Recommending a vendor to a client: an ethics checklist for business lawyers

The short answer: no fee keeps it simpler, but three duties remain

When a lawyer tells a client about a vendor and takes nothing for it, the fee-division and payment-for-referral rules largely drop out of the picture. What remains is the ordinary professional framework: protect the client's confidential information, make sure no personal interest colors the advice, record what you recommended and why, and suggest independent review when the client is relying on your judgment. How each piece applies depends on the version of the rules your state has adopted.

For a SourceX recommendation the practical sequence is short. Get the client's consent before you share its name with anyone, confirm that you hold no financial interest in the outcome, and write a file memo the same day.

What the rules actually say

The ABA Model Rules are a template that each state adopts in its own form. The ABA's index of the Model Rules is the starting point; your state's version controls.

• Confidentiality of the client's identity. In Illinois State Bar Association Advisory Opinion 12-03, on a lawyer's participation in a networking group with nonlawyer professionals, the committee treated a client's identity as confidential, so client consent is needed before sharing a client's name. It also said a reciprocal referral arrangement must be non-exclusive, the client must be informed, and the arrangement must not interfere with independent judgment. The opinion is advisory and specific to Illinois, but its confidentiality point maps directly onto vendor introductions.
• Conflicts from a lawyer's own interest. The general conflict rule for current clients, Model Rule 1.7, treats a significant risk that a representation will be materially limited by a personal interest of the lawyer as a conflict. A recommendation with no fee and no tie to the vendor is less likely to raise that question; a recommendation from which you would gain anything is more likely to.
• Business transactions with a client. If you were to take a financial interest connected to the client's matter, Model Rule 1.8(a) permits a business transaction with a client only if the terms are fair and reasonable and disclosed in writing, the client is advised in writing to seek independent counsel, and the client gives informed consent in a signed writing. The ABA's Ethics 2000 Commission explanation describes Rule 1.8 as setting conditions under which such transactions may go forward rather than banning them outright. Whether a referral reward triggers 1.8(a) is a question for your state's rule and your ethics counsel.
• Payments for recommendations and reciprocal referrals. Rule 7.2 governs giving value to people who recommend a lawyer's services, and states differ on its exceptions; the ABA's chart of state advertising and solicitation rule differences shows the variation. It matters here only if a vendor offers to send clients back to you.
• Independent judgment. Model Rule 2.1 asks a lawyer to exercise independent professional judgment and render candid advice, which is the reason to keep any recommendation separate from any benefit to you.

How the rules apply in common situations

For the fee question in depth, see whether a lawyer can accept a referral fee from a non-lawyer business. For the confidentiality question, see what a lawyer can share when introducing a client.

A documentation checklist for the file

A short memo protects the client and you. Record:

• The date, the client contact and what prompted the recommendation.
• What you said about the vendor, including that you have not reviewed its terms for this client.
• A statement that you receive no fee, commission or other benefit, or a description of any benefit and the client's written consent.
• The client's consent before you shared its name or any matter information.
• Your suggestion that the client review the license terms independently, and whether it asked your firm to do that work.
• Which public materials you gave the client, such as the who qualifies criteria.
• The client's decision and the date.

When to suggest independent review

Suggest separate advice, or a formal engagement for your firm, when any of these apply:

• The client is relying on you to judge whether licensing is a good idea, rather than simply hearing that the option exists.
• You or your firm has any relationship with the vendor.
• The license would cover employee communications, customer records, call recordings or regulated data, where privacy and consent questions need specialist review.
• The license would be exclusive for AI training for an agreed term, and the client has other commercial plans for the same records.
• A sale, financing or restructuring is under way and a license could affect disclosure schedules or the deal timeline.

Talking points for the client conversation

Facts worth giving the client, all drawn from how the program works:

• The company keeps ownership; the data is licensed, not sold.
• Nothing binds the company until it agrees price and terms and signs.
• De-identification and redaction requirements are agreed with the company before any work begins, and data is delivered only after an executed agreement and the company's authorization.
• There is one all-in price with SourceX's fee included and no separate charges.
• The eligibility baseline is a US company with 50+ full-time employees at peak (contractors excluded), several years of documented operations, rights to the records and an authorized sponsor such as the owner, CEO or CFO.

Questions to put to your ethics counsel or state bar hotline

1. Does my state's confidentiality rule treat the client's identity as confidential in a vendor introduction?
2. Would any benefit from the vendor, including a referral reward, be a personal-interest conflict under our Rule 1.7 or a business transaction under our Rule 1.8(a)?
3. If I advise on the license itself, what disclosures does the engagement letter need?
4. Does our state allow reciprocal referral arrangements with nonlawyers, and on what conditions?
5. Do my firm's policies on outside activities or vendor relationships add requirements?

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Next step

If the client wants to proceed, it can apply directly at sourcex.si/apply. If your ethics review clears participation and you want to introduce companies yourself, register as a partner. The overview for business attorneys explains how other lawyers approach the program.