What you need to do to make sure your referral fee is paid. Iron-clad things that you should do now!

The cozy referral relationship between the referring attorney and the litigation law firm always has a happy beginning.  The litigation lawyer promises great results and the referring attorney dreams of a fat check.  In a perfect, ethical world, everyone is happy.  Unfortunately, we don't live in a perfect, ethical world.

Here's the problem: TRUST. The referring attorney trusts that the litigation law firm will honor their referral fee, often based on nothing more than a verbal agreement. Bad practice! Under New York ethical rules, the referring attorney must assume joint responsibility with the trial law firm for the handling of the case and the referral relationship must be memorialized in writing to the client.  Furthermore, the division of the legal fee between the referring attorney and the litigation law firm must be disclosed in writing to the client.

Unless the referral relationship and the division of the legal fee are memorialized in writing to the client (preferably in the retainer agreement), the referring attorney does not have a legal basis to claim a proportionate share of the legal fee, i.e., one-third of the legal fee.  Without a writing memorializing the terms of the referral relationship, the referrring lawyer is limited to a recovery based upon quantum meruit, which means he/she will recover nothing in most cases.

In any case that you refer to a litigation law firm, you must insist that the referral of the case be memorialized in the retainer agreement.  For example: "Client recognizes and understands that his case has been referred to The Jones Law Firm by [The referring lawyer] and both lawyers assume joint responsibility for the handling of the case. Furthermore, client understands and acknowledges that the [referring lawyer] shall receive one-third of the legal fee."

If the litigation law firm will not agree to include this language in the retainer agreement and sign a separate memorandum regarding the division of the legal fee with you, then you should not be doing business with them.  If you don't protect your referral fee at the outset of the case, your dreams of a fat check will be just that, a dream. Make sure you are vigilant about protecting your legal fee at the beginning of the case and forget about trusting the liigation law firm "to do the right thing".