Retain or Refer? What’s the Best Way for Solos/Smalls To Take Care of Their Best Clients?

A colleague recently sought advice on the following (facts have been changed):

I recently achieved a fantastic result for an out of state client who had a matter in my jurisdiction.  The client now wants me to help with all of his legal work, and asked me to assist with a matter in his home state where I’m not licensed involving a subject with which I have limited experience.  Should I take the case and retain outside counsel to assist or just refer it out entirely?

The question is trickier than it seems. If my colleague had asked about an inquiry from a prospective client with a matter he couldn’t handle, referral is a no brainer. There’s simply no reason to try to hang on to a matter outside your expertise and jurisdiction and either incur the cost of retaining outside counsel (which will potentially increase the cost to the client) or run the risk of unauthorized practice or malpractice if you don’t.  Moreover, referral doesn’t necessarily mean that you’ll lose devised ethically compliant ways to facilitate payment of referral fees.

But things are different when servicing established clients. Some lawyers are loathe to refer an established client because they fear the other firm may try to poach the client. The prospect of poaching doesn’t worry me – after all, if another firm steals my client, it’s my bad for not having done enough to keep him (that’s true even if the other firm badmouths me – because if a client believes those lies or doesn’t feel comfortable enough to bring them to my attention, then I haven’t done my job in maintaining a trusted relationship).  What does concern me, however, is that if I refer a client to another firm, those lawyers may not take care of the client as I would, or deliver the same quality of service that I provide. Indeed, there’s a very, very small group of colleagues whom I trust enough to serve my existing gold-standard clients.

Still, what happens when a client needs a service that a solo or small firm can’t provide — or might be able to offer but would require outside assistance? That depends. In a situation where I truly lack any knowledge (such as a bankruptcy or estate planning or tax matter), I’ll refer the client to that trusted circle of colleagues, and contact them in advance to let them know that I expect white glove treatment for the client.  By contrast, if I have the general skills to represent the client, but I’m not licensed in jurisdiction or would benefit from some added input about the specific subject matter, I prefer to bring in an outside attorney as a co-counsel, local counsel or consultant. The outside lawyer won’t enter into a retainer agreement with the client, but rather, will contract with me to provide services to my firm.   While there may be times where I’ll allow the outside firm to speak directly with my client, I’ll usually participate in those communications or ask the consulting attorney to copy me on any emails.  In this way, I can provide the level of expertise necessary to handle the case while continuing to serve as my client’s attorney and trusted advisor.

Of course, a local/co-counsel or consulting relationship comes with drawbacks as well. Most commonly, I’ve found that many lawyers aren’t particularly receptive to playing second fiddle to another attorney who doesn’t know as much about the forum or the subject matter – and they’ll often try to take the lead or cut me out of the arrangement which I won’t tolerate. Moreover, while this type of dual relationship can make life easier for clients (since the client isn’t required to sign a retainer agreement with another lawyer), there’s also the possibility that the client may wind up paying a higher fee since he’s being billed for two lawyers rather than one. In this type of situation, to the extent that there’s duplicative billing (such as two lawyers on a phone call or at a meeting), I’ll reduce my fee as necessary to keep the overall bill reasonable. (Having been on the flip side of this type of arrangement – where I’m brought in as FERC counsel, I don’t particularly like when the retaining firm constricts my hours so that it can retain a larger portion of the fee for itself).

So that’s how I’d respond to my client’s inquiry – refer the case only if absolutely necessary; otherwise keep the work and bring on the help you need to provide the highest level of service to your client.  What’s your advice? The comment section is open.

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