MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2008-05
Propriety of Attorney Being Paid Fee Out of Settlement of Matter in Which He is Charged With Malpractice
The Ethics Committee of the Maryland State Bar Association has received your inquiry forwardedto the Committee on November 12, 2007, and responds as follows:
Facts you have presented
You are a sole practitioner who represented an individual in a personal injury case against two large corporate defendants. In light of the prospect of multi-state litigation, your client authorized you to associate with a larger firm (Firm A). After some time, you and the client became unhappy with Firm A, and they withdrew their appearance. The client, upon your advice, engaged another firm (Firm B) to handle the claim.
In the subsequent litigation, one of the two defendants was dismissed from the case, and the client filed a legal malpractice claim against you and Firm A, which you dispute. Firm B has settled the case with the remaining defendant and is pursuing the claim against you and Firm A for malpractice. You have made a claim for attorney’s fees for your work arising out of the settlement with the defendant from whom a recovery was successfully obtained and indicate that any fee would be paid only after the malpractice claim against Firm A and your office was resolved. Firm B, the client, and you have all agreed on “the amount to which you would be entitled,” but you and Firm B want to make sure that there is no ethical prohibition to your receiving a fee. You further indicate that there is no allegation of fraud or serious misconduct against you, and the former client and Firm B want you to receive the agreed upon fee. Your question is whether there are any ethical prohibitions barring you from receiving a fee from the settlement obtained from one defendant when it is alleged that you have committed malpractice in allowing the other defendant to be dismissed.
Whether you may ethically collect a fee
The ethical requirements upon Maryland Attorneys regarding fees are dictated by Maryland Rules of Professional Conduct 1.5. Rule 1.5 generally dictates that “[a] lawyer shall not . . . collect an unreasonable fee.” Whether or not a fee is reasonable depends on several factors, including those enumerated in Rule 1.5(a) and 1.5(e). Neither Rule 1.5 nor its commentary discusses fees in light of malpractice actions related to the work from which the fee stems.
While the Ethics Committee may not opine whether your fee is reasonable, your fee in this case may be reasonable even though there is a claim for malpractice against you related to the second defendant. An allegation of malpractice alone does not create an ethical issue that would bar an attorney from collecting a fee if the fee is still “reasonable” in light of the factors listed of Rule 1.5. The Committee points out that the factors listed in Rule 1.5 for determining the reasonableness of a fee are not exhaustive.1 Conceivably, there are other factors that might make a fee unreasonable; however, the Committee reiterates that the narrow allegation of malpractice alone is insufficient to render a fee unreasonable. Instead, the overall circumstances, including factors listed in Rule 1.5, dictate whether a fee is reasonable.
While your case involves a dismissal, your fee in this case may still be reasonable given that your case appears to have two separate parts – a claim against two different defendants. The positive result against one defendant allows you to accept a reasonable fee for services provided to recover against that defendant. The Committee knows of no rule that would prohibit you from collecting a fee for services that had a positive outcome for the client against one defendant where there was a negative outcome against a second defendant. 2 The fact that you relate that both your former client who has claimed malpractice against you and your former client’s current law firm desire that you receive the fee point to the fact that the fee may be reasonable, though you should still individually gauge whether the fee is reasonable overall in light of the criteria laid out in Rule 1.5(a) and 1.5(e) prior to collecting the fee.
The Committee thanks you for your inquiry.
1 Rule 1.5 Fees
(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment of the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
…
(e) A division of a fee between lawyers who are not in the same firm may be made only if:
(1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;
(2) the client agrees to the joint representation and the agreement is confirmed in writing; and
(3) the total fee is reasonable.
2 Comment 1 to Rule 1.5 states that “[t]he factors specified in (1) through (8) are not exclusive.”
REFERENCES:
Rule 1.5(a) and (e), Md. Rules of Professional Conduct
Comment1, Rule 1.5, Md. Rules of Professional Conduct
ASSIGNED TO: Elliott D. Petty, Esquire
DATE ASSIGNED: November 20, 2007
DATE DISTRIBUTED: January 24, 2008