Do You Pay Referral Fees? Get Your Client's Signed "Consent," Not Just "Acknowledgement"

You may be surprised to learn that an attorney's 25% referral arrangement discussed orally with the client, and reduced to a writing signed by the client, is not enough to satisfy rule 1.5.1 of the State Bar Rules of Professional Conduct requiring the client's "consent" to any fee division. 

So held the Third District in Reeve v. Meleyco (D3 Mar. 24, 2020) 46 Cal.App.5th 1092. The written fee agreement was unenforceable, and the referring attorney filed after the two-year statute applicable to quantum meruit actions. 

"Written consent," the court held, "requires written words expressing agreement or acquiescence, not just words expressing receipt or understanding." Even client's trial testimony that by signing the acknowledgment he had "agreed" to it was not enough, because the agreement has to be in writing. 

The result: Referring attorney got nothing. Client had a total settlement haul of $3.375 million, and the jury had awarded the referring attorney $78,750, to which the trial judge had added $49,364.35 in prejudgment interest. But the entire award was reversed as a matter of law. 

And the client was awarded his costs on appeal. 

This article is also available at the tvalaw.com blog here.

[Tags: Retainer Agreements, Professional Ethics ]

Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at [email protected] or (714) 641-1232.