Florida Bar Journal

Lawyer Referral Fees and the (Unintended?) Legacy of Noris

Illustration by Barbara Kelley

If a Florida attorney retains a fee interest in a referral, does he or she assume unlimited liability for the potential legal malpractice of the working attorney or is his or her liability governed by Florida’s comparative fault statute, which is intended to prevent damage awards against a party that are not proportional to that party’s actual fault?^[1] Rule 4-1.5 of the Rules Regulating The Florida Bar provides that when one lawyer refers a matter to another, “each lawyer assumes joint legal responsibility for the representation.”^[2] The Third District, in its 1997 decision, Noris v. Silver, 701 So. 2d 1238 (Fla. 3d DCA 1997), interpreted this language literally to suggest that if the referring attorney and working attorney agreed to divide the attorneys’ fees as expressly permitted by the rule, then the referring attorney “would be liable” for the malpractice committed by the working attorney.

This article argues that the phrase “joint legal responsibility” in Rule 4-1.5 and as applied by the Noris court is not synonymous with traditional “joint and several liability,” and that rather than being co-extensive, the liability between the referring and working lawyer should be subject to a comparative negligence analysis pursuant to F.S. §768.81. To date, no Florida appellate court has ruled on the applicability of a comparative negligence analysis in this context, perhaps because the legislature abolished pure joint and several liability in 2006 — years after the Third District decided Noris.^[3] However, because Noris has never been overruled, yet may still be technically wrong, its uncertain legacy likely frustrates rather than promotes the policy goals it presumably seeks to advance.

Rule 4-1.5

Rule 4-1.5 of the Rules Regulating The Florida Bar, titled, “Fees and Costs for Legal Services,” governs the ethical considerations of various fee agreements, through subsections (f) “Contingent Fees,” and (g) “Division of Fees Between Lawyers in Different Firms.” Rule 4-1.5(g) reads:

(g) Division of Fees Between Lawyers in Different Firms. Subject to the provisions of subdivision (f)(4)(D), a division of fee between lawyers who are not in the same firm may be made only if the total fee is reasonable and:

(1) the division is in proportion to the services performed by each lawyer; or

(2) by written agreement with the client:

(A) each lawyer assumes joint legal responsibility for the representation and agrees to be available for consultation with the client; and

(B) the agreement fully discloses that a division of fees will be made and the basis upon which the division of fees will be made.^[4]

The Third District relied upon this rule and prior Florida Supreme Court precedent to reach the conclusion in Noris that Rule 4-1.5 renders any referring attorney who retains a financial interest in the matter liable for the potential malpractice of the working attorney:

[W]hen fees are divided pursuant to Rule 4-1.5(g)(2), “each lawyer assumes joint legal responsibility for the representation….” Therefore, if Silver and Falk agreed to divide the attorney’s fee, Silver would be liable for the malpractice committed by Falk…. Accordingly, we hold that if Falk and Silver agreed to divide the attorney’s fees, then Silver is legally responsible for the malpractice committed by Falk (emphasis added).

In the 20 years since, Noris has been cited extensively by secondary authorities as one of the few reported decisions in the country directly addressing attorney liability in the context of Model Rule 4-1.5’s “joint responsibility” language.^[5] Indeed, a 2005 Texas Law Review note described Noris as the “seminal case” on the issue.^[6] But analysis of Noris suggests that the opinion should be revisited for two reasons: First, although arguably couched in dicta, the court’s analysis may have misapplied the controlling law at the time. Second, the court’s perception at the time Noris was decided, that both attorneys could be found jointly and severally liable, may no longer be viable given the Florida Legislature’s decision to adopt comparative negligence in lieu of joint and several liability in the years since the opinion. In either case, the authors believe that the decision frustrates the public policy concerns typically advanced in support of referral fees and, in so doing, potentially harms rather than protects those who seek representation.

