Fee Sharing Agreement With Nonlawyer Unenforceable as Violation of Public Policy

On July 8, 2016, a Pennsylvania appellate court affirmed the dismissal of breach of contract and breach of fiduciary claims brought by a nonlawyer against a law firm. The firm allegedly promised to pay the nonlawyer a “yearly consulting fee”1 plus “a five percent share of the firm’s annual profits” attributable to securities-law cases against institutional investors that the nonlawyer “originated and worked on.”

Rule 5.4(a) generally provides that “[a] lawyer or law firm shall not share legal fees with a nonlawyer.” However, it permits a lawyer “to include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement.” Rejecting the nonlawyer’s argument that this exception applied, the court found that there was an impermissible “direct link” between the specific fees to be received by the firm and specific payments to the nonlawyer. As a result, the court found that the arrangement, if it existed, “violate[d] public policy,” and all of the nonlawyer’s “legal claims based on that arrangement fail.” See SCF Consulting, LLC v. Barrack, Rodos & Bacine, No. 1413 EDA 2015 (Pa. Superior Ct. Jul. 8, 2016).


  1. This fee in 2014 allegedly was $210,000.00 per month.
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