The California Supreme Court decides that failure to comply with the ethical rule requiring written client consent to fee divisions does not preclude recovery on the basis of quantum meruit.
Huskinson & Brown referred a medical malpractice action to Mervyn Wolf. Wolf agreed to pay Huskinson a 25% referral fee, but Huskinson did not obtain the client’s written consent to the fee division as required by California Rule of Professional Conduct 2-200. When Huskinson sued Wolf the trial court awarded Huskinson the 25% fee on an unjust enrichment theory. Alternatively, it awarded Huskinson an amount equivalent to value of services actually rendered by Huskinson plus expenses. The Court of Appeal denied Huskinson recovery under any theory. The Supreme Court determined that while the violation of 2-200 precluded division of the fee pursuant to the oral fee splitting contract between Huskinson and Wolf, Huskinson was entitled to recovery under quantum meruit.
Rule 2-200 restricts attorney compensation for a division of fees, but it does not preclude division of labor on a client’s matter. Payment of an hourly fee is not tied to the specific legal fees paid by the client. Thus, a quantum meruit award, when based on the reasonable value of services, does not constitute a division of fees within the 2-200’s contemplation.
In Chambers v. Kay (2002) 29 Cal.4th 142 (PL Update No. 140) the court precluded fee divisions without compliance with Rule 2-200. The Court held that Rule 2-200’s disclosure and consent requirements safeguards clients’ right to know how their legal fees will be determined and the extent of, and the basis for, their attorneys’ sharing of fees. Written disclosure is indispensable to the client’s ability to make an informed decision regarding the fee division and attorney selection. Written disclosure impresses on the client the importance of consent and the right to reject a fee division.
Allowing recovery in quantum meruit would not discourage compliance with Rule 2-200 because typically attorneys prefer to receive the contingent fee and thus have an incentive to comply with the rule.
The court noted that sections of the Business and Professions Code that require written fee agreements nonetheless specifically allow attorneys to collect a reasonable fee in the event of noncompliance. Allowing quantum meruit recovery is consistent with the Legislature’s policy determination that failure to obtain a written agreement does not preclude an attorney from receiving reasonable compensation for services. It is also consistent with case law recognizing that attorneys may recover the reasonable value of their services when their fee contracts are found to be invalid or unenforceable for other reasons
The court rejected Wolf’s analogy to a case that required a public employee, appointed in violation of well-settled statutory conflicts of interest provisions, disgorge all benefits of his employment. Huskinson violated a Rule, not a statute and there was no reason to reconsider the equally well-settled principle that an attorney is entitled to reasonable compensation in spite of an unenforceable fee agreement.
The court acknowledged that there are situations where an attorney’s quantum meruit recovery is prohibited because the attorney seeks compensation for conduct that is a violation of a Rule of Professional Conduct. For example an attorney cannot be compensated where he or she engages in conflicting representation or accepts professional employment adverse to the interests of a client or former client without the written consent of both parties. Unlike the conflict of interest provisions Rule 2-200 does not bar attorney services, it merely precludes the division of fees.
Comment: Huskinson settles the question that recovery under quantum meruit is available when a contractual fee is not. However violations of Rules that preclude an attorney from rendering services in certain situations will also preclude the recovery of fees.