to take the fee dispute to court, or any "alternative dispute resolution mechanism" that allows the attorney to prevent the credit company from collecting an excessive fee. Moreover, unless the client must sign a voucher as a precondition to payment, the client should "at a minimum be sent a copy of the voucher" that the lawyer submits to the credit company when asking the company to bill the client.

Delegation of Bill Preparation to Non-Lawyers: Assoc. of the Bar of the City of New York, Formal Op. No. 1994-9, 1994 WL 780796 (July 27, 1994): A law firm can permit a non-lawyer "supervisory bill clerk" to prepare bills to the insurance company that pays the lawyers to defend its insured, and can delegate final billing authority to the non-lawyer without an attorney reviewing the bills before they are sent out. The attorneys, however, remain ultimately responsible to insure that the fees charged are reasonable under NY DR 2-106(A) and that the bills do not contain improprieties.

Duty to Try to Amicably Resolve Fee Disputes: N.Y. State Bar Op. 684 (1996): Under EC 2-23, "a lawyer should be zealous in efforts to avoid controversies over fees with clients and should attempt to resolve amicably any differences on the subject." The client's mere failure to pay a past due bill "does not warrant action."

1.5:250      Fee Arbitration

Relevant Disciplinary Rules

NY DR 2-106(E) provides that "[i]n domestic relations matters to which part 1400 . . . is applicable, a lawyer shall resolve fee disputes by arbitration at the election of the client." The new joint ruling in Part 1400 reinforces DR 2-106(E). Section 1400.7, which parallels DR 2-106(E), provides as follows:

§ 1400.7: In the event of a fee dispute between attorney and client, the client may seek to resolve the dispute by arbitration, which shall be binding upon both attorney and client and subject to review under CPLR Article 75, pursuant to a fee arbitration program established and operated by the Chief Administrator of the Courts and subject to the approval of the justices of the Appellate Divisions.

Article 75 of the CPLR consists of fourteen separate sections, §§ 7501-7514, and governs all arbitration agreements in New York, not just fee arbitration agreements. The fee arbitration program referred to in § 1400.7 is found in 22 NYCRR Part 136.

Relevant Ethics Opinions

Guidelines for Arbitration Clauses in Retainer Agreements: N.Y. County Lawyers' Ass'n Op. 723 (1997): A lawyer wants his retainer agreement to provide that all disputes arising under the agreement -- whether fee disputes, malpractice claims, or otherwise -- shall be subject to arbitration either before the American Arbitration Association or before an arbitral body affiliated with a bar association in New York, as the client elects. Under DR 2-106, the terms and conditions of a client's engagement of a lawyer must "be reasonable and based on informed consent." With respect to an arbitration clause, "such consent cannot be knowing without disclosure of the material differences between arbitration and litigation. Chief among these differences is that an agreement to arbitrate amounts to a waiver of the right to a jury trial." Other material differences between litigation and arbitration may include "the extent of discovery rights, the right to compel production of witnesses and documents, the availability of relief, the availability of appellate review on the merits, the fees and costs payable to the arbitrator, the availability of a public forum, and the like.

Duty to Try to Amicably Resolve Fee Disputes: N.Y. State Bar Op. 684 (1996): Under EC 2-23, "a lawyer should be zealous in efforts to avoid controversies over fees with clients and should attempt to resolve amicably any differences on the subject." The client's mere failure to pay a past due bill "does not warrant action."

1.5:260      Forfeiture of Lawyer's Compensation

Relevant Cases

Reduced Fee for Dereliction of Duty: If a lawyer is found to be derelict in his or her duty to a client, the court can order a reduction in an otherwise reasonable fee. See Newman v. Silver, 553 F. Supp. 485 (S.D.N.Y. 1982), aff’d in relevant part, 713 F.2d 14 (2d Cir. 1983).

Quantum Meruit Recovery Only: Even where a lawyer’s misconduct renders a fee agreement unenforceable, a lawyer may still be able to recover the fair value of the lawyer’s services. See, e.g., In re Rosenman & Colin, 850 F.2d 57 (2d Cir. 1988) (even though law firm failed to send monthly bills in breach of its agreement with the client, firm was allowed to recover the fair value of its services); In re Kamerman, 278 F.2d 411 (2d Cir. 1960) (even though attorney-client agreement was champertous, the lawyer was allowed to recover in quantum meruit).

Forfeiture: A lawyer’s actions might, under certain circumstances, forfeit his or her right to recover a fee. Spivak v. Sachs, 16 N.Y.2d 163, 263 N.Y.S.2d 953 (1965) (holding that a lawyer who was not admitted to practice in the state where the services were performed was not entitled to a fee). See also Silbiger v. Prudence Bonds Corp., 180 F.2d 917 (2d Cir.) (L. Hand, C.J.) (noting in dicta that a lawyer with a conflict of interest might not avoid forfeiture solely by showing that the clients did not incur actual harm), cert. denied, 340 U.S. 831 (1950).