The Road to Noris

The Third District decided Noris in 1997 on the heels of the 1995 landmark decision, Chandris, S.A. v. Yanakakis, 668 So. 2d 180, 185-6 (Fla. 1995). In Chandris, the Florida Supreme Court reviewed two legal questions certified by the U.S. Court of Appeals for the 11th Circuit related to the enforceability of a contingency fee contract to provide legal services in Florida by an attorney not authorized to practice in the state. The Chandris court would ultimately find that Florida contingent fee agreements entered by attorneys not subject to the state’s professional regulations are unauthorized legal services and are void as against public policy, and further, that contingency agreements that do not comply with the regulations generally are also void as against the public interest.^[7]

This holding, and the court’s express disapproval of a line of cases that permitted the enforcement of noncompliant contingent fee contracts by attorneys seeking fees, effectively shattered any remnants of what was once considered the wall between disciplinary rules and civil remedies. In dissent, Justice Anstead presciently complained about the “broad sweep of the blanket rule adopted by the majority in making the Rules of Professional Conduct rules of law,” writing that it was not only contrary to caselaw,^[8] but also contrary to the rules themselves.^[9] Specifically, Justice Anstead cited a portion of the preamble to Florida’s Rules of Professional Conduct, that provides:

Violation of a rule should not itself give rise to a cause of action against a lawyer nor should it create any presumption in such a case that a legal duty has been breached. In addition, violation of a rule does not necessarily warrant any other nondisciplinary remedy, such as disqualification of a lawyer in pending litigation. The rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purpose of the rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis for a lawyer’s self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the rule. Accordingly, nothing in the rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequences of violating such duty. Nevertheless, since the rules do establish standards of conduct by lawyers, a lawyer’s violation of a rule may be evidence of a breach of the applicable standard of conduct.^[10]

Justice Anstead closed his dissent by cautioning that “[w]e are venturing into uncharted territory today based on a factual situation that simply does not appear to justify such a drastic pronouncement.”^[11]

Shortly thereafter, the First District decided Smith v. Bateman Graham, P.A., 680 So. 2d 497 (Fla. 1st DCA 1996), which rejected a law firm’s efforts to seek an injunction against a former employee prohibiting him from soliciting the firm’s clients, based on a lack of standing. In so doing, the court cited the preamble, just as Justice Anstead had in his Chandris dissent, for the idea that “violation of a rule should not itself give rise to a cause of action against a lawyer nor should it create any presumption in such a case that a legal duty has been breached,” and that although they can be used for sanctioning or self-assessment, the rules do “not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the rule.”^[12]

The Smith court then concluded that it “[did] not read Chandris as authorizing a private cause of action for the ethics rules,” and, candidly acknowledging that it may have read Chandris “too narrowly,” certified a related question to the Supreme Court — an S.O.S. that the Court has yet to answer to this day.^[13] (Notably, although the preamble to the ABA Model Rules has since abandoned it, Florida’s preamble retains the conclusion that “[a]ccordingly, nothing in the rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequences of violating such duty.”^[14])

It was against this perplexing backdrop that the Third District received and reviewed Noris. Despite both Chandris and Smith having been decided around the same time as Noris and addressing similar legal questions resting on the interplay of Bar rules and substantive legal concepts, the Noris court did not even cite to Smith, while stopping short of analyzing the scope of Chandris. Instead, the court merely distinguished Chandris on factual grounds before employing an expansive interpretation of that case, writing that, “if [the referring attorney and working attorney] agreed to divide the attorney’s fees, then [the referring attorney] is legally responsible for the malpractice committed by [the working attorney].”^[15] In addition, in a footnote, the court rejected the argument that “the preamble to the Rules of Professional Conduct which states, in part, that ‘[v]iolation of a rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached,’” precluded liability for the referring lawyer based on his failure to comply with Rule 4-1.5,^[16] writing in conclusory fashion “[t]hat argument does not survive the reasoning set forth in…Chandris v. Yanakakis….”^[17]

While the Noris court provided no additional commentary, if the proposition that Rule 4-1.5 supports joint and several liability for referrals is rationally traceable to the holding of Chandris — which would have been expected given the proximity of time of those decisions — then it is not apparent how Chandris’ policy-based holding that an attorney should not be permitted to enforce a noncompliant fee contract against a client supports the Third District’s distinguishable suggestion in Noris that Rule 4-1.5 creates joint and several or vicarious liability between different firm co-counsel.

Like the Smith court, the Noris court sought guidance from a higher authority and certified the following question to the Florida Supreme Court:

Where there is an express or implied agreement for the payment of a referral fee, but the attorneys have not executed the written agreement required by Rule Regulating The Florida Bar 4-1.5(g), is the referring attorney civilly liable in the event of legal malpractice by the working attorney?

Unfortunately, the Supreme Court left this question unanswered as well.

