Lawyers may share fees with other lawyers.  But may an attorney take part of a fee just for referring a case?

No, the Second Circuit confirmed in Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., No. 08-4966-cv (2d Cir. Feb. 18, 2010).  

The panel cited New York Disciplinary Rule 2-107(A)(ii), which (like similar rules in other states) bars fee-sharing between lawyers unless "[t]he division is in proportion to the services performed by the lawyer, or, by a writing given the client, each lawyer assumes joint responsibility for the representation".  Id., slip op. at 13-14.  

The referring lawyer, Daniel J. Baurkot, performed no services (other than sending the case to Wagner & Wagner, which in turn hired Atkinson, Haskins, et al.) and never assumed joint responsibility for the representation in a "writing given the client" (or indeed until after the case settled for almost $1 million), the court concluded.  

Nor could the lawyers cure the defect after the fact:  Baurkot simply hadn't done valuable work for plaintiff, and "the undertaking of joint responsibility is difficult (to say the least) to accomplish, other than as a charade, after a settlement with the defendant has been reached."  Id. at 15.

[Contrast that with a 2009 New York Court of Appeal case in which the referring lawyer did assume joint responsibility — and got his fee — despite ethical objections by the referee lawyer.]

The court noted two other requirements of the disciplinary rule.  The client must "consent[] to employment of the other lawyer after a full disclosure that a division of fees will be made", and "[t]he total fee of the lawyers [must] not exceed reasonable compensation for all legal services they rendered to the client."  Id. at 13-14 (quoting N.Y. Disciplinary R. 2-107(A)(i) & (iii)).  

The one-third contingent fee satisfied the "reasonable compensation" prong, but the client didn't receive "a full disclosure that a division of fees will be made" until very late.  That, too, ran afoul of Rule 2-107(A).

The court affirmed the district court's remedy for the ethical violation — forfeiture of the fee that Wagner & Wagner agreed to pay Baurkot.  Those funds went to the plaintiff, an infant.

The court expressed its concern that the lawyers seemed insufficiently conscious of their duties to the plaintiff. Baurkot and Wagner & Wagner took the appeal without plaintiff's consent in writing and still hadn't acquired the annuity that the settlement terms called for plaintiff to receive.  The court appointed pro bono counsel to represent plaintiff.  It also remanded the case to the district court to assure that plaintiff does obtain the annuity and for the court to "take any appropriate remedial and disciplinary actions."  Id. at 18.