Fee Sharing

Clarify your fee sharing agreement, preferably in writing.

In California, the State Supreme Court decided a case on whether a referral fee could be collected where the client did not know or agree to a fee split.

In this case, counsel for the plaintiff-attorney (seeking enforcement of an oral agreement for referral fee) argued that quantum meruit should be the minimum award even if the referral fee could not be enforced under the Rules of Professional Conduct. Otherwise, the reneging defendant-attorney is unjustly enriched. (Of course, the attorney also argued that the client was aware of the arrangement but just didn’t sign an agreement approving the arrangement.)

The California Supreme Court said there would be an unjust enrichment in either situation, but used the quantum meruit theory to award the referring attorney at least a minimum fee. Thus, both attorneys were punished to a degree, or, said in another way, there was no unjust enrichment on just one side of the issue.

In Michigan, an inactive attorney cannot enforce a referral agreement relating to a personal injury contingent fee matter.

Moral: Be crystal clear on what you’re doing with colleagues. Lawyers are no better than others — when there’s money involved, even lawyers can have selective memories!

Categorized in: Cash Flow - Finances, Management