“If Accountant sends me clients,” Paradox asked Ethox, “is there some way I can repay Accountant? I know there is a limit on paying for referrals.”
“Yes,” Ethox answered, “ABA Model Rule 7.2(b) generally prohibits a lawyer from ‘paying anything of value for recommending the lawyer’s services.’ But there are several ways you can show your gratitude.”
“Like how?” Paradox inquired.
“Well, first, Rule 7.2(b)(5) expressly allows a lawyer to give nominal gifts of gratitude, as long as they are not intended or expected to be compensation for the referral.”
“What is a nominal gift?” Paradox pressed.
“Rule 7.2 does not provide a lot of guidance,” Ethox admitted. “But the comment advises the gift should be no ‘more than a token item,’ such as a holiday or hospitality gift. So you could probably give a bottle of wine, or some cookies or steaks, something like that.
“Game tickets are probably also OK,” Ethox continued, “but not Super Bowl or World Series tickets. That would probably be going too far.”
“Can the size of the gift vary,” Paradox pressed, “based on the size of the referral?”
“That would probably be OK,” Ethox responded. “But even if Accountant sent you a really good new client, the gift would still need to be nominal, a token of appreciation. You want to avoid anything that might look like a payment for the referral or a sharing of attorney fees with a non-lawyer.”
“What about referring work back to Accountant? Are reciprocal referral arrangements OK?” Paradox asked.
“Reciprocal referral arrangements with non-lawyers are allowed,” Ethox said, “but according to Rule 7.2(b)(4) and comment 8, you must adhere to four safeguards.”
“What are those safeguards?” Paradox asked.
“First, the lawyer must remain free to exercise independent professional judgment,” Ethox answered. “This includes, for example, that a referral cannot be conditioned on the lawyer using the referring professional, even on the matter referred to the lawyer.”
“So if Accountant sends me work but insists I hire Accountant as an expert, that would be a problem?” Paradox asked.
“Yes, exactly.” Ethox continued. “Second, you must tell the client about the referral relationship. Often a simple warning is fine, that you have worked with Accountant in the past and often refer each other clients.”
“Absolutely,” Paradox confirmed. “In fact, I have hired Accountant myself.”
“Then you should probably tell the client that as well,” Ethox said, “because it may be material that you are referring your client to your own accountant.”
“Fine,” Paradox agreed.
“Third,” Ethox said, “the referral arrangement cannot be mandatory or exclusive. You should refer a client to Accountant only when you think Accountant would be a good match for your client. Likewise, Accountant should refer legal work to you only when Accountant thinks you are a good lawyer for the job. If either of you think a client would be better served using someone else, you need to be free to refer the client to another professional.”
“I only want to refer clients when it seems appropriate,” Paradox confirmed. “That would protect my relationship with my clients, and also with Accountant.”
“That is a good way to see it,” Ethox encouraged Paradox. “Finally, comment 8 advises lawyers not to have referral arrangements of indefinite duration. Do not agree to refer people indefinitely, or keep referring people to Accountant, without periodically stepping back and ensuring the referral arrangement is still appropriate and makes sense.”
“OK,” Paradox said, “I can do that. But do we need to follow the same principles when referring work to other lawyers?”
“Rule 7.2(b) is not expressly limited to referral relationships with non-lawyers,” Ethox answered. “But referral relationships among lawyers are often different, because Rule 1.5(e) allows fee sharing, with certain restrictions.”
“This is great,” Paradox thanked Ethox. “I am glad I can send Accountant a thank-you gift—and new clients in the future, as long as we comply with Rule 7.2(b).”