Effective January 1, 2021, changes to the ethical rules for attorneys in Arizona now allow lawyers to pay referral fees to anyone. Previously, Ethical Rule 5.4 prohibited a lawyer from sharing fees with a non-lawyer. In addition, Ethical Rule 7.2(b) prohibited giving “anything of value” to anyone for recommending a lawyer’s services or referring someone to a lawyer. Those two ethical rules have been deleted.
The decision to delete these ethical rules prohibiting referral fees was made after research found that most clients don’t care if a lawyer pays a fee to a referral source. It’s something most of us are used to. Every time my pest exterminator comes to my house, he leaves me a note indicating that I will get a referral fee if I send another customer his way. In short, if the referral fee has no impact on the fees the client is paying a lawyer, most clients tend to have no objection to the payment of a referral fee.
In addition, most of the other states in the U.S. had already removed the restrictions on paying referral fees. This change simply brought Arizona into line with the rest of the country.
Lawyers may still pay a percentage of the collected fees on a case to a lawyer who refers the case, but ethical rule 1.5(e) continues to require that the lawyer disclose the referral fee arrangement in writing (usually in the written fee agreement with the client) and that, by signing the written agreement, the client consents to the division of fees between the lawyers.
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