Canadian Regulator Adopts a Cap on Referral Fees

On April 27, 2017, the Law Society of Upper Canada, which is the body that regulates lawyers in Canada’s largest province of Ontario, approved a set of recommendations that cap lawyer referral fees.   The action limits referral fees to 15% of the first $50,000 in legal fees and 5% thereafter, with an absolute cap of $25,000.  It adopted a standardized form for referral agreements that would be signed by everyone involved in a referral, including the referring lawyer, the lawyer getting the file and the client.

This action was based on a report issued by the Professional Regulation Committee’s Advertising & Referral Fee Arrangements Issues Working Group.   That Report is described in this new story and is available here (at Tab 4-2).

The U.S. counterpart to this issue is ABA Model Rule 1.5(e). Under Rule 1.5(e), a fee division among lawyers from different firms is proper if “the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing.”  That rule also requires that the feed division be in proportion to the work done or all lawyers assume “joint responsibility for the representation.”  Some states, such as Pennsylvania, have omitted the proportionality/joint responsibility clause, and other have omitted the “confirmed in a writing” requirement.

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