Monday, May 22, 2017

Fee-Sharing In The Midwest

The Illinois Supreme Court held that fee-sharing agreement between law firms was enforceable

This appeal involves an action for breach of contract brought by one law firm against another after the defendant law firm refused to honor the fee-sharing provisions of the firms’ joint client retainer agreements. A single question of law is presented: Are fee-sharing provisions in otherwise valid retainer agreements between clients and two separate law firms void and unenforceable if the primary service performed by one firm is the referral of the clients to the other but the agreements fail to specifically notify the clients that the lawyers in each firm have assumed joint financial responsibility for the representation?

Reversing the judgment of the circuit court of Lake County dismissing the plaintiff law firm’s second amended complaint pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2014)), the appellate court answered that question in the negative, rejecting the defendant law firm’s argument that the agreements’ lack of an express statement that the attorneys assumed joint financial responsibility violated Rule 1.5(e) of the Illinois Rules of Professional Conduct of 2010 (eff. Jan. 1, 2010) and thereby rendered the agreements invalid. 2016 IL App (2d) 151148. In reaching this result, the court declined to follow the Appellate Court, First District’s decision in Donald W. Fohrman & Associates, Ltd. v. Mark D. Alberts, P.C., 2014 IL App (1st) 123351, to the extent that case held that fee-referral agreements must expressly inform clients that the attorneys are assuming joint financial responsibility.

We allowed the defendant law firm’s petition for leave to appeal in order to resolve the conflict between the appellate court’s decision in this case and Fohrman. Ill. S. Ct. R. 315(a) (eff. Mar. 15, 2016). We also granted the Illinois Trial Lawyers Association leave to file a brief amicus curiae. Ill. S. Ct. R. 345 (eff. Sept. 20, 2010). For the reasons that follow, we affirm the judgment of the appellate court and remand the cause to the circuit court for further proceedings...

We therefore agree with plaintiff that the fee-sharing provisions of the 10 joint client retainer agreements at issue in this case were not fatally defective under Rule 1.5(e) of the Illinois Rules of Professional Conduct of 2010 simply because they did not contain language specifically stating that plaintiff and defendant had agreed to assume joint financial responsibility for the representation. The circuit court therefore erred as a matter of law when it dismissed plaintiff’s second amended complaint on that basis, and its judgment was properly reversed by the appellate court. In light of this conclusion, we need not address plaintiff’s additional contentions that certain of the retainer agreements were not subject to the current version of Rule 1.5(e) because they were signed before the Rules of Professional Conduct took effect or that defendant should be estopped from contesting the validity of the agreements under Rule 1.5(e) based upon his failure to pursue the question in an earlier appeal.

(Mike Frisch)

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