Maximize Your Practice: When Referring Cases Pays Better Than Handling Them

I got a call two weeks ago now from a lawyer in Texas who had a crash in Virginia , had a case with a crash in Virginia and a family that lived in Tennessee , and he wanted to bring us on as local counsel , and he wanted to know what are the things that are different about Virginia law than Texas law . What do I need to know ?

And I said I don't have the first fucking clue because I don't know anything about Texas law . Here's what I can tell you , though . The best way for you to get paid on this case and avoid malpractice potential is to just send it to me and I'll write you a check for a third of whatever it ultimately results for .

And he passed on that deal because he's operating a small law firm , probably with not very many clients and kind of a crappy website , and that's fine , and he might find somebody who takes this case on as local counsel , although it won't make sense for that lawyer's time because what he wanted to pay for local counsel work isn't worth it for anybody who's got a

practice of any size .

And what I want to impress on you is that when you just refer cases out that are outside of your state or outside of your practice area and you find a lawyer that'll write you a check for a third of the recovery for making a phone call If you're one of , by the way , check your ethics rules , right , you do have to be in a state where you don't have to

accept joint responsibility . You don't have to split the fee in ratio of the amount that you work on the case , and thankfully in Virginia I'm in one of those states , and when I refer a case out , I don't have to take on any responsibility for the ultimate outcome and I don't have to actually do any work on it .

And so this if you are not in one of those states , this episode doesn't apply to you .

Don't listen to me , check your own ethics rules , but the highest hourly rate you will ever make in your injury practice is when you find a good place , a good home for those clients who you should not be serving , and if you are out of state , you should not be serving clients who

are not in the state where you know anything about the law . And in today's episode , I'm going to talk you through what it's like to be on the other side of that transaction , because I recently wrote a six-figure check to a lawyer for making a phone call .

And if you have a Virginia crash and you would like to get a six-figure check for doing very little work , if it's a seven-figure case , send it to me . And that's what this episode's about . All right , so let me back up and give you the framework for this discussion , why I think it's important for us to talk about today .

So earlier this year I settled a case for $925,000 , $950,000 , something like that and it was referred to me by an out-of-state lawyer . And the way that injury lawyers work if you're not an injury lawyer , if you're not a lawyer at all is that when lawyers refer us cases , we can work out a referral fee back to them .

And there's some ethics rules that I'll talk about a little bit later in the show , but generally , if I get a case that comes in as a referral from another lawyer , I'm sending that lawyer a check for a third of my fee or a quarter of the fee if we've tried the case , and so the case settled for , I think , $925,000 .

Our fee is a little bit over $300,000 . And so the check that I'm writing to this out-of-state lawyer is a little bit over $100,000 . It's a pretty good payday , right , except when you consider this . So it's a case that he had worked on for 20 months and as an out-of-state lawyer you can't file a lawsuit in a state where you're not licensed .

He's not licensed in Virginia . He'd taken a Virginia auto accident case . It was a complex tractor trailer crash . My clients were pinballed across 495 . And with a complex injury .

Also , I had a client who had a significant mental health history , who was put in the hospital as a result of this crash for a significant period of time and then was in rehab for a significant period of time and then was in rehab for a significant period of time .

And the neurologist and the treating doctors , while they determined that something was wrong with her , they never definitively pointed , either on a scan or an MRI or with any other testing , to the crash as the cause of the thing that was wrong with her . So it was like this was obviously the straw that broke the camel's back .

She would not have been in the hospital on the day of this crash had she not been in the crash . But significant question for the next six months that she spent in rehab , why was she there ? Would she have been there for any other reason ?

And so in Virginia , for a number of reasons that I won't get into on this podcast , that doesn't really matter , but insurance adjusters and defense lawyers don't really understand that .

So had we gotten to trial on this case , the fact that she had all of this other significant history that predisposed her to having this result would not have come into evidence , would not have been admissible .

But of course it's all that you hear about in the claims settlement process , because that's all that insurance adjusters and defense lawyers are trained to talk about .

