COMMITTEE ON
PROFESSIONAL ETHICS
Opinion 906 (1/31/12)
Topic: Sharing of legal fees
by an attorney with a non-profit organization that is not a law
firm.
Digest: Sharing of legal fees by an
attorney with a not-for-profit organization that is not a law firm is
prohibited by Rule 5.4.
Rules: Rule 5.4.
QUESTION
1. Can an attorney employed by a
not-for-profit organization that is not a law firm share legal fees with
the not-for-profit organization? The American Bar
Association’s (“ABA”) Model Rules of Professional
Conduct specifically allow this sort of fee sharing under Model Rule
5.4(a) (4). However, New York State did not adopt this
standard.
OPINION
2. When the proposed Rules of Professional
Conduct were submitted by the New York State Bar Association
(“NYSBA”) to the Presiding Justices of the Appellate
Division of the Supreme Court of the State of New York, on February 1,
2008, the Reporters’ Notes accompanying proposed Rule 5.4, which
included ABA Model Rule 5.4(a)(4), contained the following observation,
at pp. 177-178:
Rule
5.4(a)(4), which has no equivalent in the existing Disciplinary Rules,
permits a lawyer to share court-awarded fees from a particular matter
with a non-profit public-interest organization that procured the
lawyer’s employment in the matter. This is a change
from existing DR 3-102 [22 N.Y.C.R.R. § 1200.17], which would
prohibit such sharing. The reason for the change is to make it
easier for lawyers to provide financial support to public-interest
groups that sponsor or engage in litigation to advance the public
interest. The change recognizes the importance of public-interest
work and should increase financial support for groups that perform such
work. Because the Rule is limited to court-awarded fees, and
because fee sharing is permitted only with non-profit public-interest
organizations, the potential for abuse is low. Furthermore, Rule
5.4(a)(4) does not permit such sharing where “prohibited by court
rule or other law.” Currently, section 491 of the Judiciary
Law appears to prohibit such fee sharing, so the Rule probably would
have no effect without an amendment of that statute. The NYSBA
supports such an amendment to Judiciary Law § 491 and believes that
an ethics rule should be in place in the event the Legislature enacts
such an amendment. The NYSBA also believes that judicial
approval of fee sharing with public-interest groups would remove a
potential impediment to legislative action amending section
491.
3. The Administrative Board of the New York
State Courts, when adopting the New York Rules of Professional Conduct
to supersede the prior New York Code of Professional Responsibility,
rejected the NYSBA’s proposed Rule 5.4(a)(4). The
Administrative Board included only Rule 5.4(a) (1)-(3). As
summarized by Professor Roy Simon, Simon’s New York Rules of
Professional Conduct Annotated (2009 ed.) (West), at p.
269:
Section (a) is identical to DR 3-102. It states
the basic rule that a lawyer may not divide legal fees with a
non-lawyer. This basic rule is followed by three subdivisions,
each stating an exception. The first two exceptions relate to
deceased lawyers, and the third exception relates to retirement
plans.
4. Thus, the exception contained in the
Model Rule is not in effect in New York, having been explicitly
rejected.
5. We do not address the situation in which
the non-profit organization which employs the attorney is itself a
“law firm.” See, e.g., Rodriguez
v. City of New York, 721 F. Supp.2d 148, 154 (E.D.N.Y. 2010) (Cogan,
J.) (“[S]everal courts have found that where the legal fees
awarded are to be deposited into a separate fund controlled exclusively
by lawyers and used solely for legal work, the ethical concerns
associated with fee splitting are no longer present. . . .”)
Neither do we address the question – because it is a question of
law -- as to whether there is a First Amendment right, which would trump
the regulations at issue, to share legal fees with a non-profit
organization which is not a law firm. See, e.g., Roy D.
Simon, Jr., Fee Sharing Between Lawyers and Public Interest
Groups, 98 Yale L.J. 1069, 1126-1132 (1989).
CONCLUSION
6. Sharing of legal fees by an attorney
with a non-profit organization that is not a law firm is prohibited by
Rule 5.4.
(25-11)
Related Files
Ethics Opinion 906 (Adobe PDF File)
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