1.5:270      Remedies and Burden of Persuasion in Fee Disputes

Relevant Cases

Attorney's Burden: See Jacobson v. Sassower, 66 N.Y.2d 991, 499 N.Y.S.2d 381 (1985) (lawyer had the burden of proving the existence and terms of the attorney-client agreement); Wong v. Michael Kennedy, P.C., 853 F. Supp. 73 (E.D.N.Y. 1994) (lawyer who drafts fee agreement has a fiduciary duty to client and bears burden of showing that agreement is fair, reasonable and fully understood by client).

1.5:300   Attorney-Fee Awards (Fee Shifting)

Primary New York References:
Background References: ABA Model Rule 1.5, Other Jurisdictions
Commentary: ABA/BNA § 41:301, Wolfram § 16.6

1.5:310      Paying for Litigation: The American Rule

[The discussion of this topic has not yet been written.]

1.5:320      Common-Law Fee Shifting

[The discussion of this topic has not yet been written.]

1.5:330      Statutory Fee Shifting

Relevant New York Local Court and Practice Rules

Rule 28 of the Joint Civil Rules for the Southern and Eastern Districts of New York requires a court in an action on behalf of an infant or incompetent to authorize payment of a reason able attorney’s fee and appropriate disbursements, whether obtained through settlement, execution or otherwise.

Appendix V to the Rules of the Southern and Eastern Districts of the United States District Court of New York, Attorney’s Fees, Section (A)(1), which pertains to Common Fund Cases, provides that where a case settles early and before significant attorney time has been expended, the court shall deter mine a percentage recovery. Section (A)(2) provides that where the attorney expends a significant amount of time, the fee award is based on a percentage of the recovery, but the attorney must submit time records calculated under the lode star method which serve as a guideline for the court in setting the percentage.

Subsection (B) of this Rule applies to cases involving fee awards pursuant to statute. It requires plaintiffs’ attorneys to submit their fee applications within thirty days after the entry of a final judgment, no longer subject to an appeal, or as directed by court. Disputed fee matters are then referred to the court. The fee award in statutory cases should approximate the fee awarded in non-statutory cases.

Rule 83.5(a) of the Rules of the Northern District of the United States District Court of New York, which pertains to contempt proceedings, allows the inclusion of reasonable attorneys’ fees as part of the list of damages available to the moving party.

Rule 909 of New York’s Civil Practice Law and Rules provides that if a judgment in a class action suit is rendered in favor of the class, the court can award attorneys’ fees to the representatives of the class based on a reasonable value of legal services rendered. The statute also allows the recovery of the amount awarded from the opposing party.

Section 1102(d) of New York’s Civil Practice Law and Rules notes that a "poor person" is not liable to pay the costs or fees unless there is a recovery in his or her favor. In that event, the court might order him or her to pay out of the recovery all or part of the costs and fees a reasonable amount for the services and expenses expended by the county or city for stenographic transcripts.

Section 8303-a of New York’s Civil Practice Law and Rules allows the award of attorneys’ fees up to $10,000 if a frivolous action is brought sounding in personal injury, property damage, wrongful death, or dental, medical, or podiatric malpractice.

1.5:340      Financing Litigation [see 1.8:600]

See 1.8:600

1.5:400   Reasonableness of a Fee Agreement

Primary New York References: DR 2-106, 22 NYCRR § 691.20(e), 22 NYCRR § 603.7(e)
Background References: ABA Model Rule 1.5(a), Other Jurisdictions
Commentary: ABA/BNA § 41:301, ALI-LGL § 46, Wolfram § 9.3.1
NY Commentary: Simon's N.Y. Code of Prof. Resp. Annot. (1999 ed.) Canon 2, et seq.

1.5:410      Excessive Fees

Relevant Ethics Opinions

Flat Monthly Fees: Nassau County Bar Op. No. 94-25 (1994): A lawyer wanted to charge his clients a flat monthly fee for expenses. NY DR 5-103(B)(1) allows an attorney to advance expenses for litigation as long as the client remains ultimately liable for the expenses. If the flat charge does not adequately reimburse the attorney for the expenses, then it violates NY DR 5-103(B) because the client is not ultimately responsible for the expenses. If the monthly charge is too high, it might be an "excessive fee" in violation of NY DR 2-106(A). An attorney is allowed to earn some profit in the charges for services such as photocopying and telephone calls, but the profit has to be reasonable and the client must give his or her informed consent. Whether a flat charge is reason able is a fact question which must be answered on a case-by-case basis. The attorney cannot continue charging the flat monthly rate if the case becomes dormant.

Billing for Disbursements to Third Party Providers: ABA Formal Ethics Op. No. 93-379 (1993): Under NY DR 2-106(A) and ABA Model Rule 1.5(a), a lawyer can charge a client for actual disbursements to third-party providers, such as court reporting fees and travel expenses. The attorney cannot, however, assess a surcharge on the disbursements in the absence of disclosure to the contrary. Also, if a lawyer gets a discount from the third-party provider, it would be improper not to pass on the discount to the client. If the lawyer provides services in-house, the lawyer can pass on reasonable costs to the client. Unless the client agrees, the lawyer cannot charge more than the actual cost of the services.