Since Noris, Florida has Abolished Joint and Several Liability

Since the Noris decision in 1997, the Florida Legislature has modified Florida’s comparative fault statute, codified at F.S. §768.81, to implement pure comparative fault in the state. Partial comparative fault was first codified in Florida in 1986 and has evolved significantly since then. The 1986 statute eliminated joint and several liability for most non-economic damages in favor of an allocation based on percentage of fault, but stopped short of imposing pure comparative fault. Joint and several liability, thus, still applied to all actions in which damages totaled less than $25,000, and for all economic damages^[18] in which each defendant’s comparative fault equaled or exceeded the plaintiff’s fault.^[19]

Following the 1986 amendment, the next significant development came in 1999. As in the 1986 version, liability for payment of noneconomic damages remained proportionate to a party’s percentage of fault, but joint and several liability for economic damages became more nuanced with the introduction of an economic damage “sliding scale.”

In 2006, the legislature’s move toward the abolition of joint and several liability was completed when it eliminated the 1999 sliding scale approach in favor of “pure” comparative fault. The statute reads, “[i]n cases to which this section applies, the court shall enter judgment against each party liable on the basis of such party’s percentage of fault and not on the basis of the doctrine of joint and several liability.”^[20] This version of the statute indicated that it would only apply to causes of action accruing on or after the April 26, 2006,^[21] effective date of the statute. In 2011, the legislature amended the statute once more, making the application of pure comparative fault retroactive.^[22]

Rule 4-1.5’s “Joint Responsibility” May Not Mean “Joint and Several Liability”

While most commentators cite Noris in support of the conclusion that Rule 4-1.5 creates “joint and several” liability for referring and working attorneys, it is not entirely clear this was even the holding, or that Rule 4-1.5’s brand of “joint responsibility” is indeed synonymous with the traditional common law concept of joint and several liability, as at least some attorneys have understood.^[23] Like its model counterpart, the comments to Rule 4-1.5 characterize subsection (g)’s “joint responsibility” as responsibility that “entails the obligations stated in [R]ule 4-5.1” of the Rules Regulating The Florida Bar.^[24] Rule 4-5.1, however, does not expressly impose joint or vicarious liability — or indeed any other form of shared “responsibility” — between same-firm partners similar to a general partnership. To the contrary, Rule 4-5.1 resembles the liability limiting language of an LLP or PA statute. The text in full follows, with pertinent portions italicized:

Rule 4-5.1. Responsibilities of Partners, Managers, and Supervisory Lawyers

(a) Duties Concerning Adherence to Rules of Professional Conduct. A partner in a law firm, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers therein conform to the Rules of Professional Conduct.

(b) Supervisory Lawyer’s Duties. Any lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct.

(c) Responsibility for Rules Violations. A lawyer shall be responsible for another lawyer’s violation of the Rules of Professional Conduct if:

(1) the lawyer orders the specific conduct or, with knowledge thereof, ratifies the conduct involved; or

(2) the lawyer is a partner or has comparable managerial authority in the law firm in which the other lawyer practices or has direct supervisory authority over the other lawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.^[25]

In other words, Rule 4-5.1 does not impose liability (legal or ethical) on a same-firm lawyer jointly and severally (or vicariously), unless the related attorney 1) ordered the specific conduct or knowingly ratified it or 2) failed to take reasonable remedial action while knowing of the conduct at a time when its consequences could have been avoided or mitigated. As mentioned above, the rule’s language seems to track the liability-limiting language of LLP and PA statutes^[26] far more closely than it tracks the liability-expanding language of the general partnership law^[27] in which one would typically find joint and several liability.^[28] It also appears to directly contradict the notion that a nonspecialized attorney who refers a client to a more qualified specialist would be responsible for that specialist’s failures in the tasks for which he or she is uniquely qualified.

There is little meaningful Florida authority on Rule 4-5.1 to provide independent guidance on this issue. West’s annotated version of the rule cites only a small handful of cases, none of which adequately flesh out the boundaries of a supervising lawyer’s potentially vicarious liability for a supervised attorney. There is also a dearth of similar commentary regarding analogous Model Rule 5.1. Rachel Bosworth’s Texas Law Review note, “Is the Model Rule Outdated? Texas Carries Referral Fee Responsibility into the Limited Liability Era,”^[29] contains an excellent and thoroughly researched policy discussion advocating against joint and several liability for referring attorneys, while several other commentators, and at least a few state bar ethics panels, appear to have reached the opposite conclusion that Model Rule 1.5 imposes vicarious liability by incorporating Rule 5.1 by reference.^[30] However, at the risk of stating the obvious, if Rule 4-5.1 does not impose vicarious liability upon partners in the same firm, there is no basis for arguing it supports vicarious liability between lawyers in different firms.

