7 Critical Differences: New York vs. ABA Rules on Fee Sharing and Lawyer Referrals (2026 Ethics Guide)

 Legal Ethics & Referrals,New York
March 27, 2026
6 min read
Attorney-to-attorney referrals are essential to modern practice, but the ethics surrounding referral fees, lead-generation platforms, and per diem counsel remain some of the most misunderstood areas of professional responsibility. This guide breaks down what the ABA permits, how New York’s rules differ, and the specific actions lawyers must take to stay compliant, drawing exclusively from […]

Attorney-to-attorney referrals are essential to modern practice, but the ethics surrounding referral fees, lead-generation platforms, and per diem counsel remain some of the most misunderstood areas of professional responsibility.

This guide breaks down what the ABA permits, how New York’s rules differ, and the specific actions lawyers must take to stay compliant, drawing exclusively from official ethics opinions.

1. ABA Framework: When Fee Sharing Is Permitted

Under the ABA Model Rules, dividing fees with a lawyer in another firm is allowed when the requirements of Model Rule 1.5(e) are met:

  1. Fees may be shared when each lawyer either performs work or assumes joint responsibility.
  2. The client must consent in writing to the arrangement.
  3. The combined fee must be reasonable.

Key Point on Nonlawyer Ownership: A lawyer in a Model Rules jurisdiction is generally not violating Rule 5.4(a) merely because part of the fee ultimately reaches a nonlawyer under another state’s rules. The originating lawyer’s only division is with another lawyer, ensuring the lawyer’s independent professional judgment is not compromised.

2. New York’s Stricter Landscape on Referral Fees

New York permits fee-sharing, but the structure is far more demanding than the ABA version, requiring both specific disclosure and actual involvement.

2.1 What Written Client Consent and Disclosure is Required?

To divide a fee with a lawyer outside your firm, New York requires:

  • Client consent after full disclosure, confirmed in writing.
  • Disclosure must include the exact percentage share each lawyer receives (a stricter rule than the prior Code).
  • The total fee must be reasonable.

2.2 Why Do New York Courts Deny Referral Fees to “No-Show” Lawyers?

In contrast to the ABA, New York lawyers must satisfy one of two requirements to receive a split fee:

  • Divide the fee in proportion to the work performed, or
  • Assume joint responsibility for the entire matter.

Example of Risk: Courts in New York routinely deny referral fees when a lawyer fails to perform any work, provide proper notice, or assume responsibility. The Second Circuit has affirmed the denial of a fee to a lawyer who did nothing and provided no client disclosures.

Key Takeaway: In New York, “no-show lawyers” do not get referral fees, and improper arrangements risk total fee forfeiture.

3. Paying for Leads and Listings: What New York Allows

New York draws a sharp, often confusing, line between paying for legitimate advertising and paying for an impermissible recommendation.

3.1 Why Does New York Prohibit Paying for Lawyer Recommendations?

Rule 7.2(a) forbids lawyers from giving anything of value to anyone in exchange for a recommendation. A communication constitutes an illegal recommendation when it:

  • Vouches for a lawyer’s skills, reputation, or qualifications, or
  • Suggests the service has vetted, ranked, or selected the “best” or “top-flight” lawyer for the client.

Ethics Opinion Guidance: NY Opinion 1267 and 1213 confirm that paying to be included on platforms that use algorithms evaluating success rates, track records, or “best lawyers” improperly constitutes a payment for a prohibited recommendation.

3.2 When Is Lead-Generation Ethical: The Neutral Selection Model

New York Opinion 1131 allows lawyers to pay for leads only when the service operates as a neutral directory:

  • The platform uses purely mechanical, transparent criteria (e.g., geography, practice area, order of sign-up).
  • The platform does not vet, rank, or evaluate lawyers.
  • No statement implies the lawyer is the “best,” “right,” or recommended option.

3.3 Are Reciprocal Referral Groups Allowed?

Networking groups that require members to refer business, or pay dues that indirectly purchase referrals, are prohibited. Opinion 791 makes it clear: attorneys cannot participate in paid organizations that require reciprocal referrals among members.

4. Per Diem Lawyers: Ethical Use and Fee Division Rules in New York

Per diem or freelance coverage lawyers are common. New York has specific rules governing their use and compensation.

4.1 When Is Using a Per Diem Lawyer Permitted?

A lawyer may ethically hire per diem counsel and pay a flat directory fee when:

  • The per diem directory is not recommending lawyers (only listing them).
  • Only lawyers, not clients, access the service.
  • Lawyers pay only a flat listing fee, unrelated to the case outcome.

4.2 What Standard Rules Apply to Hiring Per Diem Counsel?

Both the hiring lawyer and the per diem lawyer must maintain professional standards:

  • Perform necessary conflict checks.
  • Ensure competence and diligence in the task.
  • Maintain client confidential information properly.

4.3 When Must a Firm Disclose a Fee Markup for Per Diem Lawyers?

If a hiring firm charges the client more than it pays the per diem lawyer (a “markup”), the firm is engaging in a fee division, and the client must receive written disclosure of:

  • The division of fees, and
  • The specific share each lawyer receives.

Note: This disclosure requirement, mandated by Rule 1.5(g)(2), is unique to per diem work and does not apply to the markup on time billed by the firm’s associates.

Conclusion

Fee sharing, referral payments, and per diem practice remain ethically sensitive. Compliance requires clear, written disclosures, and a strict avoidance of any “recommendation-based” language or platform. By adhering to New York’s specific requirements for involvement and transparency, attorneys can manage these relationships compliantly.

References 

ABA & Multi-Jurisdictional Ethics

  1. ABA Standing Committee on Ethics & Professional Responsibility.
     Formal Opinion 464: Division of Legal Fees With Other Lawyers Who May Lawfully Share Fees With Nonlawyers (Aug. 19, 2013).

New York State Bar Association Ethics Opinions

  1. NYSBA Comm. on Prof’l Ethics, Op. 1267 (2024) – Paying for a Recommendation or Referral.
    (Clarifies Rule 7.2(a) and prohibits payments to services that recommend or “vet” lawyers.)
  2. NYSBA Comm. on Prof’l Ethics, Op. 1213 (2021) – Lawyer Paying for Recommendation.
    (Restrictions on algorithmic or curated matching systems.)
  3. NYSBA Comm. on Prof’l Ethics, Op. 1131 (2017) – Lead Generation; Payment for Leads.
    (Permits neutral, mechanical lead generation without recommendations.)
  4. NYSBA Comm. on Prof’l Ethics, Op. 791 (2006) – Networking Organizations & Reciprocal Referrals.
    (Payments involving referral obligations violate Rule 7.2.)

  5. NYSBA Comm. on Prof’l Ethics, Op. 779 (2004) – Paying a National Marketing Organization for Client Leads.
    (Prohibits purchasing screened “leads” because it constitutes paying for recommendations.)
  6. NYSBA Comm. on Prof’l Ethics, Op. 1113 (2017) – Use of Per Diem Lawyers & Directory Services.
    (Permits flat-fee per diem directories if they do not recommend or evaluate attorneys.)

New York Legal Ethics Reporter (NYLER / NYPRR)

  1. Maltz, Richard. Dividing a Fee with a Per Diem Lawyer, NYLER.
    (Explains application of Rule 1.5(g)(2) and mandatory fee-split disclosure for per diem counsel.)

Emanuel, Lazar.Court Denies Referral Fee to No-Show Lawyer, NYPRR (Apr. 2010).
(Illustrates fee forfeiture where the referring lawyer performs no work and provides no written client disclosure.)

This article is for informational purposes only and does not constitute legal advice.