Referral Fees in Texas

Historically in Texas, there were no particular rules regarding the division of fees among lawyers or the payment of a referral fee from one lawyer to another for forwarding the case. In 2005, however, the Texas Supreme Court enacted new referral fee rules which do away with “pure” referral fees (those where the referring lawyer has no role in the case other than forwarding it to another lawyer). Now, referral fees in Texas must be based on either a “proportion of services” basis or a “joint responsibility” basis.

In a “proportion of services” situation, each lawyer performs substantial services on behalf of the client with respect to a particular legal matter. Each lawyer who participates in the division of the fee is required to perform services beyond simply being hired by the client and forwarding the case to another lawyer. There must be a “reasonable correlation” between services performed and the sharing of the fee between the referring lawyer and the handling lawyer.

In a “joint responsibility” situation, the referring lawyer assumes an ethical and perhaps financial responsibility for the representation. The referring lawyer must make a reasonable investigation into the client’s legal matter and refer the matter to a lawyer reasonably believed to be competent to handle it. The referring lawyer must monitor the matter throughout the representation, respond to client questions and keep the client informed of progress in the case, and assist the handling lawyer when necessary. “Joint responsibility” does not mean joint control, and the referring lawyer is not required to attend deposition or hearings or trial, or be copied on all pleadings and correspondence.

Importantly, attorneys must obtain the client’s written consent in advance regarding the basis for the referral and the division of fees. The complete rules pertaining to referral fees in Texas may be found in Rule 104 of the Texas Disciplinary Rules of Professional Conduct.

In our practice handling personal injury and wrongful death cases on a contingent-fee basis, we find that referrals on a joint responsibility basis are most common and most akin to the traditional referral fee arrangements our referring attorneys have enjoyed over the years.