July 11, 2001
A lawyer may distribute fees among damaged individuals sought to be represented as a part of a class action, out of a fund designated as attorney fees, provided there is no prior agreement for the sharing of fees, and provided there is no scheme to solicit further actions as a result of the payments.
References: RI-3, RI-104, RI-163; MCLA 750.410; MSA 28.642; Woll v Attorney General, 116 Mich App 791; 233 NW2d 560 (1982); State Bar of Michigan v Woll 387 Mich 154; 194 NW2d 835 (1972); MCLA 750.410; MSA 28.642.
A lawyer regarding the disposition of funds received as part of a class action resolution has requested an opinion. The lawyer sought to represent damaged Michigan individuals, as a class. The class was subsequently found to be part of a larger class action in an Illinois court, and the Michigan case was stayed as a result. The funds were awarded by an Illinois court, and provided to counsel through an agreement with counsel for the lead plaintiff. The funds were allocated as attorney fees awarded in the Illinois proceedings, but not designated in any manner in the payment to the requesting lawyer.
The requesting lawyer inquires as to the options that exist for disposition of these funds. The lawyer desires to dispose of the funds by one of following means, listed in order of the lawyer's preferences:
- To use a portion of the attorney fees to see to it that the Michigan plaintiff's are fully compensated for their damages (this option was objected to by the lead lawyer as a fee splitting arrangement); or
- To contribute fees that are in excess of those thought to be reasonable to a charity of the lawyer's choosing.
Certain factual matters are assumed. The court awarded the total fund of attorney fees, and therefore it is presumed the total fee is reasonable. It is assumed that the requesting lawyer was not certified as lawyer for the Michigan class members. If the lawyer represents the individuals as a party to the class, the disposition of the fund is entirely a matter between the lawyer and the client. Absent objection by the client, the arrangement would not be objectionable. RI-3. (Court awarded attorney fees and/or sanctions are a matter of contract between lawyer and client). This opinion presumes that the lawyer involved does not technically represent the individuals to whom the fees would be given.
MRPC 5.4 provides that, unless an exception not applicable to the current facts is triggered: "A lawyer or law firm shall not share legal fees with a non-lawyer . . . ." The factors that led to the rule do not appear to be present. They include concerns that the lawyer's independent professional judgment may be impaired (RI-163); that the lawyer may "cut corners" in order to maximize profits; and, the practice encourage non-lawyers to practice law. (RI-104). Payments to non-lawyers have also been criminally proscribed as "solicitation" in the personal injury area. Woll v Attorney General, 116 Mich App 791; 233 NW2d 560 (1982); State Bar of Michigan v Woll 387 Mich 154; 194 NW2d 835 (1972); MCLA 750.410; MSA 28.642.
There is nothing to suggest that the payments would be for purposes proscribed under this rule. The Committee has previously opined that a lawyer may communicate and/or advertise that a portion of legal fees will be donated to a charity. RI-163. Such an arrangement if prospective in nature would be much more likely to be contrary to the purposes underlying the rule than the arrangement sought by the lawyer in this case. It is concluded that the division of fees with injured parties to the class action is acceptable provided there is no scheme to solicit further business. The division of fees with a charitable organization would also be acceptable under RI-163. Of course no opinion is rendered with regard to the tax ramifications of such a division of fees to the individuals, or the charitable organization.