Business divorce disputes among lawyers will often require the division of contingent fees realized after the parties have separated their business interests.
An agreement between lawyers in a firm to divide fees in the event of their separation cannot function as a restriction on a lawyers right to practice and to compete with a former firm, but otherwise is generally enforceable.
Courts also use principles of quantum merit — ‘as much as he deserves – to allocate contingent fees between lawyers who once practiced togther.
The division of fees, in particular contingent fees earned after a firm is dissolved or the resignation of a rainmaker, are the catalyst for business divorce disputes in law firm breakups. These disputes involve some key issues:
- Is there an agreement in place covering the division of fees?
- If there is an agreement, is it enforceable?
- If there is no agreement, how will a court divide the fees?
Agreements to Divide Fees
Lawyers practicing together in a firm frequently make agreements on how fees will be divided after the withdrawal of a lawyer. These agreements may be part of the firm’s partnership, operating agreement or corporation bylaws, or embodied in an employment contract or separation agreement. These types of agreements are generally, but not always, enforceable.
Getting the client’s consent to such a division is also a good practice and, in at least one jurisdiction, may be required.