Duty of Departed Lawyer When Dividing Fee with Former Firm
Adopted: April 23, 2004
Opinion rules that a lawyer must deal honestly with the members of her former firm when dividing a legal fee.
Inquiry #1:
Attorney X worked for ABC Law Firm when she began the representation of Client in a workers' compensation claim. Prior to the resolution of the workers' compensation claim, Attorney X left the firm to join another firm. Client chose to continue to be represented by Attorney X. The Industrial Commission entered an order releasing ABC Law Firm from further representation and acknowledged ABC's entitlement to a portion of any legal fee ultimately awarded in the case by the Industrial Commission.
Client's workers' compensation case settled. An order was entered by the Industrial Commission approving the settlement and the total attorney's fee to be paid from the settlement. The settlement proceeds have not been delivered to Attorney X for disbursement. Separate checks for the client's settlement proceeds and the approved legal fee will be sent to Attorney X. Is Attorney X required to notify ABC Law Firm that the Industrial Commission has awarded a legal fee in the case and to notify the firm of the amount of the fee?
Opinion #1:
Yes, the Rules of Professional Conduct require lawyers to deal honestly with each other and to comply with the law and court orders. Rule 8.4(c) and (d).
Inquiry #2:
When the check for the legal fee is received by Attorney X, where should it be deposited?
Opinion #2:
Rule 1.15-2(g) requires mixed funds to be deposited in a lawyer's trust account intact: "When funds belonging to the lawyer are received in combination with funds belonging to the client or other persons, all of the funds shall be deposited intact."
Inquiry #3:
Should Client's consent be obtained prior to disbursing any of the legal fees from the money deposited into Attorney X's trust account?
Opinion #3:
No, if the Industrial Commission has already approved the total amount of the legal fee and Client has no liability to ABC Law Firm for the fee, the dispute is between ABC and Attorney X and Client's consent is irrelevant
Inquiry #4:
Is Attorney X required to advise Client of Client's obligations relative to ABC Law Firm or any other party with a claim against the settlement funds?
Opinion #4:
Yes. Rule 1.4(b) requires a lawyer to explain a matter to a client to the extent reasonably necessary to make informed decisions about the representation. If Client is liable to ABC for litigation expenses or to a provider for medical expenses, Attorney X should advise Client of and may withhold the funds to pay medical liens as provided in 2001 Formal Ethics Opinion 11.
Inquiry #5:
May Attorney X determine the amount of her share of the legal fee and disburse that amount to herself without the specific consent of ABC Law Firm
Opinion #5:
Yes, if Attorney X, acting in good faith, determines that her entitlement to a specified portion of the legal fee is undisputed, she may withdraw this amount from the trust account and pay it to herself. She should also disburse any undisputed portion of the remaining fee to ABC Law Firm. The disputed portion of the legal fee must remain on deposit in the trust account until the dispute with ABC Law Firm is resolved by agreement or litigation. In determining the amount of her fee, Attorney X must be guided by her duty of honesty to the members of ABC Law Firm. See opinion #1 above.