Is an attorney referral agreement enforceable if it doesn’t expressly state that the attorneys are assuming “joint financial responsibility” in representing the clients?  Late in the November term, the Illinois Supreme Court agreed to decide that issue, allowing a petition for leave to appeal in Ferris, Thompson & Zweig, Ltd. v. Esposito, a decision from the Second District.

If that name sounds familiar to long-time readers of Appellate Strategist, it’s because the case has been before the Supreme Court on the merits once before.  According to the Appellate Court’s opinion, the parties’ relationship began in 2007.  Plaintiff referred a number of workers’ compensation clients to defendant in return for a portion of the attorney fees defendant received.  Each referral was evidenced by a written agreement, signed by the parties and the clients.  In 2012, defendant refused to pay plaintiff pursuant to two referral agreements, and plaintiff sued.  Defendant moved to dismiss, arguing that the Illinois Workers’ Compensation Commission, not the Circuit Court, had jurisdiction over the case.  The trial court disagreed, the Appellate Court affirmed the trial court, and the Supreme Court affirmed the Appellate Court.

While that was going on, the defendant refused to pay the plaintiff pursuant to the other ten referral agreements.  The plaintiff sued again, attaching the referral agreements to the complaint.  Defendants moved to dismiss, arguing that the agreements were unenforceable under Rule 1.5(e)(1) of the Rules of Professional Conduct because they nowhere stated that the attorneys were assuming “joint financial responsibility” for the representation.  The plaintiff responded, among other things, that Rule 1.5(e)(1) doesn’t mandate that a written referral agreement must contain such an express statement.  The trial court granted the motion to dismiss.

The Appellate Court reversed.  The relevant language from the Rule provides as follows: “A division of a fee between lawyers who are not in the same firm may be made only if (1) . . . the primary service performed by one lawyer is the referral of the client to another lawyer and each lawyer assumes joint financial 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.”  The court concluded that the express language of the Rule appeared to require only that the client’s agreement to the share each lawyer would receive be expressly set forth in the agreement, not the joint financial responsibility.  Further, the last antecedent rule, which presumes that relative or qualifying words and phrases refer to the immediately preceding matter, rather than reaching back further, would also suggest that the requirement of the writing refers merely to the division of the fee.

The committee comments to the rule supported the same conclusion.  What is meant by the “joint financial responsibility” language is that the referring and the referred attorney are essentially in a one-case-only general partnership for purposes of the representation – if one of the attorneys is sued for malpractice in connection with the case, the other is liable too.  This provision does not directly concern the client, and would apply regardless of whether it’s expressly set forth anyway.  Finally, the Court considered earlier versions of Rule 1.5(e), which had always required that referral agreements be in writing, but had never required an express acknowledgement of joint financial responsibility.

We expect Ferris Thompson to be decided in the fall of 2017.

Image courtesy of Flickr by Mr. Littlehand (no changes).