Partially Contingent Fees [in Domestic Relations Matters]: Nassau County Bar Op. No. 93-24 (1993): Under NY DR 2-106(A), a lawyer cannot charge a contingent fee in excess of the schedules in 22 NYCRR § 691.20(e). A lawyer wanted to enter into a retainer agreement that would have the client pay a certain non-contingent amount if he lost the case and a contingent amount if he recovered money. The Bar Association opined that since 22 NYCRR § 691.20(e) applies when an attorney’s fee is dependent in whole or in part on the amount of recovery, it applies to fees that are only partially contingent. Therefore, a partially contingent retainer is allowed only if the "attorney’s total compensation, after any fixed, minimum, or hourly fee has been taken into account, does not exceed the percentages set forth in the schedules of Section 691.20(e)(2)." This statute "effectively precludes an attorney from recovering in the event of a loss if any portion of the attorney’s fee is contingent."

Contingent Fees in Will Dispute: Assoc. of the Bar of the City of New York, Formal Op. No. 1993-2, 1993 WL 765495 (December 15, 1993): Under NY DR 2-106(A), an attorney can charge a one-third contingent fee in a will dispute. Even though the attorney might be able to obtain a recovery within a short time, the attorney also takes the risk of spending many years on the matter without ever getting paid.

Retainer Agreements with Non-Refundable Minimum Fees: NYSBA Comm. on Prof. Ethics, Op. No. 599, 1989 WL 252368 (March 16, 1988): With only a few exceptions, NY DR 2-106(A) bars an attorney from entering into a retainer agreement requiring a non-refundable minimum fee.

Contingent Fees for Patent Applications: N.Y. City Bar Op. 80-14 (1980): Pursuant to NY DR 5-103(A) and NY DR 2-106(A) a lawyer can handle patent applications on behalf of an inventor in exchange for a one-third interest in rights to the invention if the inventor is unable to pay the legal fees on an hourly rate.

Additional Fees From Guardianship Petitioner beyond Court Award: N.Y. State Bar Op. 689 (1997): May a lawyer accept fees from a guardianship petitioner in addition to any legal fees awarded by the court under Article 81 of the Mental Hygiene Law? Under DR 2-106(A), a lawyer may do so provided that (1) the total fee is not excessive, and (2) receiving additional fees directly from the petitioner does not violate any law, court rules, or court order.

Allocation of Travel Expenses: Nassau County Bar Op. 95-1 (1995): An attorney incurs travel expenses while traveling at the request of Client A, but during the trip the attorney performs some work for other clients, who do not obtain any benefit from the fact that the attorney is traveling. Under DR 2-106(A), the command not to charge an excessive "fee" also prohibits an attorney from charging excessive expenses. Thus:

If an attorney travels solely for the purpose of serving Client A, then the entire cost of the trip must be charged to Client A even if the attorney performs work for other clients during the trip. Otherwise, the other clients would be asked to pay for travel expenses that they never requested or authorized and that do not confer any benefit on them.

(The Committee added: "To the extent that 'Point 3' of Nassau Ethics Op. 95-4 contradicts this opinion, it is withdrawn.") Of course, "if an attorney is making a trip on behalf of two different clients -- for example, if the attorney is hiring a driver to go to court for two different clients, or is flying to another city to work on matters for two different clients -- then the attorney should allocate the travel expenses fairly between them."

Relevant Cases

Court's Inherent Authority to Review Reasonableness: In Gair v. Peck, 6 N.Y.2d 97, 188 N.Y.S.2d 491 (1959), cert. denied, 361 U.S. 374, 80 S. Ct. 401 (1960), the court opined that independent of NY DR 2-106(A), courts have the inherent authority to review the reasonableness of contingent fee agreements.

DR 2-106(B) Factors Cited: In re Sherbunt, 134 A.D.2d 723 (3d Dep't 1987): In resolving fee disputes, courts should look to the factors set forth in DR 2-106(B).

Nonrefundable Fees: The Court of Appeals, in In re Cooperman, 83 N.Y.2d 465, 611 N.Y.S.2d 465 (1994), declared that non-refundable fees generally violate NY DR 2-106(A) because if the work is not completed, then the fee is obviously excessive. The court noted, however, that "minimum fees" might be acceptable as long as the minimum fee is refunded if the work is not completed.

