CBA Record July-August 2025

ban is the broader prohibition on nonlaw yer ownership or control of law firms. Though the language of Rule 5.4 may seem clear, its real-world application often raises complex interpretive questions. One critical area of confusion involves what counts as a “legal fee.” Courts and ethics authorities have broadly interpreted the term to encompass not just specific client payments, but revenues and profits derived from legal services. Thus, arrange ments that share law firm earnings— whether explicitly labeled as fees, profits, or distributions—can trigger scrutiny under Rule 5.4. The opacity of this line has led to the demise of several innovative business models. For instance, the ethics fallout over Avvo Legal Services—which charged a fixed fee for legal services and then paid lawyers after subtracting a market ing fee—illustrates how regulators view even indirect fee-sharing as a violation. Likewise, the New York City Bar’s Formal

PRACTICAL ETHICS BY TRISHA RICH The Increasingly Elastic “Ban” on Fee Sharing with Nonlawyers F or more than a century, the prohibition on sharing legal fees with nonlawyers has been a cornerstone of legal ethics. Codified in Rule 5.4(a) of the ABA Model Rules of Professional Conduct and adopted by most U.S. jurisdictions (more on that below), this rule aims to preserve the professional independence of lawyers. But like many rules of professional conduct, its practical application is more nuanced—and increasingly contested—as business models and market realities evolve. This column provides a refresher on the traditional ban, outlines some key excep tions, explores how the rule affects related areas like litigation funding and lead genera tion, and discusses some ongoing prospects for reform.

The term “nonlawyer” is used throughout the column for consistency with use in the Model Rules, the Illinois Rules of Professional Conduct, and many other authorities. Core Prohibition At its heart, Model Rule 5.4(a) provides that “a lawyer or law firm shall not share legal fees with a nonlawyer,” subject to limited exceptions. Nearly every U.S. jurisdiction has adopted some version of this rule—with the notable exception of Arizona, which elimi nated the restriction in 2021. The rationale for the prohibition is to safeguard a lawyer’s professional independence and to prevent interference by those not bound by legal ethics rules. Closely tied to this

Opinion 2018-5 cautions against funding arrangements that effectively give non lawyers a cut of legal earnings. Exceptions to the Ban Despite its sweeping language, Rule 5.4(a) includes several longstanding exceptions that most jurisdictions accept: l Payment to a deceased lawyer’s estate: A law firm may pay a deceased

Trisha M. Rich is a commercial litigator and legal ethicist at Holland & Knight, CBA First Vice President, and a past president of the Association of Professional Responsibility Lawyers, the national bar association for legal ethicists.

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