- Court Declines to Meddle With Fee Sharing Agreement despite Unequal Sharing of Workload
- July 1, 2009
- Law Firm: Hinshaw & Culbertson LLP - Chicago Office
Samuel v. Druckman & Sinel, LLP, ___ N.E.2d ___, 2009 WL 813095, 2009 N.Y. Slip Op. 02447 NY Ct of App. 2009)
In a fee sharing dispute between a referring attorney and the attorney to whom he referred the case, the referring attorney was entitled to a share of an enhanced fee award even though the enhancement was primarily attributable to the work performed by the latter attorney.
Attorney Elliot Sinel referred a medical malpractice case to attorney Steven Samuel. The referral agreement called for Sinel to be “compensated at the rate of one-third of the entire legal fee recovered[.]” Id. at *1. Samuel then brought in another attorney, Steven Pegalis. Samuel and Pegalis tried the case and recovered a settlement of $6.7 million. Due to the amount of work they had performed, Samuel and Pegalis successfully moved for an enhanced fee of $1.9 million. The two attorneys split this fee, and Samuel forwarded one-third of his share to Sinel.
Sinel rejected the payment and asked for one-third of the total $1.9 million. Samuel then sought a declaratory judgment that Sinel was not entitled to any fee because he had violated what was then New York DR 2-107. Sinel counterclaimed for his one-third share.
The issue under DR 2-107, which required informed consent from clients for fee sharing arrangements, was whether Sinel had violated the rule by failing to advise the client that both Sinel and Samuel would be responsible for the representation. The Court of Appeals upheld the Appellate Division finding that Sinel had complied with DR 2-107. The court’s holding was based on the fact that Sinel informed the client that he (Sinel) would assist and consult with Samuel, and that the client consented to the involvement of Samuel. The court also noted that Samuel, who was bound by the same ethical rules as Sinel, could not seek to avoid the fee sharing agreement on ethical grounds when he freely agreed to be bound by, and benefited from, the agreement. The court did not address any potential issues related to the involvement of Pegalis.
The more contentious issue, which had divided the Appellate Division, was whether Sinel was entitled to one-third of the enhanced fee ($1.9 million) or merely one-third of the normal statutory fee. The Court of Appeals held that the plain meaning of the fee sharing agreement called for Sinel to receive one-third of the enhanced fee. This holding modified the holding by the Appellate Division that Sinel should merely be entitled to a share of the unenhanced fee because Sinel had not participated in the extra work that led to the enhanced fee.
Significance of Opinion
The court exhibits a degree of deference to attorney freedom of contract in the realm of fee sharing.