How to Avoid a Reckless Referral In The Remote Work Era

After hearing of the downfall of Girardi & Keese and the coming to light of not only Girardi’s clients who were harmed by his greed (but also that this firm was known to have a habit of stiffing lawyers on the payment of referral fees), fellow members of the bar need to better vet the lawyers that we refer our cases to and utilize best practices to ensure the referral fees are paid.  Remote work has made it more of a challenge to follow-up with lawyers in the building or down the hall. In California, with the old California Rule of Professional Conduct 2-200 and the new Rule 1.1.5, both concerning referral fees (created to protect clients, not referring lawyers), referring lawyers are open to exposure of being wrongfully deprived of their earned referral fees (“stiffed”) by unscrupulous referred-to lawyers. This article discusses the relevant rules and law, along with a case against Benjamin Reccius and Reccius Law, and solutions to prevent getting stiffed, so members of the bar can avoid a “Reckless” (or “Reccius”) Referral.

The old rule and the new rule are largely the same.  If a referring lawyer refers a case to the referred-to lawyer, the referred-to lawyer would typically be in charge of including the referral fee consent in the client’s legal services agreement, which states the terms of the referral, and that the client’s fee does not increase as a result of the referral (in compliance with Rule 2-200).  Rule 1.5.1 now merely requires the agreement between the two lawyers to be in writing (otherwise difficult to prove anyway), that the client provide informed written consent at the time the lawyers enter into the agreement to divide the fee or as soon thereafter as possible.

For ethical lawyers who pay referral fees, they have no problem putting the agreement in writing with the referring lawyer and including, at a minimum, a simple sentence in their legal services agreement with the client that discloses the terms of the referral and states that the client’s fee will not increase. On the other hand, shameless lawyers will promise a referral fee and then intentionally or negligently fail to include a simple sentence about the referral in the engagement letter, and then stiff the referring lawyer on the referral fee using non-compliance with the rule as a defense. Sadly, there are many cases in which referring lawyers simply do not receive their fee due to the fraud and anticompetitive practices of these shady lawyers. See Margolin v. Shemaria (2000) 85 Cal.App.4th 891, 902, Chambers v. Kay (2002) 29 Cal.4th 142, Reeve v. Meleyco (2020) 46 Cal.App.5th 1092, and Dietz v. Meisenheimer (2009) 177 Cal.App.4th 771, 801.

In Natbony v. Reccius, the plaintiff referred a landlord-tenant case to the defendant, in which Mr. Benjamin Reccius promised in writing that he would pay a 25% referral fee, but when the case settled, he claimed that he failed to have the client consent to the fee, and then defamed the plaintiff and tried to prevent the plaintiff from contacting the client.  During the first trial, the judge awarded the referral fees to the plaintiff and admonished the defendant for not keeping his promise.  On appeal by the defendant, the second judge failed to acknowledge an exception to Rule 2-200, held in Barnes, Crosby, Fitzgerald & Zeman, LLP v. Ringler (2012) 212 Cal.App.4th 172, where a defendant should be equitably estopped from asserting non-compliance with Rule 2-200 when the defendant “is responsible for such noncompliance and has unfairly prevented another lawyer from complying.” Incredibly, the appellate judge also criticized the defendant for his “bad business practice” and “harming [his] own reputation.”  You can review the appellate brief and evidence about the case here: https://suzannenatbony.com/srn/recciusreferral/.

If referring lawyers want to prevent what the lawyers receiving the referrals (like Reccius and Girardi) did to stiff the referring lawyers of their referral fees, the following are three simple steps to avoid a “Reckless” Referral:

Research the referred-to lawyer. Does this lawyer have bad reviews for being unethical to clients or other lawyers? Has the lawyer been sued for malpractice or failure to honor obligations? What do mutual connections say about him or her?

Strike an agreement in writing with the referred to lawyer. While simple text messages and emails confirming the amount of the referral fee would likely hold up in court, it’s best to use a reciprocal referral agreement that is fair to both sides. A 2-page “Lawyer Reciprocal Referral Agreement” can be found here: https://www.lawtake.com/index.php/listing/index/video/#document-listing-tab

Before referring the lead to a new referred-to lawyer, email the lead something along the lines of the following:

Please kindly fill out my Referral Consent Form (at https://bit.ly/3vceVeI) and click on “Yes, I confirm” and enter your name, email, and sign. I will then refer you to up to 3 lawyers to take your matter. Here is more information about my work providing referrals for your reference: https://suzannenatbony.com/srn/contact-3/#referral.

By requiring the lead to consent to the referral prior to referring to the referred-to lawyer, you avoid facing an uphill battle dealing with unscrupulous lawyers who try to stiff you of your referral fee due to noncompliance.  You can learn how to create a referral consent on your law firm’s website by creating a free login at LawTake.com, and then while signed in, click on this link to download the free instruction form: https://www.lawtake.com/index.php/referral-fee-form-helpful-info-to-referring-lawyers-pdf.html