State Bar of Michigan
home member area contact us


ethics



 print this page


for members
SBM general information

member directory

admissions, ethics, and
   regulation


diversity & inclusion

justice initiatives

member services

practice management
   resource center


public policy resource
   center


publications and
   advertising


research and links

sections & committees


ethics for members
ethics developments
ethics opinions
TAON (trust accounts)


from the courts
opinion searching
virtual court


for the public
public resources
media resources


giving opportunities
a lawyer helps
access to justice
   campaign

Ethics Opinion

print this page

This opinion has been questioned and modified in ethics opinion R-19, effective August 4, 2000

CI-495

March 29, 1080

SYLLABUS

  1. A division of fees with another lawyer who is not a partner in or associate of an attorney without notice to and consent of the client to the employment of the other lawyer, and without regard to the division of services performed and responsibility assumed by each, is unethical.
  2. Payments of money to a withdrawing partner pursuant to a separation agreement for services and responsibility already rendered by the withdrawing partner to the client is permissible.
  3. A covenant in a partnership agreement providing that a withdrawing partner is entitled only to the payment of certain sums of money and not to any of the files of the partnership is unduly restrictive of an attorney's license to practice law and contrary to public policy permitting the client freedom to select an attorney of his or her choosing.

    References: MCPR DR 2-107(A)(1) and (2), DR 2-107(B), DR 2-108(A).

TEXT

A lawyer intends to resign from a law firm in which the lawyer is a partner. The law firm will permit the lawyer to take with him a number of client files, but demands that the lawyer agree to reimburse the law firm for costs advanced on the files, and pay to the law firm 50% of any contingent fee the lawyer eventually receives on a file, without regard to the division of work originally by the law firm and subsequently by the departing lawyer.

MCPR DR 2-107(A) states:

    "(A) A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm or law office, unless:

      "(1) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.

      "(2) The division is made in proportion to the services performed and responsibility assumed by each.

      "(3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they render the client."

After departure from the law firm, the inquirer will no longer be a partner or associate, since those words are customarily understood to describe the relationship between attorneys working together within the same professional organization. MCPR DR 2-107 provides for notice to and consent from the client before employment of another lawyer, after a full disclosure that the fees paid by the client will be divided between lawyers in separate practices. The fee division must be made "In proportion to the services performed and responsibility assumed by each." A uniform 50% split in relation to each file does not establish a division of fees in relation to the services performed and the responsibility assumed initially by the law firm and subsequently by the inquirer. Because of the various stages of developments of the work in progress in each of the files, the proposed fee split formula is not consistent with MCPR DR 2-107.

Would it make any difference if the partnership agreement provided that upon departure a lawyer was entitled only to the payment of certain sums of money, and not to any client files, and that the payment of the sums of money terminates any and all interest which the withdrawing partner might have had in the partnership?

In holding that attorneys no longer practicing in association together may not divide fees for services performed for clients subsequent to their disassociation, CI-187 stated:

    ". . . amounts to be paid pursuant to separation . . . would be for services already rendered by the separating . . . lawyer and could not include fees which are to be generated in the future unless that separating . . . lawyer were to perform services or assume responsibilities with regard to the conduct of that case."

To the extent that the payment of certain sums of money to the withdrawing partner is made pursuant to a separation agreement for services already rendered by the withdrawing partner, the payment is permissible. MCPR DR 2-107(B) states:

    "This Disciplinary Rule does not prohibit payment to a former partner or associate pursuant to a separation or retirement agreement."

There is, however, another ethical problem to be considered. Agreements restricting a lawyer from representing former clients upon the termination of the partnership are prohibited under MCPR DR 2-108(A), which states:

    "A lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement, except as a condition to payment of retirement benefits."

The covenant proposed would prevent the withdrawing attorney from representing a former client of the firm. Of paramount importance is the client's freedom to select an attorney of his or her own choosing. The reputation and skill of the departing lawyer could well be the reason the firm represents the particular client. To deny the client access to the departing lawyer, particularly under circumstances where the former partner was the principal contact with the client and primarily responsible for the client's affairs, would be contrary to public policy. The files properly belong to the client, not to the partnership or the particular attorney.

Would it make any different if the partnership agreement provided that, with respect to pending matters retained by the withdrawing partner, the partner would be required to pay the law firm 2/3 of the eventual contingent fee received by the partner? Under MCPR DR 2-107, the percentage of the split must be based upon services and responsibility. Client approval is required with regard to any division of fees.

Would it make any difference if the partnership agreement provided that upon termination and liquidation of the partnership that in any matter in which payment is contingent upon the result, the withdrawing partner should account to the partnership for the proportionate share of the value of the work in process up to the date of termination, and make payment to the partnership and dissolution if and when that partner receives payment for such services? Such a proposal would be consistent with MCPR DR 2-107.

Whether an unethical partnership agreement, or unethical terms in a partnership agreement, is nevertheless enforceable under law is a question beyond the jurisdiction of the Committee.

 
     

 

follow us
Follow Us on Facebook Follow Us on LinkedIn Follow Us on Twitter Follow the SBM Blog

 

©Copyright 2014

website links
Contact Us
Site Map
Website Privacy Statement PDF
Staff Links

SBM on the Mapcontact information
State Bar of Michigan
306 Townsend St
Lansing, MI 48933-2012
Phone: (517) 346-6300
Toll Free: (800) 968-1442
Fax: (517) 482-6248