Excessive Fees Found: In In re Ferrucci, 180 A.D.2d 959, 580 N.Y.S.2d 806 (3d Dept.), appeal denied, 79 N.Y.2d 941, 583 N.Y.S.2d 185 (1992), the court held that the attorney violated NY DR 2-106(A) where he charged excessive fees to three divorce clients. He charged $10,550 for a simple divorce that should have cost no more than $3,000; he charged $11,250, and ultimately settled for $3,500, for a divorce that the court declared should have cost no more than $2,500; and he charged $6,600 and ended up taking $4,500 for a divorce that should have cost no more than $3,000. See also In re Hausen, 108 A.D.2d 206, 488 N.Y.S.2d 742 (2d Dept. 1985), (attorney censured for violating both NY DR 2-106(A) and 22 NYCRR 691.20(e) by charging a contingent fee that would have given him $652 out of a $1,380 recovery which exceeded the maximum allowed by Schedule A of 22 NYCRR 691.20(e).); Potenza v. Oneida County Bar Ass'n, 29 A.D.2D 213, 287 N.Y.S.2d 138 (4th Dept. 1968) (deeming $2,200 fee for minor attempts at securing prisoner's release unreasonable); Brandes v. Zingmond, 151 Misc.2d 671, 573 N.Y.S.2d 579 (Sup. Ct. Nassau County 1991) (calling nonrefundable retainer in divorce action "grossly excessive" where lawyer refused to refund $15,000 fee even though he had performed only 4.2 hours of work).

Minimum Fee Retainer Agreement: In Landsman v. Moss, 180 A.D.2d 718, 579 N.Y.S.2d 450 (2d Dept. 1992), the court held that the attorneys did not violate NY DR 2-106(A) by entering into a retainer agreement in a malicious prosecution case, giving them the client’s entire net recovery up to $12,000, and one-third of any recovery in excess of that, where the client had still not paid the attorneys for their work in another completed case. (The arrangement did, however, violate NY DR 5-103(A) by giving the attorneys a proprietary interest in the case).

Class Action Attorneys Fee Award: See In re Crazy Eddie Sec. Litig., 824 F. Supp. 320 (E.D.N.Y. 1993) (deeming award of $14.2 million in fees arising from class action settlement reasonable).

Suspension Imposed for Excessive Fees: In re Jacobs, 188 A.D.2d 228, 594 N.Y.S.2d 794 (2d Dept.) (three-year suspension imposed on lawyer for misconduct which included the charging of excessive fees), appeal dismissed, 601 N.Y.S.2d 569 (1993).

1.5:420      "Retainer Fees:" Advance Payment, Engagement Fee, or Lump-Sum Fee

[The discussion of this topic has not yet been written.]

1.5:430      Nonrefundable Fees

Relevant Cases

Suspension for Non-Refundable Retainer in Divorce Action: The Court of Appeals, in In re Cooperman, 83 N.Y.2d 465, 611 N.Y.S.2d 465 (1994), affirmed a two-year suspension given a lawyer for charging non-refundable retainers in divorce action. The Court declared that non-refundable fees generally violate NY DR 2-106(A) because if the work is not completed then the fee is obviously excessive. The court noted, how ever, that "minimum fees" might be acceptable as long as the minimum fee is refunded if the work is not completed.

Strict Construction of Agreements: See also Jacobson v. Sassower, 66 N.Y.2d 991, 499 N.Y.S.2d 381 (1985) (court construed the attorney-client agreement’s non-refundability clause narrowly).

1.5:500   Communication Regarding Fees

Primary New York References:
Background References: ABA Model Rule 1.5(b), Other Jurisdictions
Commentary: ABA/BNA § 41:101, ALI-LGL § 50, Wolfram § 9.2.1

1.5:600   Contingent Fees

Primary New York References: DR 2-106(D)
Background References: ABA Model Rule 1.5(c), Other Jurisdictions
Commentary: ABA/BNA § 41:901, ALI-LGL §§ 46, 47, Wolfram § 9.4
NY Commentary: Simon's N.Y. Code of Prof. Resp. Annot. (1999 ed.) Canon 2, et seq.

1.5:610      Special Requirements Concerning Contingent Fees

Relevant Ethics Opinions

Requisites of Contingent Fee Agreements: Assoc. of the Bar of the City of New York, Formal Op. No. 1993-2, 1993 WL 765495 (December 15, 1993): NY DR 2-106(D) does not require a contingent fee retainer to be in writing, but it does require that a lawyer notify the client in writing of the method by which the contingent fee is to be determined. If the retainer agreement is in writing and contains the information required to be disclosed under NY DR 2-106(D), then no additional writing is required at the beginning of the matter. NY DR 2-106(D), however, also requires that the lawyer provide the client with a written statement of the outcome at the conclusion of the matter, showing the remittance to the client and the method of its determination.

Contingent Fee for Collection of Past Due Alimony or Child Support: NYSBA Comm. on Prof. Ethics, Op. No. 443 (1976): An attorney does not violate NY DR 2-106(D) by charging a contingent fee for the collection of past due alimony or past due child support.

Unsigned Retainer Agreement Expressing Contingency Fee Terms: Nassau County Bar Op. 97-4 (1997): A lawyer was retained by a restaurant corporation to handle a sales tax audit. The lawyer submitted a written contingent fee retainer agreement to the corporate client for signature but the agreement was never signed. Because client never signed a retainer agreement, counsel's retainer arrangement (if any) with the client is unwritten. Whether the attorney can enforce the unsigned retainer arrangement between inquiring attorney and the client as one calling for a contingent fee is a question of law which the Committee did not address. However, sending an unsigned retainer agreement for the client to sign "appears to satisfy DR 2-106(D) which requires a written statement of the contingency fee terms."

