State Bar of Arizona Ethics Opinions

95-10: Referral Fees; Referral to Medical Provider; Conflicts of Interests
12/1995

Lawyers may not accept referral fees from medical providers for referring a client to the medical practitioner.  [ER 1.7]

FACTS:[1]

 

A marketing and consulting service that represents medical practitioners has offered to pay attorneys a "referral fee" for referring prospective patients to medical practitioners who are clients of the marketing and consulting service.  The service would provide attorneys with a list of its clients and make suggestions as to which medical practitioner would be appropriate based on the medical practitioner's expertise and location. 

 

QUESTION PRESENTED

 

Whether receipt by a lawyer of a referral fee from a service as described violates any ethical rules.

 

Relevant Ethical Rules

 

ER 1.7 Conflict of Interest

 

(b)        A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's ... own interests, unless:

 

                       1) the lawyer reasonably believes the representation will not be adversely affected; and

 

                       2) the client consents after consultation.

 

Opinion

 

This issue, like most conflict issues, involves the duty of loyalty owed by an attorney to a client.  Loyalty to a client may be adversely affected or impaired when an attorney has a financial incentive to make recommendations, or give advice to a client that may be influenced or motivated by something other than the client's best interests.

 

ER 1.7(b) permits certain conflicts of interest to exist so long as the lawyer reasonably believes the representation will not be adversely affected and the client consents after being provided full information.  However, there are certain circumstances where a client should not even be asked to agree to a potential conflict and, in such case, the lawyer involved cannot properly ask for a client's agreement or provide representation on the basis of the client's consent.  In In re Been, 171 Ariz. 250, 254, 830 P.2d 462 (1992), the Court stated: 

 

                        We wish, however, to emphasize that when a lawyer receives a personal benefit apart from the client's fee from a transaction in which he represents a client, the lawyer's ethical obligation is not always fulfilled by merely disclosing the existence of the personal stake, explaining the potential consequences, and obtaining the client's consent.  There is an inherent potential for a conflict of interest in such situations, and the lawyer must always ensure that his or her personal interest does not interfere with the unfettered exercise of professional judgment the client is entitled to expect under the circumstances.

 

The Committee concludes that such is the case under the facts presented here.

 

Here the lawyer is to receive a certain amount of money as payment for referring a client to doctors that are on a list provided to the lawyer.  This direct financial interest has the potential of adverse consequences to the client in several ways.

 

First, the lawyer is placed in the position of having to disclose a direct financial interest the lawyer has in making a referral and seek the client's consent.  This could have the effect of undermining the trust and confidence a client should have in relying on the advice and counsel of an attorney.

 

Second, if the referral is in connection with a case being handled by the attorney, the fact that the lawyer has received a fee for the referral is information that is not only discoverable but could be injurious to the client at trial.

 

Third, if the client has any difficulty with the doctor, the payment of the referral fee places the lawyer in an awkward position with respect to resolving the difficulty for the client.

 

Fourth, the reverse of the issue here expressly is prohibited by the Rules of Professional Conduct.  ER 7.1(j), provides that lawyers would be in violation if they paid a doctor or anyone else for recommending their services.

 

Moreover, legally there may be problems with such an arrangement as A.R.S. § 13-3713 makes it a felony to receive a fee for referring someone to a medical provider.

 

The Committee concludes that our profession's integrity and the public interest would prohibit a lawyer from accepting a referral fee for the referral of a client to a medical practitioner.               



    [1]Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.  ã State Bar of Arizona 1995