A “virtual” law firm got a win when the U.S, District Court for the Eastern District of Missouri held that the firm, though unconventional, did not violate fee-sharing prohibitions.
The case, Deighan Law, LLC v. Daugherty, began when debtors engaged the law firm via the Internet to provide legal services in their Chapter 13 Bankruptcy proceedings. The law firm operates online and has attorneys in all fifty states, with three general partners and about 300 limited partners around the country. The Bankruptcy Court held that the law firm was little more than a referral service.
On appeal, the Missouri Court looked to Section 504 of the Bankruptcy Code, which prohibits fee-sharing arrangements. The Code states that partners “in a professional association, corporation, or partnership may share compensation[.]”
The Missouri Court then looked to Missouri Rule of Professional Conduct 4-1.0(c), which provides a definition of law firm. The comment to the rule states that lawyers are in a partnership if they “present themselves to the public in a way that suggests that they are a firm or conduct themselves as a firm.”
The Missouri Court determined that the law firm’s partners presented themselves as a law firm because they identified themselves as partners of the law firm on all bankruptcy documents. Additionally, the law firm provides aid to attorneys with its staff in Chicago, sharing of mutual contacts common in physical law firms, and partners sign a partnership agreement. Thus, the partners acted like a firm, despite the different platform and their fee-sharing arrangement was upheld.
To read the Missouri Court’s opinion, click here.