1.5:620      Quantum Meruit in Contingent Fee Cases

[The discussion of this topic has not yet been written.]

1.5:700   Unlawful Fees

Primary New York References: DR 2-106(A)
Background References: ABA Model Rule 1.5(d), Other Jurisdictions
Commentary: ABA/BNA §§ 41:901, ALI-LGL § 48, Wolfram §§ 9.3.2; 9.4
NY Commentary: Simon's N.Y. Code of Prof. Resp. Annot. (1999 ed.) Canon 2, et seq.

1.5:710      Contingent Fees in Criminal Cases

Relevant Disciplinary Rules

NY DR 2-106(c)(i) prohibits "[a] contingent fee for representing a defendant in a criminal case."

Relevant Ethical Considerations

NY EC 2-20 recognizes that "[p]ublic policy properly condemns contingent fee arrangements in criminal cases, largely on the ground that legal services in criminal cases do not produce a fund out of which the fee can be paid."

Relevant Ethics Opinions

Lien on Proceeds from Personal Injury Case as Collateral for Outstanding Fees in Criminal Case: Nassau County Bar Op. No. 94-7 (1994): An attorney proposes a retainer in a criminal matter under which the client will be "individually responsible" for paying the fees at an hourly rate but will not be required to make current payments. Instead, the client will provide the attorney with a lien on a separate personal injury case "which will act as collateral against any payments out standing following the disposition of the indictment." The attorney already represents the same client as the plaintiff in his personal injury action. This retainer does not violate NY DR 2-106(C)(1) because the fee is not "contingent" on anything, but rather is an hourly fee for which the security is contingent. (The lien might violate NY DR 5-103(A)(2) if it gives the attorney too great a proprietary interest in the plaintiff’s personal injury action. That determination depends on all of the facts.)

Contingent Fees in Criminal Cases Involving Fines Only: N.Y. County Lawyers' Op. 714 (1996): Under DR 2-106(C)(1), a lawyer may not charge a contingent fee in any criminal case. This categorical prohibition applies even to "cases involving corporate criminal defendants subject to large fines but where no individual faces incarceration."

Contingent Fees in Criminal Cases: NYSBA Comm. on Prof. Ethics, Op. No. 412 (1975): An attorney cannot charge a contingent fee in a criminal case, but a non-contingent fee in a criminal case can depend partly on the results obtained.

Relevant Cases

Ineffectiveness of Counsel Claim Based on Contingent Fee: In People v. Green, 208 A.D.2d 861, 618 N.Y.S.2d 554 (2d Dept. 1994), a defendant was tried before a jury and convicted of robbery, assault, and other charges. Defendant appealed, claiming that his lawyer represented him on a contingent fee, which is prohibited by NY DR 2-106(C)(1). The Second Department rejected this argument and affirmed the conviction be cause the defendant failed to show that the contingent fee arrangement "affected the manner in which his attorney conducted the defense prejudicially to the defendant."

Minimum Contingent Fee in Civil Case to Repay Fees Due from Criminal Case: In Landsman v. Moss, 180 A.D.2d 718, 579 N.Y.S.2d 450 (2d Dept. 1992), attorneys defended a client against criminal assault charges. The client did not pay them. The attorneys subsequently commenced a civil case (a malicious prosecution case) on the same client’s behalf. To compensate the attorneys for the unpaid bills in the criminal case the retainer agreement in the civil case gave the attorneys the client’s entire net recovery up to $12,000, and one-third of any recovery above that. This agreement did not violate NY DR 2-106(C)(1) because the fee was contingent upon the outcome of the civil matter only, not on the outcome in the criminal matter, which was already completed. The agreement did, however, violate NY DR 5-103(A) "as it caused the plaintiff's attorneys to acquire too great a proprietary interest in the plaintiff's malicious prosecution action."

Public Policy Underlying Prohibition of Contingent Fees in Criminal Cases: In People v. Winkler, 128 A.D.2d 153, 515 N.Y.S.2d 488, (2d Dept. 1988), rev’d on other grounds, 71 N.Y.2d 592, 528 N.Y.S.2d 360 (1988), the court opined that the prohibition in NY DR 2-106(C)(1) against contingent fees in criminal matters is based on a public policy recognizing that such agreements carry the "inherent danger of corrupting justice."

1.5:720      Contingent Fees in Domestic Relations Matters

Relevant Disciplinary Rules

NY DR 2-106(C)(2) prohibits a lawyer from entering into an arrangement for, charging or collecting, in any domestic relations matter to which Part 1400 of the joint rules of the Appellate Divisions is applicable, any fee "[t]he payment or amount of which is contingent upon securing a divorce or upon the amount of maintenance, support, equitable distribution or property settlement. . . ."

Relevant Ethical Considerations

NY EC 2-20 provides: "Because of the human relationships involved and the unique character of the proceedings, contin gent fee arrangements in domestic relation cases are rarely justified. . . ."

