Court Opinion

ID: 9728971
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:20:53.913937+00
Date Added: 2024-06-11T18:25:53.656387
License: Public Domain

*566THOMPSON, J.
I concur in the majority opinion which I view as a scholarly analysis clearly and concisely disposing of the issues raised by the combating lawyer-litigants.
I add to that opinion my personal view that nothing contained in our opinion should be construed as approving the referral fee arrangement which gave rise to the funds in dispute. The stipulated facts indicate an arrangement by which the parties involved in the litigation before us referred the Brower personal injury-malpractice action to a skilled specialist in an arrangement by which the referring counsel retained an interest of 40 percent of the eventual contingent fee.1 The record is silent as to the extent to which the client was informed of the referral, the referring lawyers’ referral fee, the client’s right to compensate the referring lawyers on other than a contingent basis while reducing the referred lawyer’s percentage contingent fee by what would otherwise have been the referral percentage, and the extent to which the referring lawyers acted in their client’s interest and not their own in making the fee arrangement with the lawyer to whom the case was referred.
In my judgment, the fiduciary duty of a lawyer to his client requires that before a lawyer refer the client’s matter to another, he: (1) inform the client of his intention to refer the matter and the reasons why; (2) inform the client of any referral fee arrangement; (3) give the client the option of compensating the referring attorney for the reasonable value of services performed up to the date of referral so that the percentage of contingent fee that would otherwise be a referral fee will go to benefit the client; and (4) inform the client of the potential conflict in interest if the client elects to permit a referral fee based upon a proportion of a total contingent fee so that the client may himself negotiate the fee with the lawyer to whom the case is referred.
Unless the client is so informed and then intelligently and knowingly acquiesces in the referral fee arrangement, it is my view that the referring lawyer holds his referral fee in constructive trust for the client. From the tenor of the stipulated facts, such may well be the situation in the case at bench.
I reach my conclusion of the referring lawyer’s obligation upon the basic principles of the duty of a fiduciary. Arguments of public policy dictate the same result. In an era where recovery in tort is founded *567primarily upon socialization of the loss occasioned by injury to person and property (Fun Arsdale v. Hollinger, 68 Cal.2d 245, 253 [66 Cal.Rptr. 20, 437 P.2d 508]), the society which bears that loss must be protected against arrangements which prevent the recovery from reaching the party injured, reduced only by necessary legal fees and other expenses of litigation. The pure referral fee, which compensates one lawyer with a percentage of a contingent fee for doing nothing more than obtaining the signature of a client upon a retainer agreement while the lawyer to whom the case is referred performs the work, is far from necessary to the injured person’s recovery. To the extent that the referral fee is paid for that purpose, loss has not been socialized. Rather, the obtaining of business by a lawyer who, by his own motion, has conceded his inability to handle it has been subsidized.

The briefs discuss the arrangement as a referral fee and not as an association of counsel dividing a fee upon the basis of the value of work actually done.