In June, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility released Formal Opinion 487, which provides guidance on fee-splitting arrangements when a lawyer replaces the initial attorney in a contingency matter.
Opinion 487 advises that a successor counsel must notify the client, in writing, that a portion of any fees recovered may be paid to the original counsel.
The opinion acknowledges that when a client decides to retain new counsel mid-litigation, the original lawyer may be entitled to quantum meruit for the value he added to the case, or payment under a “termination” or “conversion” clause in the original client agreement. Nonetheless, clients often do not understand that there is a continuing obligation to pay the original lawyer for the value of his services, even after representation has been terminated.
The Opinion directs lawyers to Rule 1.5(a-c), which applies to the successor lawyer in the fee relationship with the client. The Rule and its relevant Comments emphasize that an understanding as to fees must be established between the new attorney and his client, and that client consent must be obtained, in writing, before the fee is divided.
Opinion 487 also notes that the duty to disclose the original lawyer’s potential claim and entitlement to some portion of the recovery does not constitute an “unreasonable burden” on the successor counsel. Also, in many instances, the fees paid to both attorneys will not affect the client’s recovery, as a client cannot be exposed to more than one contingency fee when switching attorneys, under Rule 1.5(b).
You can read more about Formal Opinion 487 here, or read the opinion here.
