After a jury awarded the family over five million dollars, the appellate court vacated the verdict and ordered a new trial. Before the new trial began, the law firm ended its relationship with the primary handling attorney. The clients then discharged the original law firm and hired the primary attorney and outside lawyer. When the underlying case later settled, the former law firm sued to collect a percentage of the contingency fee.

Factual Background

The litigation started when an injured patient suffered a severe heart attack following cardiac surgery. The patient and his spouse hired the original law firm under a standard contingency fee agreement. The contract called for a forty percent fee upon any financial recovery.

For several years, the associate attorney managed the case at the original law firm. He handled preliminary motions, took depositions, and met frequently with the clients. As trial approached, the initial law firm brought in a seasoned trial lawyer to assist with the medical malpractice claims. Together, the two attorneys tried the case for three weeks. Consequently, the jury awarded a judgment exceeding five million dollars in favor of the injured patient.

However, the trial court verdict did not stand. The appellate court vacated the judgment due to evidentiary errors and remanded the case for a new trial. Before the retrial took place, the original law firm ended its relationship with the associate attorney.

Because of this split, the original law firm informed the clients that their primary lawyer was leaving. The clients received notice that they could stay with the firm or hire new counsel. Unhappy with losing their primary lawyer, the clients promptly discharged the original law firm. Instead, they chose to retain the associate attorney and the co-counsel under a new contingency fee agreement.

The new attorneys continued the legal work for eighteen months. During this period, outside events created leverage against the medical providers. Ultimately, the new attorneys secured a confidential financial settlement. The total contingent fee was placed in an escrow account. Soon after, the original law firm filed a lawsuit against the successor attorneys and the clients. The firm sought to recover legal fees based on quantum meruit for its years of work.

Parties’ Arguments

The original law firm argued that it was entitled to a major share of the legal fee. First, it pointed out that its staff handled almost five years of intense work. Its team conducted discovery, tried the case to a multi-million dollar verdict, and defended the appeal. Furthermore, expert witness testimony showed that ninety-five percent of the docket entries occurred while the initial firm held the file. Thus, the original firm argued that its efforts created the foundation for the ultimate settlement.

In contrast, the successor attorneys argued that the original firm deserved no fee at all. They claimed that the original firm effectively abandoned the clients by firing the primary lawyer. Therefore, they asserted that the firm breached its duty and forfeited any claim to compensation.

In addition, the successor attorneys argued that quantum meruit claims cannot be brought directly against successor counsel. They asserted that such claims can only be brought against former clients. Finally, they argued that if any fee was due, the court had to enforce internal fee-sharing agreements. They claimed these agreements entitled the individual attorneys to specific percentages of any fee generated by the case.

Court’s Ruling on Quantum Meruit in Medical Malpractice

The circuit court ruled in favor of the original law firm. First, the trial judge rejected the argument that the firm abandoned its clients. The judge noted that the firm offered to continue representation with qualified staff. Furthermore, the transition of the case file was smooth and caused no harm to the clients. Therefore, the original firm did not forfeit its right to reasonable fees.

Second, the trial judge held that the quantum meruit award must come directly out of the total contingency fee already collected. The court stated that the clients did not owe any extra money. After deducting out-of-pocket expenses, the trial court awarded sixty-five percent of the remaining fee to the original law firm.

On appeal, the appellate court affirmed the finding that the original firm was entitled to quantum meruit fees. The appellate court agreed that no abandonment occurred. Additionally, the court confirmed that a discharged law firm can recover directly from successor counsel who hold the recovered fee. The court explained that when a contingency is fulfilled, the original firm may seek a fair share based on its contribution.

However, the appellate court reversed the circuit court on the fee-sharing issue. The court held that when a client discharges a law firm, the original contingency contract ends. As a result, any internal fee-splitting agreement linked to that contract also ends. The trial judge had mistakenly factored the old fee-split percentages into the final math. Consequently, the appellate court vacated the award and remanded the case for the trial court to re-calculate the reasonable value of the legal services.

Commentary by Baltimore Medical Malpractice Lawyer Mark Kopec on Quantum Meruit

This decision offers guidance for personal injury and medical malpractice lawyers in Maryland. First, it reinforces the rule that clients retain freedom to choose their legal counsel. When a client fires a law firm, the underlying contingency contract ceases to exist immediately.

Second, the ruling protects law firms from losing all compensation when an associate leaves with a major case. Even if a firm fires the primary lawyer, it does not automatically abandon the client. As long as the firm offers competent ongoing counsel and hands over the file smoothly, it preserves its right to fair pay.

Third, the case highlights the legal mechanics of quantum meruit recovery. Discharged attorneys do not have to double-tax the client. Instead, they can claim a fair portion of the fee earned by successor counsel once the case resolves successfully. Courts will evaluate factors like labor, skill, time spent, and overall contribution to the result.

Finally, departing lawyers must remember that internal fee-split arrangements usually die when the client contract terminates. Neither the old firm nor the departing lawyer can rely on pre-existing split percentages once a fresh retainer is signed. Moving forward, law firms and departing associates may want to establish written exit agreements. Doing so can prevent costly post-settlement court battles over legal fees.

