Tuesday, September 24, 2019
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Law Firm Fails to Avoid Paying Lawyer His Share of Fee by Invoking State Bar Rule
Court of Appeal Affirms Judgment of $476,000 Against San Jose Firm
By a MetNews Staff Writer
The Sixth District Court of Appeal yesterday rejected contentions of a San Jose law firm that attempted to deprive a former associate of his share of attorney fees in a case by claiming that paying him would run afoul of a rule of professional conduct.
Justice Franklin D. Elia wrote the opinion, which was not certified for publication, upholding an award of $476,150.26 in favor of attorney David Markevitch against his former employer, Pagano & Kass. The sum included the $169,844.18 which a jury found the firm owed Markevitch, plus attorney fees in connection with the action, prejudgment interest, and costs.
An employment contract was formed when Markevitch accepted the offer of employment contained in a letter.
Division of Fee
It provided:
“You shall...be entitled to receive the following compensation based upon business that is directly attributable to your marketing efforts (based upon collected billings or fees, not merely issued billings) during the first twelve (12) months of the attorney-client relationship by and between The Firm and the qualifying client....”
A table was included with percentages ranging from 15 percent of the “[f]irst $6,000.00 of billings per month” 50 percent of collected billings “[g]reater than $15,000.00 per month.”
Markevitch brought a client into the firm; on his behalf, it brought a putative class action in Los Angeles Superior Court; the defendant removed it to the U.S. District Court for the Central District of California based on diversity of citizenship; Judge Jacqueline Nguyen approved a settlement, ordering that the defendant pay $415,000 in attorney fees.
Refusal to Pay
Pagano & Kass refused to pay any part of that fee to Markevitch, invoking Rules of Professional Conduct, rule 2-200, then in effect (supplanted by 2018 revisions). It provided, in part:
“A member shall not divide a fee for legal services with a lawyer who is not a partner of, associate of, or shareholder with the member unless:
“(1) The client has consented in writing thereto after a full disclosure has been made in writing that a division of fees will be made and the terms of such division; and
“The total fee charged by all lawyers is not increased solely by reason of the provision for division of fees and is not unconscionable….”
The firm insisted it could not pay Markevitch because he was no longer an associate (having set up his own law office in San Jose). Markevitch argued that what mattered is that he brought the client in at a time when he was an associate.
Dispute Undecided
“We need not resolve the parties’ dispute as to whether former rule 2-200 governs in these circumstances,” Elia wrote. “Even if it does, its requirements were satisfied such that it does not preclude the enforcement of the Referral Fee Agreement.”
He said the client consented in writing to the fee-splitting.
That consent, the firm maintained, was ineffective because the man “was not an individual client, rather, he was a representative of a putative class.” To be valid, it asserted, the District Court would have to have approved.
“But the Firm cites no authority for that position,” Elia said, “which we accordingly deem forfeited.”
Judicial Approval
The firm further argued that it is settled that, under federal law, a judge must approve fee allocations in class actions.
Not all class actions, Elia said—only those involving common funds, which the present case did not.
The case is Markevitch v. Pagano & Kass, PC, H044561.
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