State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
Ethical considerations involved in the division of fees pursuant to separation and retirement agreements.
It is improper for attorneys to divide probate fees pursuant to a partnership agreement which provides that, following dissolution, if a former partner should probate the will of any of certain named persons, he will divide the fee with the other former partner(s) or their heirs.
Rules 2-108 and 3-102 of the Rules of Professional Conduct.
American Bar Association Code of Professional Responsibility, Disciplinary Rule 2-107.
The Committee has been requested to render an opinion with respect to a proposed provision in a partnership agreement between lawyers whereby the partners agree that, following dissolution, if a former partner should at any subsequent time probate the will of any of certain named individuals, he will forward to the other former partner a fixed percentage of the fee when, as, and if it is received. Under such an arrangement it is contemplated that all of the work in probating a particular estate would be done by the forwarding attorney, and that the arrangement would inure to the benefit of each former partner's beneficiary or heir following his death.
The Committee is of the opinion that the foregoing arrangement poses two ethical questions.
The first question concerns the propriety of the above described division of fees during the lifetime of the recipient. The applicable provision of the Rules of Professional Conduct, as adopted by the Board of Governors and approved by the California Supreme Court effective January 1, 1975, is rule 2-108, which provides as follows:
"A member of the State Bar shall not divide a fee for legal services with another person licensed to practice law 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 person licensed to practice law after a full disclosure that a division of fees will be made; and
"(2) The division is made in proportion to the services performed or responsibility assumed by each; and
"(3) The total fee charged by all persons licensed to practice law is not increased solely by reason of the provision for division of fees."
Rule 2-108 of the Rules of Professional Conduct embodies the long-standing principle that a division of fees can only be made in proportion to the services performed and the responsibility assumed by each lawyer involved. See American Bar Assocation Code of Professional Responsibility, Disciplinary Rule 2-107 and former canon 34 of the American Bar Association.
The Committee believes that, because of pertinent provisions of the Probate Code relating to fees, the arrangement in question does not violate what is perceived to be the basic policy behind rule 2-108 of the Rules of Professional Conduct; namely, to ensure that the fees charged by more than one lawyer or law firm in respect to a particular matter or case are reasonable. It does not necessarily follow, however, that the arrangement in question is therefore permissible under rule 2-108 of the Rules of Professional Conduct. The rule unequivocally states that a member of the State Bar "shall not" divide a fee with another person licensed to practice law unless, inter alia, "the division is made in proportion to the services performed or responsibility assumed" by each such person. (Rule 2-108(A)(2), Rules Prof. Conduct.) As the arrangement was described to the Committee, the retired or separated lawyer to whom the payments under consideration would be remitted would not perform any services or assume any responsibility in respect to the particular fee-generated estate.
On the other hand, it could be argued that subdivision (A)(2) of rule 2-108 of the Rules of Professional Conduct should not apply to payments pursuant to a separation agreement. However, rule 2-108 does not contain the exception to the general rule pertaining to division of legal fees with another attorney set forth in its predecessor, former rule 22, subdivision (b):
"This rule does not prohibit payment to a former partner or associate pursuant to a separation or retirement agreement."
To characterize this proposed division of probate fees as permissible in the face of such deletion and the unambiguous language of rule 2-108(A)(2) of the Rules of Professional Conduct would, in the opinion of the Committee, be unwarranted. Accordingly, the Committee is of the opinion that the proposed arrangement in question is impermissible under rule 2-108, whether or not a disclosure is made to the executor/client and to the court before which the probate proceeding is pending (cf. rule 2-108(A)(1), Rules Prof. Conduct), and even if the division of fees will not cause an increase in the total fee charged. (Cf. rule 2-108(A)(3), Rules Prof. Conduct.) Had the saving clause previously embodied in former rule 22, subdivision (b), been retained in the new rule, the Committee might have come to a different conclusion.
The second question posed concerns the propriety of the continuation of the arrangement following the death of a party to the agreement under which the surviving partner who acted as attorney in respect to any of the estates designated therein would be obliged to forward a percentage of his fee to the personal representative or designated beneficiary of a deceased former partner. The applicable rule is rule 3-102 of the Rules of Professional Conduct, relating to division of legal fees with persons who are not licensed to practice law. Rule 3-102 provides that:
"A member of the State Bar or a firm of which he is a member shall not directly or indirectly share legal fees except with a person licensed to practice law except that:
"(1) An agreement by a member of the State Bar with his firm, partner, or associate may provide for the payment of money, over a reasonable period of time after his death, to his estate or to one or more specified persons.
"(2) A member of the State Bar who undertakes to complete unfinished legal business of a deceased member of the State Bar may pay to the estate of the deceased member of the State Bar or other person legally entitled thereto that proportion of the total compensation which fairly represents the services rendered by the deceased member of the State Bar.
"(3) A member of the State Bar or firm of which he is a member may include employees not members of the State Bar in a retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement."
The predecessor of this rule, former rule 3 of the Rules of Professional Conduct, had been interpreted to bar payments by ex-partners to a deceased lawyer's surviving spouse or heirs, to the extent that such payments represented a percentage of fees received for legal services rendered after the lawyer's death. (L. A. Co. Bar Assn. Committee on Legal Responsibility and Conduct, opn. No. 162 (1963).) This is the prevailing view across the country. (See, e.g., ABA Committee on Prof. Ethics and Grievances, opn. No. 266 (1945); Assn. of the Bar of New York Ethics Committee, opn. No. 706 (1947).)
The purpose of rule 3-102 of the Rules of Professional Conduct is to discourage or prevent the unauthorized practice of law by lay persons. In this regard, Ethical Consideration 3-8 of the American Bar Association Code of Professional Responsibility is apposite:
"Since a lawyer should not aid or encourage a layman to practice law, he should not practice law in association with a layman or otherwise share legal fees with a layman. This does not mean, however, that the pecuniary value of the interest of a deceased lawyer in his former practice may not be paid to his estate or specified persons such as his widow and heirs. In like manner, profit sharing retirement plans of a lawyer or law firm which include nonlawyer office employees are not improper. These limited exceptions to the rule against sharing legal fees with laymen are permissible since they do not aid or encourage laymen to practice law."
The Committee does not believe that the proposed division of probate fees, with the estate or beneficiary of a former partner of the lawyer forwarding the same, serves either to encourage or perpetuate the unauthorized practice of law by the estate or the beneficiary. Nevertheless, we believe the arrangement is not permissible.
First, if the division is impermissible under rule 2-108(A)(2) of the Rules of Professional Conduct during the recipient's lifetime, then surely it is equally so after his death.
Second, the Committee does not believe that the payments in question fall within the intent of rule 3-102(A)(1) of the Rules of Professional Conduct. Unlike the agreement approved in American Bar Association Committee on Professional Ethics, opinion No. 308 (1963), the instant arrangement is open ended. It does not meet the requirement of rule 3-102(A)(1) that the agreement "... may provide for the payment of money, over a reasonable period of time..." (Emphasis added.) The recipient's estate or beneficiary would apparently be eligible to receive payments until the last client listed in the agreement had died and the estate had been probated by the surviving partner. Moreover, the Committee does not believe these payments could properly be characterized as an approximation of the decedent's interest in matters pending at the time the partnership was dissolved, since there is no way of telling what the amount of the fee to be divided will be until the client dies, and since it is entirely possible that the client's executor will choose another lawyer to represent the estate.
Accordingly, it is the Committee's opinion that the proposed agreement is also impermissible under rule 3-102 of the Rules of Professional Conduct insofar as it provides for a continued division of probate fees, after the death of a partner, with his estate or beneficiary.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.