The State Bar seeks public comment regarding proposed amended California Rule of Professional Conduct 5.4. The proposed amendment would expand the existing exception that permits a lawyer to share court awarded attorney fees with a nonprofit organization that employs, retains or recommends employment of the lawyer in a matter. The proposed expanded exception would allow fee sharing where the fee is not court awarded, but arises from a settlement or other resolution of the claim or matter.
Deadline: August 28, 2020
The California Rules of Professional Conduct are attorney disciplinary rules. By statute, the Board of Trustees has the authority to adopt amendments to the rules that are binding upon attorneys once those rules are approved by the Supreme Court of California. (Business and Professions Code sections 6076 and 6077.)
In July, 2018, the Board established a Task Force on Access Through Innovation of Legal Services (ATILS) pursuant to Goal 4, Objective d., of the State Bar’s 2017−2022 Strategic Plan:
Commencing in 2018 and concluding no later than March 31, 2020, study online service delivery models and determine if any regulatory changes are needed to better supports and/or regulate the expansion of access through the use of technology in a manner that balances the dual goals of public protection and increased access to justice.
At the Board’s March 12, 2020, Board Meeting, ATILS presented their final report and recommendation to the Board. Included in this report were seven recommendations. One of the recommendations was for the Board to issue for public comment an amended Rule of Professional Conduct 5.4 (Financial and Similar Arrangements with Nonlawyers) that would expand the existing exception for fee sharing arrangements with a nonprofit organization by adding an exception which provides where the legal fee is not court awarded, but arises from settlement or other resolution of the claim or matter, the lawyer may share or pay the legal fee to the nonprofit organization, provided that the nonprofit organization qualifies under section 501(c)(3) of the Internal Revenue Code. This is derived, in part, from the District of Columbia Rules of Professional Conduct 5.4 (Professional Independence of a Lawyer).
ATILS sunset on March 31, 2020. As a result, the Board has directed the State Bar of California Standing Committee on Professional Responsibility and Conduct (COPRAC) to receive and review the public comments for this item. Fourteen comments were received on the proposed rule and COPRAC considered these comments at its meeting on June 5, 2020. Following consideration, COPRAC amended the proposed rule in response to the public comments, in part, by: (1) creating a new subparagraph (a)(6) for the exception; (2) requiring the lawyer to comply with the same safeguards contained in rule 1.5.1 [Fee Divisions Among Lawyers]; and, (3) adding a new Comment  affirming a lawyer’s duty of independent professional judgment notwithstanding a permitted fee sharing arrangement with a nonprofit organization.
At its meeting on July 13, 2020, the Regulation and Discipline Committee authorized an additional 45-day public comment period. It was also clarified that authorization for public comment is not, and shall not be construed as, a statement or recommendation of approval of the proposed changes.
Standing Committee on Professional Responsibility and Conduct
August 28, 2020
Comments should be submitted using the online Public Comment Form. The online form allows you to input your comments directly and can also be used to upload your comment letter and/or other attachments.