Interpretation of the rules of professional conduct; Whether, in order to enforce a fee-splitting agreement, MRPC 1.5(e) requires the referring attorney to have an attorney-client relationship with the individual he or she refers; “Client”; Principle that the party seeking to void a referral agreement on the basis that it violates MRPC 1.5(e) carries the burden of showing the violation; Burden of proving compliance with (or violation of) MRPC 1.5(e); Error requiring reversal
As to whether, in order to enforce a fee-splitting agreement, MRPC 1.5(e) requires the referring attorney to have an attorney-client relationship with the individual he or she refers, the court held that “it does but that the relationship can be limited to the act of advising the individual to seek the services of the other attorney if the referring attorney and client expressly or impliedly demonstrate their intent to enter into a professional relationship for this purpose.” Thus, it reversed the Court of Appeals’ judgment to the extent that it held to the contrary. However, it also held that “defendant bears the burden of proving noncompliance with MRPC 1.5(e) when the defendant raises the violation of the rule as a defense against enforcement of the referral agreement." The result here was that “the trial court properly instructed the jury that an attorney-client relationship was required but erroneously instructed the jury about the burden of proof. This error requires a new trial as to only one of the potential clients at issue,” Dixon. Plaintiff-Sherbow (sole proprietor of his law office) claimed that he was entitled to a referral fee based on a letter forming the referral agreement. Defendant-Fieger & Fieger, PC (the Fieger Firm) argued, among other things, that the agreement violated MRPC 1.5(e). Sherbow argued that “the trial court erred by instructing the jury that the clients needed to have an attorney-client relationship with him in order for him to refer them and that the trial court erred by placing the burden of proving compliance with MRPC 1.5(e) on him.” The Fieger Firm claimed that “the agreement violated MRPC 1.5(e) and, thus, was void as against public policy. The Court of Appeals affirmed in part, reversed in part, vacated in part, and remanded.” The court held that “a fee division under MRPC 1.5(e) requires that the participating lawyers establish a professional relationship with the client.” Where, as in this case, one lawyer claimed “part of the fee on the sole basis of having referred the client to the other lawyer, the referring attorney must actually consult with the client, directly or through an intermediary, in giving the referral. The consultation itself is sufficient to create an attorney-client relationship, if the parties so intend. The burden of proving that MRPC 1.5(e) has been violated and that therefore a referral-fee agreement is unenforceable falls upon the party challenging the agreement,” which in this case was the Fieger Firm. In light of these conclusions, the court held that the “trial court properly instructed the jury that an attorney-client relationship was required but erred by placing the burden of proof on” Sherbow. This error was prejudicial only as it related to “Sherbow’s claim that he established a sufficient professional relationship with Dixon through" her son.
Full Text Opinion
State Bar of Michigan
306 Townsend St
Lansing, MI 48933-2012