State Bar Association
fees; Division of fees with estate and with other attorneys
lawyer who undertakes to complete unfinished legal business of a deceased
attorney may pay the deceased lawyer’s estate that proportion of the total
compensation that fairly represents the services (if any) that the deceased
lawyer rendered in the matter. If the
lawyer instead refers the matter to a third attorney, the lawyer and the third
attorney may share legal fees provided they comply with Rule 1.5(g).
inquirer’s friend, also a lawyer, recently passed away. The dying attorney had not made any agreement
to share fees with the inquirer, but on his deathbed the dying attorney had
informed his secretary that he wanted to refer three personal injury cases –
Matters A, B and C -- to the inquirer.
The deceased lawyer’s secretary gave the inquirer’s name to each of the
clients, who then each called the inquirer to discuss taking over their
matters. The inquirer is in the process
of reviewing the matters and assessing whether he can undertake the
representations, each of which is subject to a standard contingency
retainer. In Matter A, the deceased
attorney had conducted a preliminary investigation, obtained a copy of the
police report, requested and obtained some medical records, and had taken
several notes, but had not commenced suit.
The inquirer is still reviewing the other matters and does not know
what, if any, work the deceased attorney performed on Matters B and C.
If the inquirer accepts any of the matters, may he pay a referral fee to the
deceased attorney’s estate for the matters he accepts?
B. If the inquirer decides to refer any matters to a third
attorney, may the inquirer receive a referral fee?
C. If the inquirer refers any of the matters to a third
attorney, may the third attorney pay the deceased attorney’s estate a referral
7.2(a) of the New York Rules of Professional Conduct (the “Rules”) provides
that a lawyer may not pay a fee for the referral of business, with certain
exceptions not relevant to this inquiry. Specifically, Rule 7.2(a) provides:
(a) A lawyer shall not compensate
or give anything of value to a person or organization to recommend or obtain
employment by a client, or as a reward for having made a recommendation
resulting in employment by a client.
Rule 1.5(g) permits a division of legal fees between lawyers who are not
associated in a firm when the division is in proportion to the services
performed by each lawyer or the lawyers assume joint responsibility for the
representation. Rule 1.5(g) provides:
lawyer shall not divide a fee for legal services with another lawyer who is not
associated in the same law firm unless:
(1) the division is in
proportion to the services performed by each lawyer or, by a writing given to
the client, each lawyer assumes joint responsibility for the representation;
(2) the client agrees to
employment of the other lawyer after a full disclosure that a division of fees
will be made, including the share each lawyer will receive, and the client’s
agreement is confirmed in writing; and
(3) the total fee is not
Moreover, although Rule 5.4(a) generally prohibits a
lawyer from sharing legal fees with a nonlawyer, an exception in subparagraph
(a)(2) allows a division of fees between a lawyer who finished the work of a
deceased lawyer and the estate of that lawyer. Rule 5.4(a)(2) provides:
(2) a lawyer who undertakes to
complete unfinished legal business of a deceased lawyer may pay to the estate
of the deceased lawyer that portion of the total compensation that fairly
represents the services rendered by the deceased lawyer . . . .
a Matter from a Deceased Lawyer
Rules do not specifically cover the mechanics for assuming a matter from the
estate of a deceased lawyer. Rule 1.4
requires a lawyer to explain a matter to the extent reasonably necessary to
permit the client to make informed decisions regarding the representation. We believe this requires the inquirer to
inform the clients that they are free to choose any lawyer to represent them
and to have copies of the file with respect to the matter. Cf. Rule 1.17(c) (where a law practice
is being sold, the seller and buyer must give joint written notice to each of
the seller’s clients, which notice must inform the client that the client is
entitled to retain other counsel or to take possession of the file). See generally, N.Y. State Bar
Association, NYSBA Planning Ahead Guide: How to Establish an Advance Exit Plan
to Protect Your Clients’ Interests in the Event of Your Disability, Retirement
or Death (2016) (available at http://www.nysba.org/PlanningAheadGuide2016/).
of Fees Between the Inquirer and the Deceased Lawyer
1.5(g), quoted above, does not apply here.
