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St. Mary's Law Journal

Abstract

Texas needs to reform its policy concerning referral fees. In Texas, an attorney is permitted to receive a fee for providing a referral to another attorney. In Brewer & Pritchard, P.C. v. Johnson, for example, the forwarding attorney received a referral fee for $3 million dollars. Proponents of referral fees argue that clients are better represented because referring attorneys have a greater economic incentive to seek out more capable attorneys. On the other hand, referring attorneys may also have the incentive to seek out attorneys who pay higher referral fees rather than those most qualified. In the end, the referred clients’ interests may not be protected. Under the Texas Disciplinary Rules of Professional Conduct 1.04(f), a referring attorney does not retain responsibility for the case. As a result, referring attorneys in Texas cannot be held liable for the subsequent malpractice of the attorney who paid the referral fee. This is in direct contrast to the American Bar Association (ABA) Model Rule 1.5 which mandates that an attorney who receives a referral fee remain liable for any subsequent malpractice. Texas is in the minority of jurisdictions that allow one attorney to collect a referral fee with or without an attorney-client relationship and without requiring the referring attorney to retain any responsibility for the client’s case. Without the risk of malpractice, this creates an externality. Therefore, Texas must adopt rules to protect the interests of the client. Two of the most obvious proposals would be to prohibit referrals to attorneys who do not carry malpractice insurance, and prevent attorneys from collecting referral fees without first establishing an attorney-client relationship.

Publisher

St. Mary's University School of Law

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