In fact , in this case , after we'd filed suit and answered some discovery , my first contact with the defense lawyer was a gloating phone call from him asking if I'd seen this 15,000 pages and I'm not joking when I say that 15,000 pages of prior mental health records , including , like a suicide attempt over the summer , very sad case .

And I said yeah , I've seen all that . But also she wouldn't have been in the hospital and wouldn't have had all this care had this not been the straw that broke the camel's back . And so cases like that , in my view , are fairly clear , like the result .

The end result is always going to be what it is , but getting there requires some work , because you've got to clear some hurdles with the insurance adjuster .

You probably have got to clear some hurdles with the defense lawyer , you probably have got to line up the experts and get everything right , and if you're not a subject matter expert and if you're not an expert in the law of the state where the thing happened , you have problems getting it there .

And so this lawyer , who was from another state , had worked on the case for 20 months before he finally referred it out four months prior to the statute of limitations running , and so while he's getting a six-figure fee coming back to him , he is getting paid really for the work that he did for the 20 months . And so it got me thinking

as I was writing this check , man , how much greater is your hourly rate if you just refer these cases from the get-go ? And the problem for lawyers is that $100,000 fee , which could have been a $300,000 fee had he worked on it , is really attractive .

We have a really hard time turning away or sending away cases where they have that kind of revenue potential . But then you get stuck in this spiral , downward spiral of I don't really know what I'm doing .

Case is increasingly complex , it's taking increasingly more of my time and it's keeping me up at night because now I'm thinking about this case that I don't really know what I'm doing . It's getting increasingly complex and we're barreling down on a statute of limitations .

The return on your time and on your mental capacity for having sent that case out to somebody else and earning $100,000 really for connecting them with a good lawyer in the jurisdiction where the thing happened and a good lawyer who's a subject matter expert in that type of law is so much higher than the return on .

Okay , I could earn a $300,000 fee if I work the case all the way to its conclusion , and so my suggestion to you is where you have these spaces where you can make an incredibly high hourly rate by sending a case to somebody else , don't get distracted by the high revenue fee that you might make if you work on it to its conclusion , because your time and

your effort and your resources and your firm are so much better served by working on cases where you already are the subject matter expert in that type of law in that state . And so I'll give you an example of this , because it came up in our Great Legal Marketing Mastermind meeting just last month .

I have a buddy who's an injury lawyer a very successful injury lawyer , who's been getting a number of workers' compensation calls , and one of the things that he said is in the first quarter I generated $100,000 of referral fees in workers' compensation cases , which effectively is okay . There's probably $300,000 of fees .

He's getting a third of that , and his question to the group was knowing that I'm getting all of these calls , should I open a workers' compensation section of my firm , because it's another $1.2 million in revenue if the fee is the same going across the four quarters of the year ? And to me it's like resoundingly no right .

Why would you go out and become the expert in workers' compensation just to keep the other two-thirds of that money when just by making phone calls and connecting these people to people that can actually help them and who are already experts in how to help lawyers , right ?

Because I think , again being in this world , my perception is that everybody thinks that you can handle a personal injury case . Divorce lawyers , criminal lawyers , trust and estates lawyers , generalists they all think that they can do what we do and they can do it well , because really it's just a matter of a red car hitting a blue car and it's some medicine .

And to the extent , like when you've done a number of these , that's largely true . Like most of these cases , although every case has its own variations , most of these cases look the same . In the vast majority of cases there's some kind of a neck injury , some kind of a back injury and or some kind of a head injury .

Sometimes there's a shoulder , like there's only so many body parts that get hurt in most auto accidents . And once you learn the medicine and once you learn the law , it really can be a rinse and repeat of practice , which is great if you're in it .

If you're not in it , if you're handling a will one day , divorce the next day and then trying to handle an auto accident case , it can be very hard and in fact I've sued in the last three years two general practitioners for a for mishandling cases just like this . Really easy cases I thought , where in one case he missed a county immunity issue .

