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Suggested Guidelines for Allocating Origination Credit for Partner Compensation

Suggested Guidelines for Allocating Origination Credit for Partner Compensation

By Joel A. Rose

A partner in a Long Island based mid-sized law firm requested examples of guidelines for the
allocation of client origination credit for compensating partners.

For illustrative purposes only, below are “Origination Rules” that were excerpted from a management report I recently prepared for a law firm client. Please bear in mind that these rules were specifically prepared for a particular law firm and may not be appropriate for every law firm.

Illustrative Origination Rules for business origination are as follows:

1. Individual Credit for Original Client:

A lawyer brings in an original client (a client who is in no way affected by any relationship with any previous client), and no other claimant for this credit appears in the picture. The business credit normally goes to that lawyer.

Business origination credit may be earned for clients who have been long dormant, and who are brought in later on other business. They are then credited to the lawyer first responsible for bringing in the client, unless otherwise approved. It should be noted that estates or estate planning may mature or flow from a will drawn perhaps ten years or more before.

Any lawyer given credit for an original client will maintain contact with that client’s activity with the firm if the client’s work is of a continuing nature and this appears necessary in the interest of professional standards or the economics of the firm, or both.

It is fundamental that, when one lawyer alone has developed a prospective client and the prospective client brings him or her a case, all of the credit for that business foes to that lawyer. Similarly, where one lawyer alone has developed another lawyer or group of lawyers, as a future source of business, and the first case comes in from that source, the credit goes to the lawyer who did the developing.

Origination credit will change if a client leaves the firm and another firm lawyer brings that client back into the firm.

Another circumstance under which origination credit may change is if one lawyer brings in a client but after a period of years it is another firm lawyer that has been managing that client and its responsible for maintaining the relationship. Origination credit will change if the lawyers agree that a change in the origination credit should occur.

2. Joint Credit for Original Credit:

An original client may come in as a result of the development activities of more than one lawyer. Such cases should be divided appropriately to the circumstances. Usually this will be settled by agreement between the lawyers interested. The split should reflect each lawyer’s proportionate contribution.While in any particular case the business credit may be divided by mutual agreement between or among all parties who may have claim to such credit, such division, however, shall not be a precedent binding upon the committee thereafter in making later decisions.

3. Firm Credit:

In certain cases, there will be no individual or joint credit for business origination, and the Executive Committee will assign these fees to “firm credit.” These situations should be held to a minimum in number and time duration for new items of business.

For example, when an original client comes in not as a result of developing by any particular lawyer(s), but because of firm listing directories or general reputation or firm activity, or when a client comes in through past or present non-lawyer employees, these will become “firm credit.”

It may be desirable temporarily to withhold the business credit to any individual lawyer. In these situations, the credit will be considered “firm credit.”

4. Credit When Lawyer Leaves the Firm:

If a former shareholder shared the business credit for a client jointly with one of the continuing shareholders before he or she left the firm, the continuing shareholder shall then be entitled to all of the business credit for this client, unless otherwise decided.

5. Individuals in Corporation:

When an individual who is a member of a corporation or other enterprise which is a client of a lawyer seeks another lawyer for the handling of a personal matter, credit may be assigned to the lawyer sought for this matter and the individual will then become the client of that other lawyer.

6. Areas of Domination:

Where cases come into the firm because of the areas of influence of a shareholder, and they continue to dominate that relationship, they will be assigned credit for that business. However, the senior shareholders are encouraged through the Executive Committee to divide or reassign responsibility credit for business to younger or newer shareholders will recognition of situations where other shareholders have a role in maintaining the firm’s areas of influence or client relationships.

Due thought should be given to continuity of the firm’s operations and the possibility of withdrawal, retirement, temporary or permanent disability, death or prolonged absence of any of the shareholders, regardless of age. Such assignments of credit will almost inevitably bring in still further business to the credit of both the older and younger lawyers and provide assurance of a continuing satisfactory income to the firm.

Your comments and suggestions about how Origination credits are allocated in your firm are welcome.

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