Relevant Ethics Opinions

Contingent Fee for Representation of Wife in Simultaneous Tort Action against Spouse: N.Y. State Bar Op. 690 (1997): Under DR 2-106(C)(2), a lawyer who represents the wife in domestic relations matter on an hourly rate may simultaneously represent the wife in a tort action against her husband on a contingent fee basis, as long as the tort claim could be brought as a separate action. This is true even if the tort action is tried as part of the domestic relations proceeding. However, since a lawyer may not charge a contingent fee in a domestic relations matter, the lawyer must "keep scrupulous time re cords" to separate the work done on the tort claim from work done on the domestic relations matter. If certain work is useful in both matters, the lawyer must "determine a reason able basis" for allocating time between the two matters.

Contingent Fee for Collection of Past Due Alimony: NY State Bar Op. 443 (1976): An attorney does not violate DR 2-106(D) by charging a contingent fee for collection of past due alimony or past due child support.

1.5:730      Other Illegal Fees in New York

Relevant Disciplinary Rules

NY DR 2-106(C)(3) prohibits a lawyer from entering into, charging or collecting a fee that is prohibited by any "law or rule of court."

1.5:800   Fee Splitting (Referral Fees)

Primary New York References: DR 2-103(B) & DR 3-102, EC 3-8, N.Y. Judic. Law § 491
Background References: ABA Model Rule 1.5(e), Other Jurisdictions
Commentary: ABA/BNA § 41:701, ALI-LGL § 59, Wolfram § 9.24
NY Commentary: Simon's N.Y. Code of Prof. Resp. Annot. (1999 ed.) Canons 2 & 3, et seq.

Relevant Disciplinary Rules

Fee Splitting: NY DR 2-107 "Division of Fees among Lawyers" provides:

"A. A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of the lawyer's law firm or law office, unless:

1. The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.

2. The division is in proportion to the services per formed by each lawyer or, by a writing given to the client, each lawyer assumes joint responsibility for the representation.

3. The total fee of the lawyers does not exceed reason able compensation for all legal services they rendered the client.

B. This Disciplinary Rule does not prohibit payment to a former partner or associate pursuant to a separation or retirement agreement."

Referral Fees: NY DR 2-103(B) bars an attorney from paying or giving anything of value as a referral fee, except to a public interest or legal service organization identified in subsection (D) of NY DR 2-103.

Fee-Splitting with Non-Lawyers is addressed by: (1) NY DR 3-102(A)(1), which bars an attorney from sharing legal fees with a non-lawyer, except that an agreement by a lawyer with his or her firm, partner, or associate might provide for the payment, over a reasonable amount of time after the lawyer’s death, to the lawyer’s estate or to one or more specified people; (2) NY DR 3-102(A)(2), which allows a lawyer to share a fee with a non-lawyer if the lawyer undertakes to complete unfinished legal business of a deceased lawyer and pays the estate of the deceased lawyer that proportion of the total compensation which fairly represents the services rendered by the deceased lawyer; and NY DR 3-102(A)(3), which allows a lawyer to share a fee with a non-lawyer by including non-lawyer employees in a retirement plan even though the plan is based in whole or in part on a profit-sharing arrangement.

Relevant Ethics Opinions Concerning NY DR 2-107

Referral Fee to Administrative Law Judge: Assoc. of the Bar of the City of New York, Formal Op. No. 1994-2 1994 WL 780801 (April 13, 1994): A part-time administrative law judge for the New York City Parking Violations Bureau could not receive a referral fee for a potential lawsuit against the Office of the Sheriff for assault during an arrest unless the judge complied with NY DR 2-107(A)(2) which prohibits a fee just for a referral. Specifically, if the inquirer expects to receive a fee based only upon the value of the work performed before the date of the referral, that fee must bear a reasonable relationship to the legal services rendered in the matter as a whole. If the inquirer expects to receive a fee based upon the amount of the recovery in litigation, the fee must be based upon the inquirer’s continuing contribution to the action by assuming joint responsibility for the litigation or actually rendering legal services.

Deduction of Local Counsel Fees from Contingent Fee: Nassau County Bar Op. No. 94-2 (1994): When an attorney retains local counsel at an hourly rate to assist in a contingent fee matter, the local attorney’s fees cannot be deducted from the settlement proceeds as a litigation expense within the meaning of NY DR 5-103(B)(1) because the total legal fees would then exceed the percentage specified in the contingent fee agreement. The original attorney must pay the local attorney’s legal fees out of her share of the contingent fee. Under NY DR 2-107(A)(3), a client’s legal fees cannot be increased merely because the original attorney finds it necessary or convenient to employ a second attorney.

Payments to Departing Attorney for Services Performed: Nassau County Bar Op. No. 94-2 (1994): A lawyer who leaves her law firm often reaches an agreement with her old firm on the share of the total fee representing the proportion of the fee represented by the departing attorney’s work before leaving her old firm. Under NY DR 2-107(B) such an agreement is expressly exempted from the ambit of NY DR 2-107(A).

