Lengthy Fee Fight Settles In $6 Million Harass Case

The Supreme Court to ruled that lawyers splitting fees need the client’s written consent.

By Michael Fish

Vice Chair of the State Bar Mandatory Fee Arbitration Committee
And Chair of the MCBA Client Relation’s Committee

 

A ten-year fee fight, which prompted the state Supreme Court to provide strict rules governing attorneys’ fee-sharing agreements, has been settled.

For five years, attorneys Arthur Chambers and Philip Kay litigated over fees earned in a historic sexual harassment case. Their dispute reached the California Supreme Court, which used the case to, among other things, declare that fee-sharing agreements between lawyers are void without written consent from the client. Chambers v. Kay (2002) 29 Cal.4th 142.

The litigation came to a when both parties agreed to settle. Terms were undisclosed.

The Chambers case brought increased focus to fee-sharing agreements by both the state Supreme Court and the state bar.

A review of the fee disputes in Marin County reveals that many attorneys are not aware of the Chambers rule and the perils of fee division agreements, who are practicing on handshake agreements for division of fees.

The case began when Kay asked Chambers for help on a sexual harassment case filed by a legal secretary against the giant law firm Baker & McKenzie.

The two lawyers agreed that Chambers would receive 28 percent of the attorneys’ fees if the case went to trial. During discovery, however, the lawyers disagreed over tactical matters, and Kay dismissed his co-counsel.

At trial, a jury awarded the secretary $6.9 million in punitive damages, which the trial judge knocked down to $3.5 million. The case ultimately generated about $2.5 million in attorneys’ fees. Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128.

Kay reneged on the fee-splitting arrangement, saying Chambers had failed to perform his duties and billed for services improperly. Chambers sued in 1999.

The State Bar’s Rule of Professional Conduct 2-200 mandates that lawyers shall not divide a fee for legal services with another lawyer who is not a partner, associate or shareholder, unless the client consents in writing. In Chambers, the California Supreme Court held that, absent such approval, a fee-splitting agreement is void.

The decision left open the possibility that Chambers could recover for the reasonable value of the work he did on the case, and the two lawyers returned to the trial court to litigate that claim. They were weeks away from their trial date when they reached the settlement.