Attorneys – Contract – Fee Splitting – Client Approval – Further Negotiations

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Dunn v. Dart (Lawyers Weekly No. 11-15-0711, 17 pp.) (James L. Gale, J.) N.C. Bus. Ct. Click here for the full-text opinion.

Holding: The parties are attorneys who represented some of the plaintiffs in a class action in federal court. Even if the attorneys had reached a final agreement as to how they would split fees – which they did not – any such agreement would be unenforceable because the clients never agreed to it in writing.

Defendants’ motion for summary judgment is granted.

Agreement’s Existence

When a contract leaves material portions open for future agreement, it fails for “indefiniteness” as a matter of law.

The attorneys exchanged emails in October 2006. Read objectively, these emails reflect an initial understanding as to fee and cost sharing provisions upon which the contemplated agreement would be negotiated; however, they also indicate the expectation of further negotiation and approval of a written agreement.

Even several months later, a March 9, 2008 email reflects that there were still terms to be fleshed out and reduced to writing. The evidence does not indicate an assent by the attorneys to necessary material terms; rather, there was a contemplation of a future final agreement which was never reached.

Furthermore, subsequent conduct casts doubt on whether the attorneys believed they had reached the agreement asserted by plaintiff, i.e., that defendant Dart would advance all costs and take 2/3 of the fee while plaintiff and defendant Zaytoun split the remaining 1/3.

Clearly, Dart did not advance all costs. In the federal class action, the plaintiffs’ management committee (PMC) proposed and obtained an agreement among counsel regarding the recovery of advanced costs as well as the division of fees. Plaintiff‘s request to repurchase financing shares from Dart so that he might participate in that portion of fees as provided by the PMC agreement suggests that he believed that the PMC agreement would control all fees.

Plaintiff also made no effort to insist on a separate retainer agreement with the parties’ clients when the clients signed retainer agreements in conformity with the PMC agreement.

This pattern of conduct amplifies the lack of mutual assent to the fee-sharing agreement plaintiff promotes.

Rules of Professional Conduct

Any agreement that may have been reached is not enforceable pursuant to N.C. Rule of Professional Conduct 1.5(e). This rule provides that “a division of a fee between lawyers who are not in the same firm may be made only if … the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing.”

While plaintiff offers what he contends is written confirmation of the agreement among the three attorneys, he has offered no evidence of the approval of that agreement by the clients.

Even though the clients signed written assent to the PMC agreement as to the division of attorney fees, there is no written agreement signed by the clients assenting to the fee-sharing agreement that plaintiff now asserts.

Any fee-sharing agreement that the party-attorneys may have reached is not enforceable absent compliance with Rule 1.5(e). The failure to comply with that rule can be raised as a defense to an action to enforce fee-sharing pursuant to such an agreement.

Motion granted.