Vicarious Responsibility and Indemnification of Referring Lawyer: N.Y. County Lawyers' Op. 715 (1996): Under DR 2-107(A)(2), a referring lawyer who receives a referral fee without doing any work on a matter must assume "joint responsibility" for the representation. The referring lawyer is therefore "ethically obligated to accept vicarious liability for any act of malpractice that occurs during the course of the representation" but "is not required to supervise he activities of the receiving lawyer." The referring lawyer and the receiving lawyer may ethically agree that the receiving lawyer (the one doing the work) will "hold harmless and indemnify the referring lawyer for any claim of malpractice arising out of the representation . . . provided that the agreement does not limit the client's rights against the referring lawyer."

Division of Fees with Per Diem Attorney: N.Y. City Bar Op. 1996-8 (1996): A law firm retained a part-time attorney on a per diem basis to handle the firm's extra work. The attorney, who also works for other firms, spends 10-15 hours per week on firm matters, plays a significant role in meetings with clients, and handles client matters on a continuing basis. The firm may not refer to the per diem attorney as an "associate" but may refer to the per diem attorney as "of counsel" if the relationship between the attorney and the firm is "close, continuing, regular and personal." However, if the firm does not refer to the per diem attorney as "of counsel," the firm may not divide fees with the attorney unless the firm satisfies the requirements of DR 2-107(A)(2). (An attorney who is "of counsel" falls within the "partner or associate" exception to DR 2-107).

Relevant Ethics Opinions Concerning Referral Fees (NY DR 2-103(B) & (D))

Charitable Donation to Nonprofit Organization Distributing Referral Lists: N.Y. State Bar Op. 691 (1997): A lawyer wishes to make a charitable donation to a nonprofit organization that provides prospective clients with a referral list of attorneys who perform work in the organization's area of concern. The organization is not one of the types of organizations described in DR 2-103(D). The lawyer is included on the organization's referral list, the lawyer has received referrals from the organization in the past, and the lawyer expects to receive more referrals in the future. Under DR 2-103(B), "in view of the salutary purposes of the organization, such a donation should be permitted as long as it is clearly intended to be charitable" and is not part of "a tacit arrangement of compensation in exchange for referrals."

Internet-Based Attorney Referral Board: N.Y. County Lawyers' Ass'n Op. 721 (1997): The inquiring lawyer belongs to "a networking and social organization" composed of lawyers, law students, and legal workers. The organization sponsors an internet home page through a local internet provider. The internet provider will allow the organization to include an on-line "Attorney Referral Board" as part of its home page at no extra charge for six months in hopes that the lawyers in the organization will eventually subscribe to the internet provider's service. When an internet user clicks on the Attorney Referral Board icon, the screen will show "a directory of legal subject areas, e.g., trusts and estates or civil rights." When a user clicks on one of these subject areas, the user will see "a brief description of that area of law and a listing of attorneys who practice in that area." Each attorney in the directory "will provide information about how he or she may be contacted" and may also list additional information. (The inquiring lawyer does state how many attorneys will participate in the Attorney Referral Board, but the Committee assumes that any attorney who belongs to the organization may be listed.) Under DR 2-103(B), this plan is permitted. "We do not view the listing described by the inquirer as a prohibited for-profit lawyer referral service because the user will select the attorneys whom he or she chooses to contact . . . and no payment is to be made to the internet provider on the basis of matters actually generated by the listings." Nor is it unethical under DR 2-103(B) for the lawyers to accept a listing without charge during the six-month introductory period. A lawyer may not pay for a recommendation, but the internet provider is not making a recommendation. "Rather, the internet provider is merely an electronic publisher that wishes to market the medium through a free introductory period. Nothing of value will pass to the provider as a result of any employment generated by a listing . . . ."

Payment For Client Testimonials: NYSBA Comm. on Prof. Ethics, Op. No. 661, 1994 WL 120201, n.2 (March 15, 1994): Client testimonials are not per se improper, but "[i]t would be unethical for the lawyer to compensate or give anything of value to the client to obtain the client’s authorization for dramatized use of his or her testimonial. [NY] DR 2-103(B)."

Attorney Advertisements Distributed by Car Dealer: NYSBA Comm. on Prof. Ethics, Op. No. 659, 1994 WL 120194 (February 14, 1994): Under NY DR 2-103(B), a lawyer can allow a car dealer to give car buyers an "information package" that includes the lawyer’s advertising material as long as the lawyer does not pay the auto dealer a fee to distribute the materials, the auto dealer does not discuss the lawyer’s advertisement with customers, and the advertising material complies with NY DR 2-101.

Fees for Attorney Referral Service: Assoc. of the Bar of the City of New York, Formal Op. No. 1994-3, 1994 WL 780802 (April 13, 1994): An attorney cannot participate in a private, for-profit lawyer referral service unless the service is authorized under NY DR 2-103(D). The referral service in question advertised a toll-free number on radio and in print and refers callers to "member attorneys". Lawyers participating in the referral service were charged either (1) a flat monthly listing fee, plus additional fees for each client referred to the attorney each month, or (2) no monthly fee but a higher fee for each client referred to the attorney each month, up to a fixed maximum amount. The referral service was not operated, sponsored, or approved by any bar association. Because the service did not come under any of the categories listed in NY DR 2-103(D), a lawyer could not pay a fee for referrals from the service.

