Saturday, October 3, 2009

Who gets the fee when a lawyer leaves a firm taking the client with him?

Here is an interesting case from the Illinois Appellate Court, but before I comment on it, let me say that I have not read the case itself. I am going here based on a newspaper account.

In this case, a plaintiff hired a particular attorney to represent him in a personal injury matter. At the time, the attorney worked for a law firm. The plaintiff entered into a contingency agreement with the firm (and the firm entered into an agreement to split the free with the attorney who referred the case to the firm too.)

The case was handled by the one attorney in the firm to whom the case had been referred, but since the fee would be based on a contingency, the attorney did not keep any detailed records of the time spent on the case.

At some point in time later, the firm fired the attorney handling the case for the firm, but the client decided to keep him as his attorney so the attorney took the case with him. The case eventually settled for $275,000 and then the firm filed a motion essentially seeking to recover what it claimed to be its fee in the case. After the parties agreed to certain disbursements from the settlement amount, they could not agree on how to divide the remaining $82,500.

The trial court then found that the firm was entitled to its original contract fee of one-third of the settlement, less the amount of fees the lawyer was entitled to based on an estimate of the specific time he spent on the case (based on a $300 per hour rate). The attorney, as you would expect, argued that since he did most of the work the analysis should be exactly the opposite: that he should get the one third fee minus the value of whatever the firm could show it did for the case.

On appeal, the appeals court affirmed the trial court's calculations. The court said that a settlement was reached before any depositions were taken and before any substantive motion had been filed and that the "overwhelming" amount of work that had been done by attorneys and legal assistants employed by the firm.

This is a tough one. On the one hand, I sympathize with the notion that the attorney should get the larger chunk of the fee if he did most of the work, but, on the other, the client had a valid contract with the firm -- not with the specific attorney. It would be important to determine what happened when the attorney left the firm and took the client: did he execute a new fee agreement with the client? Did the client clearly release the firm from its duties as his legal representation? And then, of course, there is the important factual matter of who actually performed most of the work -- about which there seems to be a disagreement.

Without more, it is difficult to tell whether the court made the right decision. The case is called Rafael and Magdalena DeLapaz v. Select Construction, Inc., et al., No. 1-08-2072.

UPDATE: Here is the link to the opinion: DeLapaz v. Select

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