Certified Attorney Referral Fee Expansion: New Jersey’s New Precedent on Out-of-State Referral Fees

Certified Attorney Referral Fee Expansion: New Jersey’s New Precedent on Out-of-State Referral Fees

Introduction

The Supreme Court of New Jersey’s recent decision in In re Opinion No. 745 of the Supreme Court Advisory Committee on Professional Ethics (2025) marks a significant shift in the interpretation of referral fee regulations within the state. At issue was the controversy surrounding whether certified attorneys in New Jersey could pay referral fees to out-of-state lawyers who are not licensed within New Jersey. Previously, the Advisory Committee on Professional Ethics (ACPE) had maintained, under Opinion 745, that such payments were impermissible. The case involved multiple prominent legal organizations and bar associations, including the New Jersey State Bar Association, the New Jersey Association for Justice, several county bar associations, and other legal advocacy groups, all of whom challenged the Committee’s interpretation.

This case is set against the backdrop of New Jersey’s attorney certification program, which aims to enhance the availability of vetted legal expertise. The dispute centered on the interpretation of Rule 1:39-6(d) as it relates to referral fees, compared with the general rules governing fee divisions in the Rules of Professional Conduct (RPC), particularly RPC 1.5(e). The parties argued whether payment of referral fees—classified as “other compensation” rather than fees for legal services—should be subject to the licensure and eligibility requirements imposed on New Jersey lawyers.

Summary of the Judgment

In a unanimous decision penned by Chief Justice Rabner, the Supreme Court vacated the ACPE’s Opinion 745. The Court held that Rule 1:39-6(d) expressly authorizes certified attorneys to pay referral fees to out-of-state lawyers. The opinion clarified that referral fees are not payments for legal services rendered but are simply compensation for providing a client referral. As such, paying these fees does not trigger concerns of the unauthorized practice of law. The Court distinguished Rule 1:39-6(d) from RPC 1.5(e), the latter of which governs fee divisions for legal services performed.

Additionally, the Court acknowledged that while certain aspects of Opinion 745—particularly those addressing conflicts of interest and the treatment of fees when a lawyer withdraws—remain valid and unchallenged, the core holding regarding out-of-state referral fees was incorrect. By emphasizing the plain language of the rule, the Court ensured that the critical incentive for referrals, which is central to the certification program’s objectives, is maintained.

Analysis

Precedents Cited

The Court’s reasoning extensively considered the historical and textual context of referral fee regulations. Key precedents and sources include:

  • RPC 1.5(e): This provision originally governs the division of legal fees between lawyers who actively render services, requiring that the division be proportionate or based on a written agreement. However, the Court noted that the language “except as otherwise provided by the Court Rules” clearly demonstrates that Rule 1:39-6(d) serves as a specific exception.
  • Rule 1:39-6(d): The Court placed strong emphasis on the plain language of this rule, noting that it explicitly permits certified attorneys to pay referral fees “without regard to services performed or responsibility assumed.” The historical context, including its adoption following recommendations from the Committee on Trial Advocacy Specialization in the late 1970s, further solidified its role in enhancing referral incentives.
  • Eichen, Levinson & Crutchlow, LLP v. Weiner: The decision in this case reinforces the concept that referral fees are categorized as “other compensation.” The Court cited Eichen to show that even in cases involving suspended or disbarred lawyers, the referral fee mechanism was not intended to compensate for legal services rendered.

These precedents were pivotal since they underpinned the notion that referral fees are fundamentally different from fees earned for legal services. The Court’s interpretation thus aligns with longstanding judicial understanding and offers a clear line between referral compensation and service-based fee splits.

Legal Reasoning

The Court’s legal reasoning is anchored in a textual and contextual interpretation of the relevant rules. First, the judgment distinguishes between the purpose and application of Rule 1:39-6(d) and RPC 1.5(e). While RPC 1.5(e) pertains to the division of fees for legal services actually performed, Rule 1:39-6(d) specifically addresses referral fees, which, by definition, are awarded solely for making a referral. The Court was careful to note that the latter rule is unqualified by any requirement for the referring attorney to hold a New Jersey license.

Moreover, the decision emphasizes statutory construction principles by looking to the “plain language” and historical evolution of the court rules. The Court’s reasoning was bolstered by extrinsic evidence, including committee reports and the legislative history of the certification program, which clearly demonstrate that the purpose of Rule 1:39-6(d) is to incentivize referrals regardless of the geographical licensing status of the referring lawyer. This interpretation is further reinforced by the inherent separation of referral fees from the actual practice of law, thereby avoiding any inadvertent endorsement of unauthorized practice.

