In-House Counsel Ethics: Fee Sharing Implications

By: Devika Kewalramani MOSES & SINGER LLP

Lawyers are prohibited from sharing legal fees with non-lawyers unless an exception applies. The issue of fee sharing infrequently arises for in-house counsel as they are typically salaried employees who usually do not receive fees for advising their corporate employers.

ON THE RARE OCCASION THAT IN-HOUSE ATTORNEYS represent their employer-client in litigation and arbitration matters, ethical issues involving fee sharing and the unauthorized practice of law may be implicated. N.Y. State Ethics Opinion 1121 (Opinion 1121 issued by the New York State Bar Association, Committee on Professional Ethics (the Committee) in May 2017¹ dealt with two issues:

(1) whether in-house counsel for a company may remit the entire attorney’s fee portion of an arbitration award to the claimant company without violating the fee-sharing rule and (2) whether remittal of attorney’s fees to its corporate employer would constitute aiding the non-lawyer company in the unauthorized practice of law.

In Opinion 1121, the inquiring in-house counsel was employed by a corporation that provided medical equipment to individuals through prescribing physicians. In-house counsel handled general corporate matters and arbitrations involving denial of insurance claims and occasionally litigated them. If the claimant corporation made a monetary recovery resulting from the arbitration, the amount would be bifurcated with a portion of the award being paid for (1) the incorrect denial by the insurance provider for the medical equipment and (2) attorney’s fees awarded to the attorney-of-record. Industry practice required the paying insurance companies to distribute the attorney’s fees award to the attorney-of-record and not directly to the corporation. After receipt by the attorney-of-record, the only means by which the employer-corporation could recover the attorney’s fees was by way of sharing fees.

To read the full practice note in Lexis Practice Advisor, follow this link.

Devika Kewalramani is a partner at Moses & Singer LLP and co-chair of its Legal Ethics & Law Firm Practice. Ms. Kewalramani focuses her practice on legal ethics, professional discipline, risk management, and compliance. She serves as the chair of the Committee on Professional Discipline of the New York City Bar Association.

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1. New York State Bar Ass’n Comm. on Prof’l Ethics, Op. 1121 (2017).