Bank of America Seeks to Lower Legal Fees with Questionable Plan
Like most companies, Bank of America (BofA) wants to reduce the amount it pays in legal fees to outside counsel. But their plan to do that is far from orthodox.
The deal they've offered outside counsel is a break in legal fees based on the business that BofA sends to those law firms. As part of the offer it sent to the firms, BofA asked them to confirm "that these fee arrangements are ethical," according to the ABA Journal.
But legal experts aren't convinced the agreement would be ethical given the rules regarding referrals.
As a quick review, paying for referrals is generally frowned upon by most state bar associations. While lawyers can accept referrals, they shouldn't do anything that gives the appearance that they are exchanging each referral for a given value.
University of California at Hastings law professor Geoffrey Hazard has already dismissed the idea as unethical. It amounts to paying for each referral in his eyes.
But at least one law firm, McGuireWoods, has already agreed to the deal, reports the ABA Journal. The agreement is no different from firms that give a benefit to companies that send the firm a lot of work, according to McGuireWoods partner Thomas Spahn.
At first glance this agreement seems somewhat different from what Spahn is describing. Rather than giving some kind of bonus to valued clients, the BofA agreement seems to exchange a proportional fee discount to the amount of business BofA sends to the law firms.
While it's not direct money for referrals, it is possible to give a certain value to each client referral.
The bank has defended its actions as within ethical bounds, reports the ABA Journal. They do not require clients to retain certain law firms once a referral is made and they also disclose that the referral could result in benefits to BofA.
Whether that's enough for ethics committees remains to be seen. This kind of agreement is too new to know how the legal community as a whole will react.
But even if the agreement itself is tossed out, companies like BofA will likely keep looking for ways to keep legal fees down. While it's not news it's still important to keep in mind.
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