OPINION 351
March, 1970

COMPENSATION, COMMISSIONS AND REBATES—DIVISION OF FEES CONFLICTING INTERESTS—An attorney may receive from a bonding company engaged in writing of criminal bonds a percentage of the bond premium for referral, so long as there is a full disclosure to the client and the client consents.

Canons 6, 31, 35.

Question

A bonding company engaged in the business of posting criminal bonds offers to each attorney who refers a client to the bonding company twenty per cent of the bond premium as a "referral fee." All the bonds are made in cash and there is no credit given. Is it unethical for the attorney to accept such referral (a) without informing the client or (b) after disclosure to the client?

Opinion

Canon 31 provides that a division of fees for legal services is not proper except with other lawyers, based upon a division of services or responsibility. However, the bond premium is not a "fee for legal services." It is true that the attorney is performing a legal service when he, after undertaking to represent a client, refers a client to a particular bonding company. It is also true that the twenty per cent that is paid to the attorney by the bonding company is a fee for legal services. Yet, the entire amount of the bond premium paid directly to the bonding company is not a fee for legal services. The attorney has not divided his fee with the bonding company and therefore there is no violation of Canon 31.

Canon 35 provides that an attorney shall not accept commissions, compensation or rebates from others without the knowledge and consent of his client after full disclosure. The twenty per cent referral paid to the attorney by the bonding company would he "compensation, commission, rebates or other advantage from others" within the meaning of Canon35. The attorney may accept this rebate only if there is a full disclosure and the client consents. If the client gives his consent for the attorney to accept the rebate, the attorney must consider this in arriving at his attorney's fee. Whatever the attorney receives from others in the service of his client properly belongs to his client. Therefore, the amount of the rebate must be credited against the attorney's fee. Some regard this as splitting a fee with a layman. However, such is not the case Drinker, Legal Ethics, 97.

A minority of the members of the Committee on Professional Ethics disagrees with the majority opinion, and would hold that the conduct in question violates Canon 31, whether or not the attorney informs his client of the rebate. One Committee member feels that the arrangement with the bonding company would tend to divide the loyalty of the attorney and create potential conflict of interests in violation of Canon  6 (6-3).