Disclosure of Settlement Terms to Former Lawyer Asserting a Claim for Fee Division
Opinion rules that, in a worker’s compensation case, when a client terminates representation, the subsequently hired lawyer may disclose the settlement terms to the former lawyer to resolve a pre-litigation claim for fee division pursuant to an applicable exception to the duty of confidentiality.
Client hired Lawyer A to represent Client in a workers’ compensation matter. A year later, Client discharged Lawyer A and subsequently hired Lawyer B. Lawyer A filed a motion to withdraw as counsel while reserving her right to a legal fee. Lawyer B settled Client’s workers’ compensation case and the Industrial Commission entered an order approving the settlement and the legal fee to be paid from the proceeds of the settlement. Lawyer A asked Lawyer B for a copy of the Industrial Commission’s order. Client instructed Lawyer B to keep the settlement information confidential. Lawyer B therefore refused to provide Lawyer A with a copy of the Industrial Commission’s order, and also refused to disclose the settlement amount. However, Lawyer B asked Lawyer A to submit an accounting of Lawyer A’s hours in the case and Lawyer A’s hourly rate. Lawyer A refused to provide an accounting of her time without more information about the settlement. Lawyer A insists that she needs to know the settlement amount to determine the amount of the fee that is to be divided between the two lawyers. Lawyer A further asserts that before she can determine the amount of her fee, she must know which injury claims are subject to the settlement.
May Lawyer B share the settlement details with Lawyer A?
Keeping a client’s information confidential is paramount among the duties a lawyer owes to the client. Unless Client consents to the disclosure of information about the settlement, or one of the exceptions set out in Rule 1.6(b) applies, Lawyer B may not reveal the details of the settlement to Lawyer A.
A client has the right to discharge his lawyer at any time. Where a lawyer with a contingency fee contract is terminated before the matter is concluded, the discharged lawyer has a claim for quantum meruit recovery from the proceeds of the matter. Covington v. Rhodes, 38 NC App. 61, 247 S.E.2d 305 (1978), disc. rev. denied, 296 NC 410, 251 S.E.2d 468 (1979). Furthermore, the discharged lawyer may file his claim for quantum meruit against the client or against the subsequent lawyer. Guess v. Parrott, 160 NC App. 325, 585 S.E.2d 464 (2003).
Rather than wait for Lawyer A to file suit, however, the better practice is to attempt to resolve a dispute before litigation. To this end, at the beginning of the representation, Lawyer B should counsel Client about the law pertaining to Lawyer A’s claim for a legal fee based on quantum meruit. Lawyer B also should explain to Client that Rule 1.6(b)(6) permits a lawyer to disclose confidential client information, without the client’s consent, “to respond to allegations in any proceeding concerning the lawyer's representation of the client,” and that the exception to the rule, as noted in the comment, “does not require the lawyer to await the commencement of an action or proceeding…” Rule 1.6, cmt . Therefore, Lawyer B may disclose the details of the settlement to resolve Lawyer A’s claim for a share of the fee. Only that information relevant to the valuation of Lawyer A’s legal services may be disclosed.