The suggestion that Rules 4-1.5 and 4-5.1 extend beyond the ethical boundaries of the rules to create substantive civil liability is further refuted by the plain commentary appended to both Florida and the model version of 4-5.1 that “[w]hether a lawyer may be liable civilly or criminally for another lawyer’s conduct is a question of law beyond the scope of these rules.”^[31] The Federal Trade Commission has made a similar observation in response to the Kentucky Supreme Court’s proposed 1987 adoption of Model Rule 1.5.^[32] In urging the Kentucky Supreme Court to forego adopting the rule at all based on concerns that its vagueness might unnecessarily discourage referrals and associations that would benefit consumers, it observed that because ABA Rule 5.1 was designed strictly to address ethical issues, “its application in the context of a (civil) ‘joint responsibility’ situation is unclear.”^[33] It is, therefore, difficult to understand how Noris purported to rely upon Rules 4-1.5 and 4-5.1 for anything in reaching its holding (regardless of what that holding was), when the rule itself states it should not be used in this manner. There is no analysis or discussion by the court on the subject.

Unfortunately, Noris has received little to no meaningful commentary by Florida courts since.^[34] It has been cited in published decisions by Florida courts only a handful of times since 1997: twice as part of string cites in support of the proposition that fee agreements that violate Rule 4-1.5 are unenforceable against the client,^[35] once in support of the proposition that absent knowledge of any issues, a car rental agency has no duty to investigate whether a potential renter’s driver’s license is suspended,^[36] and in another string cite to support a trial court’s finding that the complaint failed to set forth a viable cause of action.^[37]

Post-Noris Developments in the Third District

While any suggestion that either Rule 4-1.5 or Noris supports true joint and several liability for referring attorneys should be drawn into considerable question by the opinion itself, any arguable continuing vitality must also be considered in light of a subsequent decision out of the same district, which appears to have silently retreated from the notion that Bar rules are appropriate measures of liability in civil cases. In 2002, the Third District observed in Beach Higher Power Corp. v. Rekant, 832 So. 2d 831 (Fla. 3d DCA 2002):^[38]

While not determinative of the matter at hand, we believe it is worth reminding lawyers that had Rekant been acting as BHP’s counsel, the facts as alleged would most likely have been considered a violation of the rules of professional conduct. See Rules Regulating Fla. Bar, Rule 4-1.7. (Prohibiting a lawyer from representing a client if the representation of that client will be directly adverse to the interests of another client, unless the lawyer reasonably believes the representation will not adversely affect the lawyer’s responsibilities to and relationship with the other client, and each client consents after consultation.)

The rules, however, do not play into our consideration in the instant case, because the rules themselves clearly provide that they are not to be applied for the purpose of determining the existence of an attorney client relationship, or for the purpose of determining liability. The Preamble to the Rules of Professional Conduct provide in part: “for purposes of determining the lawyer’s authority and responsibility, principles of substantive law external to these rules determine whether a client-lawyer relationship exists.” Also, as provided in the Preamble: “Violation of a rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached”^[39] (emphasis added).

It is not immediately apparent whether this should be interpreted as an implied departure from its prior analysis in Noris both because Noris does not explain the specific reasoning behind its conclusion (see above), and because Rekant does not cite or mention Noris. When read broadly together with Noris, however, Rekant suggests that unless the Florida Supreme Court has expressly held otherwise, the rules will have little or no application to determining a lawyer’s civil liability. Because the Supreme Court has not expressly held otherwise, one would expect the court to follow Rule 4-5.1’s express direction that a lawyer’s liability for another lawyer’s conduct is beyond the scope of the rules, in conjunction with the preamble’s instruction that “nothing in the rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequences of violating such duty.”^[40]

Application of §768.81 to Noris

When Noris was issued, the 1986 version of §768.81 was effective. Evaluating whether Noris would have given rise to comparative or joint and several liability under the operative version of §768.81 is relevant to fully understanding the decision, because if Noris should have resulted in comparative fault under the applicable statutory scheme, the Third District’s imposition of joint and several liability might be interpreted as a deliberate abrogation of §768.81 (1986), potentially suggesting 1) additional grounds upon which Noris may be incorrect, or 2) that the Third District somehow determined (with no analysis) that the issue is not controlled by §768.81. The latter would be potentially relevant to any modern attempts to assert §768.81 as controlling the issue, because it could support the argument that the court simply does not believe §768.81 applies in this context.

