103 N.J.L.J. 194
March 1, 1979
Division of Fees - Professional
Association and Former Member
The inquirer asks about the propriety of a proposed agreement
for the division of legal fees between a professional association
of attorneys (professional corporation, N.J.S. 14.A:17-1 et.seq.)
and a member (shareholder) who has withdrawn. The provisions in
question are apparently intended to establish a comprehensive plan
for the division of four categories of active "files" of the
parties and for the division of the fees generated by these files.
In each of the four categories of "files" the fee division
would be on an arbitrary percentage basis, the percentages varying
by category. We infer that all necessary client consents to the
allocation of the individual files have been or will be obtained and assume there will be no question of the reasonableness of the total fee of the lawyers involved. See DR 2-107(A)(1) and (3), infra, and our Opinion 203, 94 N.J.L.J. 298 (1971).
The several categories of the files are more particularly described in the inquiry by reference to the parts of the agreement.
Part 1. This part deals with the files which came to the withdrawing member while he was a member of the association and provides that he shall continue to work on them to conclusion. While the withdrawing member was with the association he did all the work on these files and when he left he continued to handle them without assistance from the association. It is proposed that any fees recovered on these files be divided 60%-40%, with the association receiving 60% and the withdrawing member 40%. This is an arbitrary figure and no consideration is given to the amount of work done by the withdrawing member while a member of the association or the amount of work done after withdrawal.
Part 2. The second part is divided into two sections. The first section deals with files which were originally files of members of the association other than the withdrawing member but which were subsequently assigned to the withdrawing member. The agreement proposes that the withdrawing member shall continue to handle these files and that the fees realized at the conclusion of a file are to be divided on the basis of 50% to the association and 50% to the withdrawing member. Once again, these are arbitrary figures with no reference to the amount of work done either by the original member, by the withdrawing member while a member of the association or by the withdrawing member after leaving the association. The second section is the converse of the first section, i.e., these are flaws which originally were the withdrawing member's but were assigned to other members of the association and remained with the association to be handled by a member thereof. Once again, there is a percentage division with no reference to work done. The percentages are not specified in the inquiry.
Part 3. The third part refers to files coming to the withdrawing member for one year after his withdrawal from the association and provides that logo of the fees realized on these files be sent to the association, with no provision for any participation in the work-up of these files by the association or its members.
DR 2-107 provides:
(A) A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm or law office unless:
(1) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
(2) The division is made in proportion to the services performed and responsibility assumed by each.
(3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client.
(B) This Disciplinary Rule does not prohibit payment to a former partner or associate pursuant to a separation or retirement agreement, or professional corporation stock valuation agreement.
DR 2-107(A)(2) explicitly prohibits any division of fees between the association and the withdrawing member with respect to the new files which are the subject matter of Part 3. In this instance there is no justification for invoking DR 2-107(B).
The situation is different as to the files mentioned in Part 1 and the first and second sections of Part 2. Those files originated while the withdrawing partner was still a member of the association with regard to those files, DR 2-107(B) prevails over DR 2-107(A)(2), with the result that, as to them, the agreement is found to be proper opinions of this Committee, (Opinion 80, 88 N.J.L.J. 460 (1965); Opinion 87, 88 N.J.L.J. 779 (1965); Opinion 203, supra), which were rendered before DR 2-l07(B) was adopted are not, in our opinion, inconsistent with the views herein expressed.