He'd sued the county instead of suing the individual and if that's foreign to you , please don't handle any auto accident cases and in the other case they had sued a shopping center and they had misnamed the shopping center , because it's important that you get the entity correct , and they hadn't done the amount of work to figure out who actually owns the shopping .

So this was , I think , a slip and fall , and in both cases they took relatively crappy injury cases and turned them into pretty good legal malpractice cases . Right , these cases , both of them were more valuable as legal malpractice cases and had higher settlement values than they ever did as injury cases .

Because now , instead of telling the story about the woman who tripped in the parking lot , or instead of telling the story about the woman who had no damage to the back of her car but still had four months of physical therapy , I'm telling the story about the lawyer , who's a general practitioner , who's never handled an injury case in his life , who screwed

something very basic up .

And if you can't competently run these cases , you really ought to be generating a good referral partner that you can send them to who can do the work All right , and so , just while we're talking about that , and because I know some lawyer somewhere is going to go , I can't do that in my state I think it's worthwhile looking at these ethics rules about fee

sharing between lawyers who aren't in the same

firm . So the ABA model rule says that lawyers who aren't in the same firm can share fees only if the division of fees is proportionate to the services performed by each lawyer or if each lawyer assumes joint responsibility . So two ways under the model rule to get a fee .

One of them is your fee is only proportionate to the amount of work that you did , which , like picking up a phone and making a phone call , probably is not worth a third of the case . The other way is to assume joint responsibility , which is a whole nother thing .

I probably wouldn't do that if I were in one of those states , because I don't know if I refer to case Iowa , say , and Iowa had that rule . Now I'm accepting , as a general partner on that case , some responsibility for the outcome of the case and somebody can sue me if the guy that I refer it to screws it up in some way and I have no control .

I probably wouldn't do that deal . But the Virginia rule is different . In Virginia it doesn't require that the referring lawyer participate in the case , doesn't require that the fee split be proportionate , doesn't require joint responsibility . All that's required in Virginia is that the overall fee be reasonable .

Responsibility all that's required in Virginia is that the overall fee be reasonable and that the client be informed of and agree to the fee split . I think at the outset of the case and we always put that in our fee agreement that here's what we're going to be paying back to the referring lawyer , at least in Virginia .

And if you're in a state like Virginia , it makes that the capability of sharing fees in between firms pretty easy . And one thing that I'll say on that is we get referrals from lawyers . I don't actually actively market to other lawyers to refer us injury cases , and there's a couple of reasons for that .

Number one I think a lot of lawyers think that they can handle them themselves , for the reasons that I already discussed , and so I don't think it's a great return on my time marketing especially to Virginia lawyers who do anything else to send me your injury cases , cause I think a lot of lawyers will just keep those cases and try to run them .

But the second thing is those cases that are in my portfolio that have been sent to us by other lawyers . They're like our highest case acquisition cost . There's no other case that cost me six figures to acquire . So I'm happy to have them , but I'd rather spend my time , energy and effort marketing to sources where I'm not allowed to pay a referral fee .

So if I'm going to doctors or chiropractors or physical therapists , the ethics rule says I'm not allowed to give them anything of value for recommending me to their clientele , and so what I can provide is not monetary value in the form of dollars coming back or paying for leads we're not allowed to do that but I can provide value in the form of .

I'm going to take great care of your clients , your patients , and I'm going to run these cases faster than anybody else can and more efficiently than anybody else can , and so when you're getting your check for any outstanding balance from me , number one , I'm going to try to get it as close to 100% of what's coming back to you as possible .

Most lawyers will call and try to negotiate a lower rate in almost every case and in many cases without lowering the lawyer's fee itself . I think that's unfair . So I don't do that if I don't have to , and then I'm not going to sit around on a case and wait till the statute of limitations to file it .

Like we work these cases , because we understand that this is how we get paid is at the end of a case , and all of that kind of brings me to time is your most precious commodity , and so how can you maximize the amount of dollars on your time and the amount of enjoyment on your time , and this is how it's manifesting

in my life right now . So my oldest son just turned 10 last month , and it made me realize that his time in the house under the roof with mom and dad is probably halfway done , like at 18 , he's probably going off to college and he's probably not living under our roof anymore .

