"
MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 1989-29
Restrictions on Right to Practice Law per Law Firm Employment Agreement
You have recently requested that our Committee provide you with an opinion with respect to certain ethical questions which you have raised relating to an agreement between a law firm and its attorney employees regarding the division of attorney's fees for cases wherein the client elects to have the departing attorney continue to represent him/her in a particular case.
For purposes of rendering our opinion you have advised us that we may assume the following:
1. Each client signs a standard retainer agreement which retains the firm to represent the client a contingent fee basis.
2. Any client that retains the departing attorney was represented by that attorney on behalf of the firm before such departure.
3. The agreement is required to be signed as a condition of continued employment with the firm.
You have requested that we advise you with respect to certain ethical matters relating to the proposed agreement which we will address in this opinion. However, several of the questions which you have posed involve legal rather than ethical issues which are beyond the purview of our Committee's functions.
The main focus of your request for our opinion refers to paragraph five of the agreement. That paragraph provides a sliding chart with respect to the division of fees which is based upon a combination of the length of time that the case was in the law firm prior to the attorney's termination and the period of time in which the fee is realized after the attorney has left the firm.
Your inquiry requests inter alia whether or not that paragraph violates Rule 5.6. It is our conclusion that it does not violate that rule.
Rule 5.6 is entitled, ""Restrictions on Right to Practice."" In pertinent part it provides that an attorney shall not participate in offering or making a partnership or employment participate in offering or making a partnership or employment agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement. Apparently you are concerned that an agreement between a law firm and its former attorney employee which provides for the division of fees could be construed to be a violation of that rule. The Committee does not view it in that light. The subject agreement does not purport to restrict the right of a departing attorney to practice law. It contains norestrictive covenants, nor does it contain any prohibition against a departing attorney from representing prior clients of the firm. What it does do is to provide, in advance of the termination of employment, for the division of fees to be earned by the law firm and attorney respectively.
In that regard, it is important to note that the agreement does not limit the freedom of clients to choose to utilize the services of the departing attorney. Rather, it defines in advance of any controversy the division of fees in a manner somewhat akin to a provision for liquidated damages.
Your next inquiry is whether the agreement violates Rule 1.5(e) since paragraph five may not reflect the amount of work done by the attorney and firm respectively. The Committee's opinion is that there is not a violation of that rule. In reaching that determination, the Committee is mindful of the Court of Appeals' decision in Vogelhut v. Kandel, 308 Md. 183, 517 A.2d 1092 (1986). In that case, the Court of Appeals had occasion to discuss the division of fees under then Disciplinary Rule 2-107 which is similar to Rule 1.5(e). In that regard, the Court of Appeals found that the rule contemplated concurrent representation of a client by more than one attorney insofar as the rule required an attorney to obtain the consent of the client upon the employment of a second attorney. The Court further indicated that the rule was formulated to prohibit brokering, to protect the client from clandestine payment and employment and to prevent aggrandizement of fees. The Vogelhut Court also found that the list of factors to be considered as guides in determining the resolution of fees (now contained in Rule 1.5) were limited to the fee agreement between a client and his attorney. The Court noted as follows:
""Where, as here, the agreement is between two attorneys and the agreement has no effect on the fee the client contracted to pay, DR 2-106 [Rule 1.5(a)] is inapposite."" 517 A.2d at 1095
It is the Committee's view that a similar approach must be taken to the instant agreement. Paragraph five of the agreement allows the law firm and attorney to agree in advance how a division of fees will be made in the event that the attorney departs the firm and undertakes to represent a party who had previously been a client of the firm. The Committee does not view that agreement as violative of the provisions of Rule 1.5(e).
You have also requested our opinion as to whether paragraph three of the agreement unduly restricts an attorney's duty to communicate with the client. The Committee does not view that as being the case. A review of paragraph three does not indicate that the attorney is precluded from discussing any matters with the client which relate to the legal affairs of the client. Rather, the language of that paragraph deals with discussing the termination of the attorney's employment with the firm. We find no ethical violation resulting from that provision.
You have also requested our opinion as to whether paragraph nine may tend to force the departing to decline to represent clients that he had previously represented on behalf of the firm.
That paragraph provides that the attorney will indemnify and hold harmless the firm as to all attorney's fees, costs, judgment or other liability imposed on the firm as a result of the attorney's conduct in representing a client. We view that provision as not involving an ethical issue, but rather is a legal one. Similarly, the remaining issues appear to request that the Committee provide advice as to legal matters rather than ethical ones, and, accordingly, they will not be addressed in this opinion.
Finally, you have also expressed concerns regarding matters which relate to economic unfeasibility or risk factors that are economical or risk prohibitive in nature. However, those are matters over which this Committee has no responsibilities.
308 Md. 183
Steven M. VOGELHUT
v.
Nelson R. KANDEL.
No. 29, Sept. Term, 1986.
Court of Appeals of Maryland.
Dec. 1, 1986.
Discharged attorney brought action against successor attorney for breach of contract, under which successor attorney agreed to give discharged attorney 25% of agreed to give discharged attorney 25% of any fee received by successor attorney for representation of client in return for discharged attorney's surrendering files relating to client. The Circuit Court for Baltimore City, David Ross, J., rendered judgment in favor of discharged attorney, and successor attorney appealed. The Court of Special Appeals affirmed, 66 Md.App. 170, 502 A.2d 1120, and discharged attorney petitioned for certiorari. Petition for certiorari was granted, 306 Md. 71, 507 A.2d 185, and the Court of Appeals, Couch, J., held that: (1) evidence supported conclusion that successor attorney was not negotiating fee arrangement as agent for client; (2) agreement was not precluded by disciplinary rules relating to fees for legal services and division of fees among lawyers; and (3) surrender of files was adequate consideration to support successor attorney's promise.
Affirmed.
Rodowsky, J., filed concurring opinion
1. Attorney and Client _ 166(l)
Evidence supported finding that successor attorney was not negotiating fee arrangement with discharged attorney as agent for client, but rather was negotiating it on his own behalf, so that fee agreement was contract between discharged attorney gave files relating to client to successor attorney in exchange for promise by successor attorney to give discharged attorney 257c of any fee received for representation of client. Md.Rule 886.
2. Attorney and Client _ 151
Disciplinary rule regulating fees for legal services, when read in pari materia with its respective ethical considerations, was plainly limited to fee arrangements between client and attorney, and had no effect on successor attorney's agreeing to give discharged attorney 25% of any fee received by successor attorney for representation of client in exchange for discharged attorney's surrendering files relating to client. Code of Prof. Resp., DR2-106.
3. Attorney and Client _ 151
Disciplinary Rule proscribing division of fees between attorneys not properly associated contemplated concurrent representation of client by more than one attorney insofar as rule required attorney to obtain consent of client upon employment of sec ond attorney and, thus, did not prohibit successor attorney's agreeing to give discharged attorney 25% of any fee received by successor attorney for representation of client in return for discharged attorney's surrendering files relating to client, where there was no concurrent representation. Code of Prof.Resp., DR 2-107.
4. Contracts _ 50
Anything which fulfills requirement of consideration, that is, when recognized as legal, will support promise, whatever may be comparative value of consideration and of thing promised; benefit to promisor or detriment to promisee is sufficient valuable consideration to support contract.
5. Attorney and Client _ 151
Discharged attorney's surrendering to successor attorney files relating to client was adequate consideration for successor attorney's agreeing to give discharged attorney 25% of any fee received by successor attorney for representation of client, regardless of whether materials contained regardless of whether materials contained in files had been duplicated by successor attorney by time files were surrendered.
"