While Noris does not describe the nature of the plaintiff’s injuries (and does not address apportionment, comparative fault, or §768.81 at all), the underlying case involved an automobile/bicycle accident. The economic (medical bills) and noneconomic (pain and suffering) damages that would have otherwise been asserted in the underlying case would be unified and converted in the malpractice case into a single measure of economic damages determined as Noris’ lost economic expectancy from the judgment he was never given a chance to obtain.^[41] While legal malpractice jurisprudence recognizes the possibility of a plaintiff’s own comparative fault,^[42] there is no realistic argument it would apply to a claim involving an attorney’s failure to file before the statute of limitations unless the plaintiff did not retain the attorney with adequate time, which is not suggested in the Third District’s opinion. A claim for economic damages in which the plaintiff was not at fault would have imposed joint and several liability under the 1986 statute, but only if each defendant’s comparative fault “equaled or exceeded” the plaintiff’s. The Noris court expressly found that Silver was not liable for negligent referral because he had no knowledge the receiving attorney would commit malpractice.^[43] That finding would ostensibly eliminate any basis for Silver’s direct liability, which should have prevented Silver’s fault from equaling or exceeding the plaintiff’s. The Noris court’s apparent acknowledgement that joint and several liability would attach to working attorney Falk and referring attorney Silver would, therefore, seem to contravene the statute. However, the court’s failure to address the issue even peremptorily leaves open the question of whether this was an express decision to disregard §768.81 (1986) in favor of Rule 4-1.5, or whether it was simply an issue that never came up.

There are no reported cases in Florida discussing the potential impact of the 2006 revision on Rule 4-1.5(g)’s “joint responsibility.” Indeed, the authors were unable to locate a single reported Florida decision containing “comparative fault” or “768.81” in any context related to Rule 4-1.5(g), and no meaningful national cases discussing ABA Model Rule 1.5 in the context of comparative fault. Regardless, it seems that any suggestion of Noris still supporting joint and several liability in the referral context would be effectively nullified by the statutory abrogation of joint and several liability. While Chandris was issued in, and remains in, a relative statutory vacuum,^[44] Noris does not exist in the same vacuum. Although Noris can possibly be read as implicitly holding that the court will disregard Florida’s comparative fault statute, that is not a strong argument under the circumstances and has almost certainly been considerably weakened by Florida’s subsequent dedication to damage apportionment based on relative fault, seen in both the 2006 imposition of pure comparative fault and the equally telling 2011 amendment to make pure comparative fault retroactive.

Conclusion

When a lawyer opts to refer a matter to a lawyer who is more qualified for that matter rather than keeping it for himself or herself, he or she serves the client’s goals by maximizing the chances of recovery and limits his or her own potential exposure for practicing above his or her experience level or in an area of law with which he or she is unfamiliar. So what is a Florida referring attorney to do in the face of the uncertainty born out of the Noris decision? The regrettable answer at this point is simply to be extremely cautious about referrals, which is unfortunate because it stands to harm nonlawyers in genuine need of assistance. Although, in theory, Noris would appear to represent an obvious boon to the legal malpractice plaintiff who likely now has another liability policy in play, the practical benefit of another answerable lawyer who is (arguably) vicariously liable may come at the expense of an entire class of prospective clients who derive immeasurable value from a system that rewards lawyers for making quality referrals.

The Official Comments to the Restatement (Third) of the Law Governing Lawyers explain how referral fees were criticized in the past as being generally detrimental to clients, based on the assumption they would lead to client brokering to the highest bidder with no consideration of the working attorney’s qualifications.^[45] Yet the commentary also explains how later analyses recognized that these concerns were based largely on fallacious assumptions, and that referrals are more likely to benefit rather than harm clients’ interests.^[46]

The risk of 100% vicarious liability for the working attorney creates a substantial disincentive to refer cases out. While the risk can presumably be eliminated entirely by forgoing any share of fees, it can be fairly assumed that many of those referrals will simply never be made, or will be made with less care, when the referring attorney has no financial interest in maximizing the putative client’s recovery. A strong argument can, therefore, be made that Noris — which was ostensibly intended to benefit clients by providing more avenues of recovery in the event of malpractice — paradoxically frustrates its own purpose. Until the court resolves the issue, Noris will likely remain a jurisprudential dead end with uncertain application.