And for his 10th birthday he asked for a gold chain with his soccer number on the back and he asked for sunglasses and he asked for some kind of baseball hat or something , all of which I've termed cool guy stuff .

And that leads me to believe that there's also a really limited window where hanging out and doing things with mom and dad is still cool , and so there's gonna be this space in his life between 12 and 13 , probably , and 18 , 15 , and frankly and probably like mid twenties , where doing anything with mom and dad is not cool anymore and that amount of time has

really compressed . At the same time , we're going now to sports like six nights a week .

I've got practice and I've got games every day , or just about every day , and twice on Saturday like Sunday is really our only reprieve from being at kids stuff and so I'm feeling compressed in my life , both in terms of I want to get out there and do things with my kids and sometimes it is sports , but sometimes it's not but also like now , my work day

looks like work out in the morning , work all day going to kids , sporting events at night , and very small window to decompress anywhere . Here's a couple of things that we're implementing in our lives , both personally and in the firm , to maximize the amount of time that we're spending doing things that we really want to do .

So personally and I've talked about this on the podcast a couple of times I don't invest in any real estate in 2023 that I have to be actively involved in the management of . Yes , we have our Airbnb . My wife and I split the management duties of that property and we have somebody on the ground who's taking care of it really .

But I'm not looking to acquire anything else where I have to do any of the work , and so what that looks like for me is investing as a limited partner in deals where somebody else is the operator on the ground . The trade-off for that is , my return on money is a little bit lower . Right , and it should be .

The most recent deal that I'm investing in is a 7% preferred return and a 75-25 split of the equity on the back end , and I'm good with that . Right now .

I don't need to make any more money by operating a deal myself when I can just ride on the coattails of somebody who knows what they're doing , reap some of the tax benefit , and while I have a lower return on my money , I have a much greater return on my time because I'm not fielding phone calls on nights and weekends from tenants whose toilets are maybe

overflowing . The other thing that we're doing and this really comes out of a couple of books that I've read recently Bill Perkins' Die With Zero was really impactful to me about spending more money during your life . So Bill Perkins says most people build up this huge pool of wealth and they leave it to their child .

If the average lifespan is 80 and you had a kid when you're 25 , you're leaving it to somebody who's 55 . And so what good is that ? They really could use it earlier in their life , number one . Or you could use it way earlier in their life to create experience and memories for them . That'll pay what Perkins calls this lifetime memory bank dividend .

And so family is just spending a whole lot more money than we have in the past on vacations . So we were just down in the Smoky Mountains in Tennessee for spring break this year and we did absolutely everything .

I'm somebody who and I've talked about this a little bit who's grown out of this scarcity mindset of if I don't spend it , then I can save it to . Now we're doing pretty well , and so I can spend more on vacations and really enjoy the vacations and not have this running tally in the back of my head about how much money that we were spending .

So this summer , for instance , we were doing two weeks at the beach with the kids .

My wife and I are booking another trip to Maine without the kids just the two of us and really overspending , at least compared to , historically , what we've spent on experiences up there , both in terms of staying in a nice bed and breakfast and in terms of not planning on packing or buying as much food to make in the Airbnb that we're staying on the second

half of the trip as we usually would . So that just feels good .

And then we booked a spring break cruise for next year and spent again more money than we would have historically , not really because I'm doing a whole lot better at the firm , but because my mindset has shifted around that towards how can I invest more in time and memories and invest less in okay , I need this big pot of money at the end of the rainbow .

The other book that I read recently is Outlived by Peter Atiyah , and so I'm spending a lot more money on my health . My wife laughs because I do tend to get impulsive on new , what she would call a fad , what I call experiment of one kind of things . They just got a continuous glucose monitor .

I'm not diabetic , I'm not pre-diabetic , but I am interested in how can I make sure that my kidneys and my liver and all those things are functioning correctly so that I don't have this problem in the future . Is there a way to get better real-time health data on myself and have this immediate biofeedback loop about ?