Fees to Advertiser Promoting Toll-Free Number Referral Service: NYSBA Comm. on Prof. Ethics, Op. No. 597, 1989 WL 252366 (January 23, 1989): Under NY DR 2-103(D), an attorney cannot pay a monthly fee to an advertiser that runs generic television advertisements which invite viewers to call a toll-free number for referral to an unspecified lawyer in the caller’s geographic area.

Payments to Real Estate Firms for Referrals: NYSBA Comm. on Prof. Ethics, Op. No. 566, 1984 WL 50021 (November 15, 1984): A lawyer cannot ethically pay a real estate brokerage firm to endorse or recommend the lawyer because NY DR 2-103(B) prohibits a lawyer from "compensating, giving anything of value to, or requesting that, any third party recommend or promote the use of the lawyer’s services except as permitted by [NY] DR 2-101 or under the specific arrangements set forth in [NY] DR 2-103(C) and (D)."

Payments to Bar Approved Referral Services: NYSBA Comm on Prof. Ethics, Op. No. 651, 1993 WL 555951 (June 30, 1993): Lawyer referral services operated, sponsored, or approved by bar association may require participating lawyers to pay the referral service a percentage of the fees earned from referred clients.

Relevant Cases:

Enforcement of Fee-Sharing Agreement: Benjamin v. Koeppel, 85 N.Y.2d 549, 626 N.Y.S.2d 982, 650 N.E.2d 829 (1995): Two attorneys entered into a fee sharing agreement pursuant to DR 2-107(A)(2) based on the proportion of services that each attorney expected to render. After Koeppel refused to pay the agreed amount to Benjamin, Benjamin sued, and Koeppel defended by arguing that Benjamin had not performed any services. The court upheld the agreement. In disputes among attorneys over enforcement of fee-sharing agreements, courts will not inquire into the precise worth of the services performed by each attorney as long as (1) each party actually contributed to the legal work, and (2) the defendant does not claim that the plaintiff refused to contribute more substantially.

Fee-Sharing with Successor Counsel: Lai Ling Cheng v. Modansky Leasing Co., 73 N.Y.2d 454, 541 N.Y.S.2d 742 (1989): In disputes between replaced and successor counsel, in the absence of an agreement, an outgoing lawyer can elect to be compensated on the basis of either the present fixed dollar amount reflecting quantum meruit or the contingent percentage fee based on his proportionate share of the work performed on the entire case.

Agreement Between Lead Counsel and Supporters: In Lewis v. Teleprompter Corp., 88 F.R.D. 11 (S.D.N.Y. 1980), the court refused to enforce an agreement under which the lawyer elected as lead counsel agreed to provide lawyers supporting his election with a designated percentage of the fee awarded.

Retention of Potential Client Referrer as Consultant: In In re Rapport, 186 A.D.2d 344, 588 N.Y.S.2d 436 (3d Dept. 1992), a lawyer violated NY DR 2-103(B) and Judiciary Law § 482 by retaining his daughter as a consultant after she told him that she was a leader of a local L-Tryptophan poisoning support group and that members of the group were seeking legal representation. The lawyer told his daughter that she was expected to recommend him. It would have been proper to retain someone else as a consultant, but his daughter’s leadership role in the support group gave her undue influence over the group members, essentially insinuating the lawyer into the support group in the person of a consultant whose consulting income would increase if she referred more cases to her father.

Payment to Legal Referral Service Director: In In re Fisher, 174 A.D.2d 236, 580 N.Y.S.2d 228 (1st Dept. 1992), an attorney was held to have violated NY DR 2-103(B) by giving the executive director of a legal referral service a greeting card containing $1,000 in an attempt to influence the operation of the service. The attorney was sanctioned by a public censure. (The sanction would have been harsher if it had not been for a psychiatrist’s testimony that the attorney’s behavior resulted from a change in the attorney’s medication just before the incident occurred).

Percentage Payments Deemed Prohibited Referral Fees: In Raphael v. Shapiro, 154 Misc.2d 920, 587 N.Y.S.2d 68 (Sup. Ct. N.Y. County 1992), a lawyer violated NY DR 2-103(B) by agreeing in a contract to purchase his former partner’s legal practice and to pay his former partner a percentage of the fees collected by the purchasing attorney on cases referred by the former partner. In essence, the purchasing lawyer was compensating his former partner solely for recommending him.

Employee Hired to Recommend Attorney: In In re von Wiegen, 146 A.D.2d 901, 537 N.Y.S.2d 76 (3d Dept.), appeal denied, 74 N.Y.2d 603, 543 N.Y.S.2d 396 (1989), an attorney violated NY DR 2-103(B) by hiring an employee to recommend the attorney’s services to others. The attorney was suspended for five years (The sanction was based in part on the attorney’s prior record of sending deceptive letters to victims of the Hyatt Regency Hotel’s skywalk collapse).