North Carolina Lawyers Weekly
In the case of a fee dispute, Rule of Professional Conduct 1.5(f)(1) requires a lawyer to notify the client of the State Bar’s fee dispute resolution program at least 30 days prior to initiating legal proceedings to collect the disputed fee. However, when a client files a legal malpractice action, the lawyer’s claims for the related fees are likely compulsory counterclaims. We hold that lawyers do not have to give notice of the fee dispute resolution program when filing a compulsory counterclaim to collect disputed fees from the client in a legal malpractice suit initiated by the client.
We affirm judgment for the law firm.
The plaintiff-clients’ legal malpractice claims were dismissed, and the case proceeded to trial on the defendant-law firm’s claims for unpaid fees.
Disqualification
Prior to trial, the trial court disqualified Brian Upchurch from representing plaintiffs. Upchurch had previously worked on matters for plaintiffs while he was employed by the defendant-law firm. He left the firm, worked as general counsel for Tompkins International, and then opened his own practice.
Plaintiffs consulted Upchurch about their claim against the law firm. He prepared an analysis containing a factual narrative and a list of 13 “Attorney’s shortcomings.”
Thereafter, Upchurch formally reestablished an attorney-client relationship with plaintiffs with respect to other matters.
Based on these facts, the trial court found, “Upchurch acted, in fact, as the lawyer for the Plaintiffs in January 2015.”
Given that plaintiff Cecil Holcomb asked Upchurch to represent him in the legal malpractice action against defendants in 2014, Upchurch knew or reasonably should have known that defendant Thomas Wilson was represented by counsel in this case as of January 2015. Therefore, when Upchurch met with Wilson to discuss a return to work for the law firm, Upchurch should not have engaged in discussion of plaintiffs’ legal malpractice action with Wilson, regardless of whether he asked Wilson directly about the litigation or they discussed the case generally in relation to his rejoining the firm.
Such communication in these circumstances violates Rule of Professional Conduct 4.2. Accordingly, the trial court did not abuse its discretion in disqualifying Upchurch from serving as plaintiffs’ counsel based on a Rule 4.2 violation.
Subject Matter Jurisdiction
Plaintiffs contend the trial court lacked subject matter jurisdiction over the law firm’s counterclaim for unpaid fees because the firm failed to notify plaintiffs of the State Bar’s fee dispute resolution program and that compliance with the program is a prerequisite to the trial court assuming jurisdiction over the litigation. We disagree.
Pursuant to RPC 1.5(f)(1), in a dispute over fees, before a lawyer can initiate a lawsuit to collect the disputed fees, the lawyer must give the client notice of the fee dispute resolution program. Neither Rule 1.5(f)(1) nor N.C.A.C. § 1D.0707(a) includes any reference to or requirement that a lawyer give notice when the client initiates a lawsuit against the lawyer and the lawyer files a counterclaim to collect disputed fees.
Additionally, in a legal malpractice suit brought by a client, a counterclaim by the lawyer for outstanding fees in the underlying case will likely be compulsory.
We hold specifically that lawyers do not have to notice the fee dispute resolution program when filing a compulsory counterclaim to collect disputed fees from the client in a legal malpractice suit initiated by a client.
Defendants did not initiate legal proceedings to collect the disputed fees. Rather, defendants filed counterclaims for outstanding legal fees in several matters, all of which were the subject of plaintiffs’ legal malpractice suit. Accordingly, the requirements set forth in Rule 1.5(f)(1) and § 1D.0707(a) that a lawyer must notify the client of the fee dispute resolution program before filing a lawsuit do not apply to the case at bar.
Defendants did not need to notify plaintiffs of the fee dispute resolution program before or after filing their compulsory counterclaim. Therefore, the trial court had subject matter jurisdiction and correctly denied plaintiffs’ motion for a directed verdict.
Affirmed.
Cecil Holcomb Renovations, Inc. v. Law Firm of Wilson & Ratledge PLLC (Lawyers Weekly No. 012-059-22, 22 pp.) (Darren Jackson, J.) (Hunter Murphy, J., concurring in part & concurring in result only in part without separate opinion) Appealed from Wake County Superior Court (Bryan Collins, J.) Matthew Van Horn for plaintiffs; David Coats for defendants. 2022-NCCOA-99
