Norton Frickey, P.C. v. James B. Turner, P.C.

Citation: 94 P.3d 1262Docket: No. 03CA0236

Court: Colorado Court of Appeals; June 17, 2004; Colorado; State Appellate Court

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A judgment was affirmed in a contract dispute between attorney James B. Turner, P.C. and Norton Frickey, P.C., regarding the enforceability of a contract apportioning attorney fees following Turner's departure from the firm. Turner appealed the trial court's pretrial ruling that the contract was enforceable and not contrary to public policy. The firm, primarily handling plaintiffs' contingent fee cases, had notified clients of Turner's departure, with approximately sixty choosing to follow him. A final settlement agreement was made stipulating that Turner would pay the firm all advanced costs and 40% of fees from clients who left to retain his services. After paying the agreed fees until late 1998, Turner refused to pay on four unresolved cases, prompting the firm to sue for breach of contract. Cross-motions for summary judgment were filed, with Turner arguing the agreement violated Colo. RPC 1.5, while the firm contended otherwise. The trial court denied both motions, ruling the agreement enforceable. A jury found no oral modification of the contract and awarded the firm approximately $140,000, plus interest and costs. Turner maintained the agreement was void due to violation of Colo. RPC 1.5(d), but the court upheld the contract, noting that contracts contrary to public policy are unenforceable only when the interest in enforcing them is significantly outweighed by public policy concerns. The Colorado Rules of Professional Conduct, adopted in 1992, underpin this framework.

Colo. RPC 1.5(d) regulates the division of fees between lawyers not in the same firm, permitting such divisions only when: (1) the division is proportionate to each lawyer's services and responsibilities; (2) the client consents to the additional lawyer after full fee disclosure; (3) the total fee is reasonable; and (4) the agreement is documented in writing and signed by all parties with informed consent. The rule aims to empower clients in selecting their representation and understanding fee structures, while protecting them from undisclosed payments and excessive fees. It is particularly relevant in disputes over contingent fees between lawyers who have represented the same client at different times. Courts enforcing compliance with this rule have deemed non-compliant fee agreements void as against public policy. However, agreements concerning fee apportionment when an attorney leaves a firm may not be subject to this rule, allowing for enforceability despite the absence of compliance with Colo. RPC 1.5(d). Some courts have noted variations in their state rules that may influence this interpretation.

Colo. RPC 1.5(d) permits payments to lawyers who have left a firm under a separation or retirement agreement, despite Rule 1.5(f). This provision mirrors an earlier rule, DR 2-107(B), and some states have adopted similar language without indicating a departure from the original intent. Jurisdictions with comparable rules to Colorado’s have found that such provisions do not apply to fee divisions between a firm and a departing attorney, allowing enforcement of separation agreement terms. Courts have ruled that these apportionment provisions do not violate public policy as they do not adversely affect clients. For example, one court noted that a fee-allocation mechanism merely divides an existing fee, thus not conflicting with RPC 1.5's policies. Another emphasized that agreements made during an attorney’s separation process do not impact client choices. Furthermore, courts asserted that these arrangements benefit clients by preventing disputes over fee distribution, enhancing efficiency. In this case, when the attorney announced their departure, the firm informed clients of their options, ensuring they could select their representation freely. After the attorney's exit, clients signed a similar contingent fee agreement, and upon claim resolution, fees were divided as per the agreements, with no extra charges to clients and no deception involved.

Clients' choice of legal representation remains intact, and public policy protecting clients is not affected. The agreement in question benefits clients by establishing a comprehensive method for fee distribution between the attorney and the firm, avoiding future negotiations or potential litigation that could delay client proceeds. This arrangement involves dividing an existing fee and is supported by case law, which encourages reasonable fee division agreements. Colorado Rules of Professional Conduct (Colo. RPC) 1.5 does not apply to intra-firm fee divisions, meaning no requirement exists for fees to be proportional to services or for client consent. The attorney's separation from the firm occurred while still employed, and the American Bar Association's 2002 comment on the Model Rules affirms that future fee divisions from prior firm associations are permissible. Colo. RPC 1.17 allows for the sale of law practices with conditions, permitting fee division not tied to services or responsibilities. While this specific rule exempts certain withdrawals from partnerships, it highlights situations where fee divisions can occur without client consent. Additionally, the Rules of Professional Conduct are not intended to alter civil liability or create a basis for liability against attorneys.

The Code of Professional Responsibility does not establish standards for civil liability of lawyers regarding professional conduct, as clarified in Taylor v. Grogan. Additionally, the canons of ethics serve as guidance rather than binding law, emphasizing their role in internal professional discipline. The Colorado Rule of Professional Conduct (Colo. RPC) 1.5(d) should not be interpreted as allowing attorneys to neglect obligations under the guise of legal ethics, aligning with a Texas court's perspective. The court dismissed the attorney's claim that People v. Wilson dictated a different outcome, noting that Wilson dealt specifically with attorney discipline and the enforceability of a fee-sharing covenant that was deemed unrelated to services rendered. In contrast to Wilson, the agreement in question involved two experienced personal injury attorneys who negotiated terms after thorough discussions, reflecting a mutual compromise. The attorneys were informed about the cases and the work involved, mitigating issues of coercion and arbitrary allocation that were present in Wilson. Consequently, the agreement is enforceable and not void against public policy, leading to the affirmation of the judgment. Judges Vogt and Loeb concurred.