Whose Fee is it, Anyway?

And who gets to hold the fee while we’re figuring out who is entitled to it?

A question about fee disputes came up at one of our CLE programs recently. The question assumed a litigation settlement where the client has received the portion of the settlement he was entitled to but his lawyers Abraham, Martin and John are arguing about how to split the lawyers’ fees. The question is where the attorneys should hold the fees while they resolve their dispute.

Rule 1.5: FEES, paragraph (e) permits a division of fees between lawyers who are not in the same firm as long as:

(1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;

(2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and

(3) the total fee is reasonable.

Abraham, Martin and John complied with Rule 1.5(e). Abraham deposited the litigation settlement in his trust account. The three former amigos are now disputing how the total attorneys’ fees should be divided.

Rule 1.15-2(g) states that “[w]hen funds belonging to the lawyer are received in combination with funds belonging to the client or other persons, all of the funds shall be deposited intact. . . . After the deposit has been finally credited to the account, the lawyer shall withdraw the amounts to which the lawyer is or becomes entitled. If the lawyer’s entitlement is disputed, the disputed amounts shall remain in the trust account or fiduciary account until the dispute is resolved.” (Emphasis added.)

Martin and John dispute Abraham’s entitlement to some portion of the total fee, so Abraham is obligated to hold the disputed amounts in his trust account until the dispute is resolved. Conversely, any undisputed portion of the total fee can be immediately disbursed.

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