You can read another Blog post on issues involving attorney’s fees: Fee-Sharing Agreement: Bennett v. Ashcraft and Quantum Meruit Arbitration: Slocumb v. Quick.

Mark Kopec is a top-rated Baltimore medical malpractice lawyer. Contact us at 800-604-0704 to speak directly with Attorney Kopec in a free consultation. The Kopec Law Firm is in Baltimore and helps clients throughout Maryland and Washington, D.C. Thank you for reading the Baltimore Medical Malpractice Lawyer Blog.

At the beginning of employment, the lawyer and the firm entered into a fee-sharing agreement to divide any contingency fee if the lawyer received a payment from representing a firm client after the lawyer left the firm. The lawyer subsequently withheld approximately $706,000 in payments, claiming the agreement was unenforceable because it violated the Maryland Attorneys’ Rules of Professional Conduct. (Id. at 415-16). 

The fee-sharing agreement provided different fee splits depending on when the lawyer retained the client and when the employment ceased. Accordingly, the focus was on how long the firm, or the lawyer was responsible for the client. (Id. at 418).

After leaving employment, the lawyer brought suit in the Circuit Court for Prince George’s County against the firm, including challenging the agreement concerning several clients. (Id. at 422).

The circuit court then ruled that the agreement did not violate the Maryland Attorneys’ Rules of Professional Conduct. (Id. at 13). The circuit court entered an order awarding the firm approximately $700,000 in fees but denying prejudgment interest. (Id. at 427).

Appellate Court

Maryland Rule 19-305.6(a) provides:

“An attorney shall not participate in offering or making a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of an attorney to practice after termination of the relationship, except an agreement concerning benefits upon retirement.”

The Appellate Court noted that financial disincentives for taking firm clients can violate the rule if they represent disguised attempts to penalize competition. (Id. at 20). However, the rule does not preclude fee-sharing agreements logically related to the anticipated financial impact of the lawyer’s departure. (Id. at 432). 

Without the agreement, the lawyer and firm would have their interests determined by quantum meruit, a legal principle that allows for the recovery of a reasonable value for services rendered. This can be a factually intensive and costly exercise, as it requires a detailed assessment of the services’ value. (Id. at 432-34).

In examining similar fee-sharing agreements, one bar ethics committee stated that if the fee-split percentages represent a generally fair allocation based on the firm’s historical experience, there is no rule violation. (Id. at 436). The Appellate Court also discussed cases from other jurisdictions upholding similar agreements. (Id. at 438-40).

Holdings

The Appellate Court’s finding in this case carries significant weight. It concluded that the agreement did not purport to restrict the right of the lawyer to practice law or restrict clients’ choice. The Court also held that although the percentages may not correspond perfectly with quantum meruit, they represent a reasonable attempt in advance. As a result, the agreement was enforceable on its face. (Id. at 440-43). This ruling sets a precedent for similar cases in the future. 

The Appellate Court also found it was enforceable as applied. The Court noted that the lawyer had previously insisted that the firm adhere to the agreement. Moreover, the fee division was reasonable, a finding that could have significant implications for future fee-sharing agreements. The lawyer obtained a $700,000 fee for one client in a matter already settled in principle. However, the lawyer obtained an increase for the client. (Id. at 433).

The Court likened the agreement to an enforceable liquidated damages clause, a provision in a contract that specifies a predetermined amount of damages to be paid in the event of a breach. This comparison is significant, as it suggests that the Court views fee-sharing agreements as a legitimate means of allocating financial risks and rewards in the legal profession. Agreements like the one at issue should be encouraged. (Id. at 445).

The Court upheld the firm’s summary judgment for approximately $706,000 and found that the circuit court failed to award prejudgment interest of approximately $81,000. (Id. at 447-60, 460-64).

Commentary by the Baltimore Medical Malpractice Lawyer on Fee-Sharing Agreement

The Appellate Court’s reasoning and result are not surprising. The courts generally favor these types of fee-sharing agreements and scrutinize them to ensure they are not a penalty. However, in this instance, the agreement was similar to those found by various courts and bar associations to be permissible under the Attorney’s Rules. This decision could have significant implications for the future of fee-sharing agreements, potentially setting a precedent for their enforceability and the factors that courts will consider in evaluating them.

Law firms seeking such an arrangement can use this opinion to model an agreement. Of course, such an agreement does not necessarily save time and money. In this case, the agreement still led to litigation that took over five years. It’s important to consider the potential benefits, such as a clear and agreed-upon fee structure, as well as the potential drawbacks, such as the risk of disputes and litigation, when deciding whether to enter into a fee-sharing agreement.

Quantum meruit can require extensive analysis, and a fee-sharing agreement can be easy to implement. However, the time and expense under either course depend mostly on whether the parties want to fight or work things out.

Mark Kopec is a top-rated Baltimore medical malpractice lawyer. Contact us at 800-604-0704 to speak directly with Attorney Kopec in a free consultation. The Kopec Law Firm is in Baltimore and helps clients throughout Maryland and Washington, D.C. Thank you for reading the Baltimore Medical Malpractice Lawyer Blog.