Referral Fees For Ontario Lawyers – Co-counsel Arrangements

Part Three in a Three Part Series on Ontario Lawyer Referral Fees.

At Ferguson Barristers we work with a network of Ontario lawyers to provide service in personal injury law and civil litigation to clients in smaller communities. We’ve prepared a three part blogs series to help lawyers better understand the referral process and how the fees are divided.

Read Part One of Ontario Lawyer Referral Fees Series, and Part Two on Paying and Receiving Referral Fees for the full story.

The new Rules of Professional Conduct also allow co-counsel arrangements. Our firm has been involved in co-counsel situations where, for example, an out-of-province resident was injured in Ontario or vice versa. Where the accident occurred in Ontario, we might be retained to issue the claim and investigate, while treatment and medical-legal consultation occur in the home province. If our client is from Ontario but injured outside of the province, we may retain local counsel to issue the claim locally and to investigate liability.

We will often have the client sign our standard contingency fee agreements and include co-counsel as a party to the agreement. In that case, we set out in writing, with co-counsel, how the standard contingency fee will be divided. Typically, we will agree that disbursements from each firm will be paid first out of any settlement received and the remainder of the fee would be divided pro-rata between the firms depending on the amount of work-in-progress put into the file.

Our experience in co-counsel arrangements with United States’ lawyers has been more difficult – at least in the matters of personal injury law in which our firm is mainly involved. In the United States, all personal injury lawyers practice on a strict contingency fee basis and there seems to be a “rule of thumb” that the referral source splits the fee two-thirds to the lawyer doing the work and one-third to the referral source.

This sounds very advantageous except that our experience is that we are the only lawyers who can adequately put the evidence together to build a case towards settlement. It is common that the work product of our firm greatly exceeds the work product of the American firm–at least in cases that settle. It is most difficult to arrange any other type fee split because, in our experience, none of these lawyers keep dockets so that their work product can be measured against our work product. We have endeavoured, with some success, to get an agreement in writing that all disbursements will be paid first from the contingency fee, and then, at that point, we agree on a fair split. Obviously we are at a disadvantage because our American co-counsel receives the settlement proceeds. Nevertheless, we have usually able to increase the percentage above the nominal and usual “one-third/two-thirds”.

Another caveat: we had some of our worst experiences with situations where a case suddenly becomes more difficult than it first appeared. U.S. lawyers have been quick to abandon these matters. The lesson to be learned is to be very careful in choosing your American referees. Check them out with other colleagues to find out if they can recommend a firm with which they have had satisfactory arrangements. Check with a legal organization to which you might belong. Check peer review services such as Martindale-Hubbel.

Overall, communication is the key. Put  in writing how the file will be run, which firm does the discoveries and where, will the trial be run jointly or by one counsel only, and, critically, communicate about who will incur the disbursements and have a joint agreement about how they will be split.