In In re Opinion No. 745 of the Supreme Court Advisory Committee on Professional Ethics (089278) (Decided February 18, 2025), the New Jersey Supreme Court held that New Jersey Rules of Court allow certified attorneys to pay referral fees to lawyers in other states even if they are not licensed here. The Court further held that the payment of referral fees does not raise concerns about the unauthorized practice of law.
Facts of In re Opinion No. 745 of the Supreme Court Advisory Committee on Professional Ethics
The Advisory Committee on Professional Ethics (ACPE or Committee) released Opinion 745 on March 7, 2024. The opinion responded to “inquiries about out-of-state lawyers” who sought “payment of referral fees from New Jersey certified attorneys.”
Rule 1:39-6(d) creates an exception to the general rule that New Jersey lawyers may not pay referral fees. It provide that (1) certified attorneys can pay referral fees (2) without regard to any legal work performed, and (3) the referral fee can be paid out of, but cannot exceed, the certified attorney’s reasonable fee for legal services rendered.
Meanwhile, Rule of Professional Conduct (RPC) 1.5(e) states in part that legal fees can be divided between lawyers who do not practice in the same firm if (1) the division is proportionate to the services each lawyer performs or (2) the lawyers assume joint responsibility for the representation in a written agreement with the client. RPC 1.5(e) does not relate to the attorney certification program.
In Opinion 745, the ACPE that “certified lawyers generally may not pay referral fees to out-of-state lawyers” who are not licensed to practice law in New Jersey. Its conclusion rests on the principle that “[r]eferral fees are a division of thelegal fee, paid for legal services rendered.” The ACPE looked to RPC 1.5(e) and concluded that “the lawyer to whom the fee is payable must be . . . licensed and eligible to practice law in New Jersey.” Opinion 745 also concluded that certified attorneys could not pay referral fees to lawyers who had to withdraw from a case because of a conflict of interest, although the referring “lawyer is entitled to payment for legal services rendered prior to withdrawing.” In addition, Opinion 745 states that “[c]ertified lawyers may pay referral fees to lawyers who were in good standing and eligible to practice law” when the referral was made but were later suspended or disbarred. Several organizations petitioned the Court for review of Opinion 745, which the New Jersey Supreme Court granted.
NJ Supreme Court’s Decision in In re Opinion No. 745 of the Supreme Court Advisory Committee on Professional Ethics
The New Jersey Supreme Court unanimously vacated Opinion 745. “We find that the Court Rules allow certified attorneys to pay referral fees to lawyers in other states even if they are not licensed here,” Chief Justice Stuart Rabner wrote. “We also note that the payment of referral fees does not raise concerns about the unauthorized practice of law.”
In reaching its decision, the New Jersey Supreme Court concluded that the text of the two rules does not present a conflict. “Although both relate to a similar subject—the division of fees—Rule 1:39-6(d) governs referral fees, while RPC 1.5(e) addresses the division of fees for legal services,” Chief Justice Rabner wrote. “Viewed in that way, the rules can be read and applied as part of a unitary system.”
The New Jersey Supreme Court also noted that because referral fees are not paid for legal services, Rule 1:39-6(d) does not invoke concerns about the unauthorized practice of law. Similarly, the Rule does not require referring attorneys to be eligible to practice law in New Jersey.