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Supreme Court clarifies fee split questions

By Diane Karpman

Ethics expert Diane Karpman can be reached at karpethics@aol.com.
Karpman

All Rules of Professional Conduct are not created equal, and not all rule violations require that you turn in your license or seek a new "career opportunity." Violation of a ministerial rule will permit the lawyer to receive the reasonable value of the services, according to a brand new Supreme Court case, Huskinson & Brown v. Wolf (Feb. 23, 2004) Cal. LEXIS 1239. www.courtinfo.ca.gov/cgi-bin/opinions.cgi.

This is a welcome decision involving rule 2-200 (division of fees). It has quelled some of the angst of lawyers caused by Chambers v. Kay (2002) 29 Cal. 4th 142. After Chambers, many lawyers feared the loss of any legal fee whatsoever if rule 2-200 was violated, and some speculated that lawyers who violated the rule could be subject to discipline. Huskinson is a bright clarification of those ideas.

Huskinson once again involved lawyer combatants in a contingency fee dispute. As between lawyers, failure to obtain client consent to a fee division means that the fee-sharing agreement is unenforceable and the expectation interest (profit) will be denied. Huskinson maintains that even lawyers who fail to fulfill rule 2-200 can recover quantum meruit.

Failing to obtain client consent is in some ways akin to failing to obtain a written fee agreement, an analogy employed by the court. (The absence of a written fee agreement is not disciplinable by the State Bar.) The fee agreement statutes (Business & Professions Code §§6147 and 6148) are self-contained. The remedy, the client's power to "void" the agreement, is included in the statute.  Nevertheless, lawyers, like plumbers, can recover the reasonable value of the services rendered. Violation of rule 2-200 is similar to a malum prohibitum act as opposed to something heinous, and therefore malum in se.

Lawyers and firms are not "categorically" barred from "making or accepting client referrals, or from agreeing to a division of fees on a client's case." One of the critical principles in rule 2-200 is that the total legal fees charged cannot be increased. If clients don't execute informed written consent to the division, then how can it be assured that they know that the fees are not increased? Inferentially, the rule is designed to eliminate any secret deals between lawyers.

A serious breach of fiduciary duty (loyalty, confidentiality, safekeeping, independent judgment and communication) can result, in some circumstances, in total denial of fees. Clients want a full, complete, high octane lawyer, with the entire cornucopia of duties. They cannot be expected to pay the "contract price" when they receive less than they bargained for.

Allowing quantum meruit recovery will not undermine lawyer compliance with the requirements of rule 2-200. Why? Because we would all be starving and living in the streets if we were limited to only quantum meruit. All you need to do is lose your share of one big contingency fee by not obtaining client consent, and you'll be certain to comply in the future. Such a loss is a deterring life event, especially if you have already mentally shopped and virtually vacationed on the Riviera.

Ethics expert Diane Karpman can be reached at karpethics@aol.com or 310-887-3900.

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