LEO #1676 PERCENTAGE OF LEGAL FEES PAID TO NONLAWYER ENTITY WHICH
          PROVIDES ELECTRONIC COMMUNICATION SYSTEM TO DISTRIBUTE
          AND TRACK LAW FIRM ACTIVITY IN CERTAIN TYPE OF CASE

You have presented a hypothetical situation in which a nonlawyer
corporation offers an electronic communications system to credit
grantors to facilitate the distribution and tracking of law firm
activity in collections cases.  The law firm handling the
collections agrees to pay three percent of net proceeds to the
nonlawyer corporation.  Another similar corporation charges
attorneys $15 per claim and ten percent of the fees paid by clients
to the law firm.   At least one of these corporations advertises
that it brings a large volume of collections business to the
attorneys who participate.

Under the facts you have presented, you have asked the committee to
opine as to the propriety of an attorney participating in the
described activity and agreeing to pay a percentage of client fees
to the nonlawyer corporation.

The appropriate and controlling disciplinary rules relative to your
inquiry are DR 3-102, which precludes a lawyer from sharing legal
fees with a non-lawyer except in certain limited circumstances,
none of which are applicable to the facts presented, and DR 2-
103(D), which in pertinent part prohibits a lawyer from
compensating a person or organization to recommend or secure his
employment by a client except for usual and reasonable fees or dues
charged by a lawyer referral service.

The committee has previously opined that the a lawyer and a
nonlawyer may not enter into a consensual arrangement whereby fees
received from one or more clients are divided between them.  See
LEO #1598.  That rule has been applied by the committee in
prohibiting the sharing of attorney fees with a group of medical
experts providing testimony services to an attorney and with a
company providing advertising services to an attorney.  See LEOs
#1047 and 1438, respectively.

In the facts you present, the committee believes that the
arrangement in your hypothetical would place an attorney in the
impermissible position of sharing his fees with non-attorneys,
i.e., with the electronic communication services company.  The
provision of a percentage of the lawyer's fee to that company would
be violative of DR 3-102.

The facts of your hypothetical suggest that the electronic
communications corporation(s) may actually provide the attorneys
with referrals of collections work.  The committee cautions that
were this to occur, the payment of a percentage of the attorney's
fee to the company would still be impermissible fee-splitting. 
While DR 2-103(D) does allow for the payment by an attorney of "the
usual and reasonable" fees charged by a lawyer referral service,
the committee opines that any arrangement in violation of DR 3-
102's fee-splitting arrangement would be inherently unreasonable in
this context.  Thus, were the electronics communications company to
provide referrals as well as tracking services, the fee percentage
payment arrangement would remain an impermissible sharing of legal
fees.

[DRs 2-103, 3-102; LEOs 1047, 1438, 1598]

Committee Opinion
May 16, 1996