Okay , when you eat that donut , here's what it does to your blood sugar , and so that creates additional accountability in my life . And then in the law firm we're doing a couple of things .

So in the past we've looked at just like my friend from earlier we've looked at developing different practice areas and in the past we've had workers' compensation and Social Security folks listed as of counsel on our website and we've even toyed with the idea of using some of our additional space here like as an incubator for other young lawyers .

Can we bring in a family lawyer , maybe , under our umbrella ? Maybe not teach them how to market , teach them how to run a business and have some revenue share there .

But at the end of the day , we are learning again and again that those things require us really to learn new things and to learn new areas of the law and to figure out where all the landmines are , and that detracts from us maximizing the value of the cases that we're already good at , and it detracts from us marketing , from getting more of those cases that

we already know how to do , and one of our core values here is constantly be learning and upgrading your set of skills , but that doesn't necessarily mean learning new , entirely different practice areas , and so we're getting better and better at saying this is our lane . We want to be elite in our lane but we don't want to go outside of it .

Because the better use of our time is develop really high value relationships and referral relationships so that when a call comes in we can send it out to somebody who is an expert in that area and get some money back .

Now it might be two , three , four years while that line is in the water waiting for the money to come back , but we'll do a little more than six figures , probably in the first half of the year in referral fees , and really it's just for having a system for somebody who answers the phone and connects the client or potential client with the expert on the other

end of the phone . So we've got them now for medical malpractice , for workers' compensation for social security disability , and we've even really started developing them for slip and fall cases and for small dollar PI cases .

It's just those are the kinds of practice areas that I'm not really interested in doing , and so if I can send those to somebody who number one likes doing it and number two is probably better than better at those kinds of cases than I am it's a win for me , it's a win for that lawyer and it's certainly a win for the client .

And and , by the way , one of the things that I've been thinking about is how come it only seems like contingency fee lawyers pay referral

fees . So I've never been able to work out a relationship with a family lawyer or an employment lawyer or a criminal lawyer where because I get these phone calls from clients where there's a referral fee that comes back either at the end of the case or in the middle of the case .

So if you're out there and you're listening , you've got a Virginia family law practice , criminal practice , employment practice and you'd be willing to talk about this kind of relationship . Please reach out to me , because we get a lot of these calls and we send them now to several people because it helps nurture those relationships of cases coming back to us .

But I would be more than happy to send them to one person Like . The reality now is we send out 35 referrals to different firms . Then at the end of the year we get four gift baskets back . I would much rather send out 35 referrals to one firm and get some checks coming back that I can use to grow my own practice .

So if that's interesting to you , if you've got a Virginia practice , please reach out to me and let me know . Lastly , I'm working on acquiring a Virginia auto accident practice .

So if you know somebody , or if you are somebody who's maybe at the end of their career like I think my avatar for this is somebody who's 50 to 65 , probably as a solo or maybe has an associate probably not , but maybe has an associate and who has some staff , and you want to do one of two things You're sick of taking depositions , you're sick of answering

discovery , you definitely don't like trying cases anymore and you want to just send us the litigation cases . Happy to do that , happy to talk about what that referral relationship looks like and happy to overpay you to be your first place to come .

So again , usually it's a third referral fee , but if we have a right of first refusal on all your cases , I'm happy to overpay for that . The other thing is , if you're really towards the tail end of your career but you have great staff that you want to take care of and you want to just transfer your entire book of business to us , be happy to do that .

And if that isn't you , the guy or the girl who's tired of sitting in depositions and doesn't want to try cases anymore , and you connect me with that person and we work something out , I'm going to pay $5,000 to anybody who connects me with somebody whose practice we end up acquiring . Yes , listen , you guys are lawyers , so some terms and conditions apply there .

We got to work out what that really looks like , but I'm happy to pay somebody for connecting us . So that's it . That really looks like , but I'm happy to pay somebody for connecting us . So that's it . I hope you've gotten some value out of this . If you did get some value , please hit subscribe .

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