Impact

This Judgment is expected to have a profound impact on both legal practice and ethical standards within New Jersey:

  • Enhanced Referral Networks: By affirming that certified attorneys can compensate out-of-state lawyers for referrals, the decision bolsters the attorney certification program’s goal—to improve access to experienced legal representation. This move is likely to increase inter-jurisdictional cooperation and client access to high-quality legal services.
  • Clarity in Fee Division: The ruling offers clearer guidance on how referral fees are to be handled, reducing ambiguities that may have previously exposed attorneys to potential liability for breach of contractual fee arrangements or misunderstandings regarding fee splitting.
  • Precedential Value: Future disputes regarding fee sharing, especially those involving the interplay between state-specific certification rules and general ethical standards, will heavily rely on this decision as a benchmark for interpreting similar questions.
  • Potential for Rule Amendments: Although the Court focused on the central issue of out-of-state referrals, it left open the possibility for future amendments to Rule 1:39-6(d), which could further refine the parameters of fee sharing among attorneys.

Complex Concepts Simplified

Several legal concepts in the Judgment might appear complex; here are simplified explanations:

  • Referral Fee vs. Legal Service Fee: A referral fee is a payment made simply for recommending a lawyer, not for actually performing legal work. In contrast, a legal service fee is for the professional work an attorney performs on behalf of a client.
  • Rule 1:39-6(d) vs. RPC 1.5(e): Rule 1:39-6(d) is a specific rule that allows for the payment of referral fees, while RPC 1.5(e) deals with dividing fees when actual legal services are performed. The Court’s reading separates these two to avoid misapplication.
  • Plain Language Principle: This principle requires interpreting a rule based on its ordinary meaning, ensuring that ambiguous language is clarified by the text’s most straightforward reading, rather than by inferred purpose.

Conclusion

In vacating ACPE Opinion 745, the Court has set a new precedent by affirming that New Jersey certified attorneys may pay referral fees to out-of-state lawyers. The decision rests on an unambiguous reading of Rule 1:39-6(d), distinguishing referral fees from fees for legal services. By prioritizing the plain language and contextual history of the rules, the Court has preserved the incentive structure foundational to the attorney certification program while ensuring compliance with broader professional conduct standards.

The case underscores the importance of clear statutory interpretation and highlights the dynamic interplay between traditional legal ethics and evolving referral practices. This decision not only clarifies existing guidance for practicing attorneys but also establishes a framework for future cases that grapple with the intersection of professional ethics, licensing requirements, and fee-sharing arrangements in an increasingly interconnected legal environment.

Overall, the Judgment is a landmark decision that reaffirms the autonomy of certified attorneys in structuring referral agreements and is likely to have far-reaching implications for the practice of law in New Jersey and beyond.

Case Details

Year: 2025
Court: Supreme Court of New Jersey

Judge(s)

RABNER, CHIEF JUSTICE.

Attorney(S)

Diana C. Manning argued the cause for appellant New Jersey State Bar Association (William H. Mergner, Jr., President, New Jersey State Bar Association, attorney; William H. Mergner, Jr. and Timothy F. McGoughran, of counsel, and Diana C. Manning, Christina Vassiliou Harvey, and Kyle A. Valente, on the briefs). Michael G. Donahue argued the cause for appellant New Jersey Association for Justice (Stark & Stark, attorneys; Michael G. Donahue, of counsel and on the briefs, and John A. Sakson, Michael C. Shapiro, and John C. Lowenberg, on the briefs). Eric G. Kahn argued the cause for appellants American Board of Trial Advocates Northern New Jersey Chapter and Trial Attorneys of New Jersey (Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins, attorneys; Eric G. Kahn, of counsel and on the brief, and Annabelle M. Steinhacker, on the brief). Terrence J. Hull argued the cause for appellant Blume, Forte, Fried, Zerres & Molinari, P.C. (Blume, Forte, Fried, Zerres & Molinari, attorneys; Carol L. Forte, Michael B. Zerres, John E. Molinari, Mitchell J. Makowicz, Jeffrey J. Zenna, Kenneth W. Elwood, Harris S. Feldman, Richard J. Villanova, Norberto A. Garcia, and Frederick D. Miceli, of counsel, and Terrence J. Hull, of counsel and on the briefs). Renee Greenberg, Deputy Attorney General, argued the cause for respondent Supreme Court Advisory Committee on Professional Ethics (Matthew J. Platkin, Attorney General, attorney; Sookie Bae-Park, Assistant Attorney General, of counsel, and Renee Greenberg, on the brief). Megha R. Thakkar submitted a letter in lieu of a brief on behalf of appellant Middlesex County Bar Association (Marc S. Gaffney, President, Middlesex Bar Association, attorney). Diane L. Cardoso submitted a letter in lieu of a brief on behalf of appellant Hudson County Bar Association (Diane L. Cardoso, President, Hudson County Bar Association, attorney). G. Glennon Troublefield submitted a letter in lieu of a brief on behalf of appellant Essex County Bar Association (James DiGiulio, President, Essex County Bar Association, attorney). Michael J. Epstein submitted a letter in lieu of a brief on behalf of appellant Bergen County Bar Association (Laura C. Sutnick, President, Bergen County Bar Association, and The Epstein Law Firm, attorneys).

Comments