One pleasant aspect of practicing law in California is that attorney referral fees are ethically permissible. To be clear, what I’m talking about are naked referral fees, where you simply refer a case to another lawyer without taking any responsibility for the matter. Many states require the referring attorney to assume some responsibility before fee sharing is ethically permitted. In California, all you need to do is comply with Rule 2-200. Keep reading to learn what a typical attorney referral fee percentage is in California.
Ethical concerns aside, what is a typical amount for an attorney referral fee in California? I had this question when I first began practicing and spent a fair amount of time asking around and researching the issue. Here’s my take:
What is a Typical Attorney Referral Fee Percentage?
The range for attorney referral fees in California is between 10% and 50% of the total fee earned. For routine contingency fee cases (i.e. those with a viable defendant, solid damages, and reasonable prospects for proving liability), a typical referral fee would be 20% to 25% of the fee earned. Cases with uncertain prospects, lower value, or those requiring significant legal work would come in on the lower end of the spectrum.
I’ve come across, both online and in person, the “third of a third” or “40% of 40%” model, where the attorney referral fee percentage matches the contingency fee percentage. In my discussions with experienced practitioners (admittedly a very small sampling), this doesn’t appear that prevalent. [Update: Seems like I may be wrong on that point.]
The high end, up to 50%, appears to be reserved for special conditions. Here’s a case from Illinois where a workers’ compensation firm had an agreement with a personal injury firm for a 50% referral fee. Presumably the personal injury firm was willing to pay a premium referral fee on routine cases in the hopes that the workers’ compensation attorney would send along enough high-value cases to make the arrangement a profitable one. Another 50% referral fee case – this one from New Jersey – had the happy combination of high value, high visibility, and straightforward liability. While these cases aren’t from California, I suspect that you could probably negotiate a similar agreement here if the conditions were right.
I’ll wrap up by noting that you should always refer your clients out to the most competent attorney for the case, not the one willing to pay the highest referral fee. It’s the right thing to do.