Professional Responsibility

This differs from DR 2-107 in that, first, under the new rule, “the share each lawyer will receive” must be disclosed, and, second, “the client’s agreement must be confirmed in writing.” Under DR 2-107, the requirement was merely that the client be informed of the fact of the division of fees.

Legal Fees Clarified

In addition to the changes described above in the applicable ethical rules, two new cases have been handed down in recent weeks that clarify different aspects of the law relating to legal fees. In Samuel v. Druckman & Sinel, LLP, 2009 WL 813095 (N.Y.), 2009 N.Y. Slip Op. 02447, the New York Court of Appeals decided a case regarding the appropriate division of fees between counsel where, although the agreement was made under the then applicable DR 2-107, the issue was less about compliance with the ethical rule, and more about the meaning to be given to the fee sharing arrangement between the lawyers.

In this case, Elliot Sinel was retained to represent a client and her infant daughter in a medical malpractice action. After conducting an investigation into the merits of the case, Sinel advised the client that he would find suitable trial counsel and later contacted Steven B. Samuel, who agreed to serve in that capacity. The arrangement was memorialized in a letter between the lawyers that included the following language:

Sinel then notified the client, in writing, that his firm had retained Samuel’s firm as trial counsel and, although that firm would be handling most of the litigation, he would be “assisting and consulting with [Samuel's firm] on a regular basis.” Sinel assured the client that she would not incur any additional legal fees for having both firms working on the case. The client consented to this arrangement in writing. Under the “sliding scale” provision, Judiciary Law §474-a (2), the fee for the successfully prosecuted action (which resulted in a $6.7 million verdict) would have been $805,767. Subsequently, pursuant to Judiciary Law §474-a (4), which allows a successful attorney in a medical malpractice action to be awarded fees in excess of those set forth in subsection (2), Samuel and his co-counsel at trial moved for an enhanced fee, and the Supreme Court awarded them attorney’s fees in the amount of $1.9 million of which $1,137,826 was Samuel’s fee and $762,173 was his co-trial counsel’s fee.

Samuel then remitted one-third of his enhanced fee to Sinel, but not one third of his co-trial counsel’s fee. Sinel sued, claiming that he was owed one-third of the entire fee. In a 3-2 decision, the Appellate Division majority held that although Sinel had sufficiently complied with DR 2-107, he was entitled to only one-third of the unenhanced fee of $805,767 because he did not participate in the services that resulted in the award of the enhanced fees. The dissenters would have awarded one-third of the entire fee awarded by the trial court.

The Court of Appeals unequivocally concluded that Sinel was entitled to one-third of the entire fee, holding that: “Where, as here, an agreement ‘is complete, clear and unambiguous on its face[, it] must be enforced according to the plain meaning of its terms’ (Greenfield v. Philles Records Inc., 98 N.Y.2d 562, 569 [2002] ). Because the language ‘one-third of the entire fee recovered’ is subject to no interpretation other than the one proffered by Sinel, he is entitled to recover that amount.”

Additionally, the Court noted that, contrary to the holding of the Appellate Division, it was of no moment that Sinel did not contribute to that part of the work that resulted in the award of the enhanced fee. “In the realm of fee-sharing disputes, ‘courts will not inquire into the precise worth of the services performed by the parties’ (Benjamin v. Koeppel, 85 NY2d 549, 556 [1995] ). DR 2-107 also makes clear that, regardless of any division of services, where ‘by a writing given to the client, each lawyer assumes joint responsibility for the representation,’ attorneys are free to negotiate such division of fees as they deem appropriate (Code of Professional Responsibility DR 2-107[a][2].” As indicated above, identical language is contained in RPC 1.5 (g)(1), so that (assuming compliance with the enhanced requirements of notice to and consent from the client also described above) this decision would be the same under RPC 1.5 (g).

In Chen v. Chen, 552 F.3d 218, the U.S. Court of Appeals for the Second Circuit upheld the decision of U.S. District Judge Edward R. Korman denying counsel’s request for attorney fees in its entirety, based in part on Judge Korman’s determination that counsel had violated New York disciplinary rules by purposely requesting a fee in excess of the statutory maximum provided for under New York law.

In this case, the Second Circuit reviewed at considerable length the facts underlying the denial by Judge Korman of any fee to Steven F. Goldman, counsel for the plaintiffs, an infant and his legal guardian, in the underlying medical malpractice case which had been settled for $2.4 million.

In sum, following a settlement, the plaintiffs’ attorney filed an affidavit seeking an amount in fees that was subsequently found to be clearly in excess of the amount payable under the applicable statutory sliding scale. Thereafter, extensive hearings were held regarding the adequacy of the lawyer’s services on behalf of the infant plaintiff, as well as regarding his fee claim. At the conclusion of this process, Judge Korman had denied counsel any fee, supporting his decision in the following terms: