Secure Your Client’s Written Consent...or Say Good Bye to Your Share of the Fees
LACBA Update, January 2003

By Louisa Lau, member, LACBA Professional Responsibility & Ethics Committee. Lau practices civil litigation and is a senior staff counsel with State Compensation Insurance Fund. She is also a member of the California State Bar Committee on Professional Responsibility and Conduct. The opinions expressed are her own.

Recently the California Supreme Court handed down an opinion regarding two attorneys from different law firms sharing attorney fees in Chambers v. Kay (11-04-02) Supreme Court S098007 (San Francisco County). The court held that the fee agreement between Chambers and Kay is invalid and unenforceable without the client’s written consent. Rule 2-200 of the Rules of Professional Conduct prohibits fee splitting between lawyers other than partners or associates absent written disclosure to, and written consent from, the client. The application of the rule is not limited to referral fees. The rule applies to arrangements among lawyers who actually share the work of representing the client. Rule 2- 200, while promulgated for the benefit of the client, is enforceable in an action between attorneys.

Kay represented Weeks in her sexual harassment lawsuit against her employer, Baker & McKenzie. Chambers was associated as co-counsel in the prosecution of Weeks’ case. Chambers and Kay had an agreement that Chambers would receive a percentage of the attorney fees recoverable from the Weeks case. However, Weeks’ written consent to the arrangement had not been obtained. Chambers shared office space with Kay and used Kay’s equipment and staff but did not have a partnership or an employer-employee relationship with Kay. As a result of certain disagreement, Chambers was disassociated from the case. Kay refused to share the fees with Chambers based on the agreement but offered to compensate Chambers at an hourly rate for the work Chambers did. Chambers sued to enforce the agreement.

The court concluded that Chambers was not a partner or associate, and thus cannot share fees absent compliance with Rule 2-200. The court opined that it will not aid the lawyer in violating one of the rules that the court has adopted to protect the public and to promote respect and confidence in the legal profession.

The court also concluded that the fee agreement failed to meet the criteria stated in the State Bar Formal Opinion No. 1994-138: (1) amount paid to the outside lawyer is compensation for work performed regardless of whether the law office is paid by the client, (2) the amount paid by the attorney to the outside lawyer is neither negotiated nor based on fees which have been paid to the attorney by the client; and (3) attorney has no expectation of receiving a percentage of the fee.

Further, the lawyer cannot recover indirectly under the guise of a quantum meruit claim predicated upon an apportionment of the contingent fee if the contingent fee arrangement does not comply with Rule 2- 200. However, to the extent the lawyer has worked on the case, the lawyer may recover based on a quantum meruit claim for the actual time spent on the case at an hourly rate.