As the text of Rule 1.5(g) and Comment  to Rule 1.5 explain, the
client must agree to the arrangement, including the share that each lawyer is
to receive, and the client’s agreement must be confirmed in writing. Here, the deceased attorney and the inquirer
did not enter into an agreement to divide fees in any fashion for Matters A, B,
and C, so they cannot satisfy the elements of Rule 1.5(g). In any event, because the referring attorney
is deceased, any fees to be divided by the inquirer would not be shared with an
attorney, but would be shared with a nonattorney – i.e., the estate of
the deceased attorney. Rule 1.5(g) applies only to fee-sharing among lawyers,
so it would not be applicable to any sharing of fees between the inquirer and
the decedent’s estate.
of Fees with Estate of Deceased Lawyer
5.4(a) prohibits a lawyer or law firm from sharing legal fees with a nonlawyer,
with limited exceptions. The exception
pertinent to this inquiry appears in subsection (a)(2) of Rule 5.4, quoted
above, which permits a lawyer to pay to the estate of a deceased lawyer that
portion of total compensation that fairly represents the services rendered by
the deceased lawyer.
apparently have never interpreted this Rule, or its predecessor in the Code of
Professional Responsibility, DR 3-102(A)(2).
Interpreting this provision in his book, Professor Simon quotes the
language of the Rule – “pay the estate of the deceased lawyer that portion of
the total compensation that fairly represents the services rendered by the
deceased lawyer,” and says:
In the case of a contingent fee matter, Rule 5.4(a)(2)
should permit the successor lawyer to agree to pay the estate either a fair
proportion of the contingent fee at the conclusion of the matter or a quantum
meruit payment at any time, before or after the matter is concluded. This parallels the law that applies to
contingent fee matters when a client changes lawyers in the middle of a
contingent fee matter.
Simon, Simon's New York Rules of Professional Conduct Annotated 1424 (Thomson
Reuters 2016) (analogizing to Cohen v. Grainer, Tesoriero & Bell, 81
N.Y.2d 655 (1993)). We agree with
Matter A, in which the deceased attorney provided legal services before his
death, the inquirer may ethically share legal fees with the referring lawyer’s
estate. Thus, under Rule 5.4(a)(2), the
inquirer could, at the conclusion of Matter A, pay the estate a portion of the
total compensation that represents the services rendered by the deceased
attorney, or at any time pay an amount representing quantum meruit for
those services. (As in the case of a lawyer who takes over a contingent fee
case from a living attorney, the proportion of the total fees that fairly
represents the services performed by the original attorney cannot be calculated
until the matter ends, but the quantum meruit amount that represents
fair compensation for those services could be calculated immediately.)
Matters B and C, however, if the deceased lawyer did not provide any legal
“services” on those matters prior to his death, then the inquirer may not
ethically pay the estate a portion of the fees.
If there were such a division of fees between the inquirer and the
estate when the deceased lawyer did not render any services, then the payment
would constitute the payment of an improper referral fee under Rule 7.2(a) and
a division of legal fees with a nonlawyer in violation of Rule 5.4(a). We do not take a position on whether merely executing
and filing a retainer agreement, and thus assuming liability for a matter,
constitutes “services rendered by the
deceased lawyer” within the meaning of Rule 5.4(a)(2) that may be taken
into account in calculating an amount that “fairly represents” the estate’s
reasonable share of legal fees.
Referred to Another Attorney
the inquirer decides to refer one or more matters to another attorney, the
inquirer may ethically receive a share of the fees for such matters if the
inquirer and the successor counsel comply with Rule 1.5(g).
comply with Rule 1.5(g)(2), the inquirer must ensure that the clients in each
particular matter agree to the employment of the other lawyer after disclosure
that a division of fees will be made, including the share each lawyer will
receive, confirmed by each client in writing, and the overall fee would have to
be reasonable. In addition, any division of fees with the lawyer to whom a
matter is referred either must be “in proportion” to the services each lawyer
performs, or, in a writing given to the client, the inquirer and the new lawyer
must assume “joint responsibility” for the representation. Comment  to Rule 1.5 provides: “Joint responsibility for the representation
entails financial and ethical responsibility for the representation as if the
lawyers were associated in a partnership.
In N.Y. State 745 (2001), we said, without elaboration, that the joint
responsibility standard in the predecessor to Rule 1.5(g) entailed more than
financial accountability and malpractice liability.
the successor lawyer (i.e.,
the lawyer to whom the inquirer refers the matters) could ethically share fees
with the estate of the deceased lawyer depends on the same analysis contained
in paragraphs 7 - 10 above.
situation described here indicates that it would be helpful if the Rules of
Professional Conduct (or court rules) addressed the question of succession
planning by sole practitioners.
Proposals for court rules regarding succession planning have been made
in past years but have not been adopted.
successor lawyer who undertakes to complete unfinished legal business of a
deceased attorney may pay the deceased lawyer’s estate that proportion of the
total compensation that fairly represents the services that the deceased lawyer
rendered. If the inquirer refers the
matter to a third attorney, the inquirer and the third attorney may share legal
fees provided they comply with Rule 1.5(g).
If the inquirer and the third attorney comply with Rule 1.5(g), the
division of fees would not be an improper referral fee under Rule 7.2(a).