By David Majchrzak and Edward McIntyre
19.3.6 Roberts v. City and County of Honolulu (9th Cir. 2019) 2019 U.S. App. LEXIS 27491, __ F.3d __ , 2019 WL 4308874 – United States Court of Appeals for the Ninth Circuit (September 12, 2019)
Issue:
In a contingent fee case, when a successor lawyer from one firm replaces a former lawyer from another firm, must the successor lawyer tell the client in writing that a portion of any contingent fee earned may be paid to the former lawyer?
Analysis:
Yes. A client has the right to terminate the services of a lawyer at any time. But when the client terminates the services of a contingent fee lawyer, without cause, before the occurrence of the contingency on which the agreement is based, the lawyer may be entitled to a fee for services performed before discharge under quantum meruit or on some other basis. That gives rise to obligations on the part of the successor lawyer.
Model Rules 1.5(b) and (c) require the successor lawyer notify the client in writing that a portion of any contingent fee earned may be paid to the former lawyer, even though the successor lawyer may not be able to state at the beginning of the representation the specific amount or percentage of a recovery, if any, that may be owned to the former lawyer unless the amount or percentage has been agreed by the client and both the former and successor lawyers. Model Rule 1.5(e) does not apply because it addresses situations where two lawyers are working on a case together, not situations where one lawyer is replacing another.
If there is a money recovery, the successor lawyer may only disburse a portion of the overall attorney’s fee to the former lawyer with the client’s consent or an order of a tribunal. If there is a dispute about the amount due the former lawyer under Model Rule 1.15(e), the disputed amount may have to remain in a client trust account until the matter is resolved. In addition, if the successor lawyer negotiates with the former lawyer on the client’s behalf, the successor lawyer must explain to the client the potential conflict of interest in the dual roles, pursuant to Model Rule 1.7, where the successor layer has a personal interest in the amount the former lawyer may receive or in the timing of the release of funds held pursuant to Model Rule 1.15(e).
California did not adopt Model Rules 1.5(b) or (c); rather Business and Professions Code section 6147 and 6148 govern what must be in a written fee agreement with a client. The ABA Formal Opinion, however, does provide useful guidance, especially for a successor lawyer to ensure that the client understands—informed in writing—that the client’s former lawyer may have a claim on the client’s ultimate money recovery, in addition perhaps to any contingent fee the client will owe to the successor lawyer.
David Majchrzak and Edward McIntyre are co-editors of Ethics Quarterly.