ABA Issues Formal Opinion on “Fee Division with Client’s Prior Counsel”

On June 18, 2019, the ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 487 to address the division of a fee when one lawyer replaces another in a contingent fee matter. See ABA Standing Cmte. on Ethics and Prof’l Responsibility, Formal Op. 487 (Jun. 18, 2019). The opinion provides helpful guidance to successor counsel and predecessor counsel in this common situation.

First, the opinion advises successor counsel to disclose to the client the existence and nature of the predecessor lawyer’s claim for fees. Id. at 2-3. This claim is generally a quantum meruit claim for “the fair value contributed to the case before being terminated.” Id. at 2.

Second, the opinion makes clear that Rule 1.5(e) does not apply to the division of fees between successor counsel and predecessor counsel–something that Comment 7 to Rule 1.5 addressed long ago. Said the committee, “this Rule is designed to regulate fee-sharing between lawyers in different firms who handle a case simultaneously.” Id. at 4.

Third, the opinion notes that the client must consent to the disbursement of legal fees to predecessor counsel. “Otherwise, the client’s right to challenge the fee as unreasonable would be impaired, if not extinguished.” See id. at 5. However, the client’s consent “may be inferred where successor counsel has repeatedly provided notice of a proposed payment to predecessor counsel and the client has not responded.” Id.

Fourth, the opinion addresses an issue that many lawyers fail to consider, namely, what is the role of successor counsel in representing the client on predecessor counsel’s quantum meruit claim. The successor lawyer virtually always undertakes to negotiate a resolution of predecessor counsel’s fee claim. In so doing, the successor lawyer must “obtain the client’s informed consent to any conflict of interest that exists due to successor counsel’s dual roles as counsel for the client and a party interested in a portion of the proceeds.” Id. at 6. Thereafter, successor counsel can obtain the client’s informed consent “that the matter should be worked out between counsel without further need for consent or consultation with the client.” Id.

Finally, the fees to be recovered by both predecessor counsel and successor counsel must be reasonable. See Rule 1.5(a). It would be unreasonable for successor counsel to “charge the client for work that only increases the successor counsel’s share of the contingent fee and does not increase the client’s recovery.” See id. at 6.

Takeaways for Successor Lawyers

Upon taking over a contingent-fee matter from a predecessor lawyer, a successor lawyer should do the following in order to comply with the principles set forth in Formal Opinion 487:

  • Enter into a new, signed contingent fee agreement with the client.
  • Discuss with the client that the predecessor lawyer has a fee claim. Obtain the client’s informed consent for you to negotiate a final resolution of that claim without further consultation or consent.
  • Obtain the client’s informed consent to your personal-interest conflict arising out of your desire to obtain a fee and to reduce the fee to be recovered by predecessor counsel.
  • Assure that you do not take an unreasonable fee by charging for work that does not increase the client’s recovery.
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