Editor's Note: Refer to Rule 7.2.
FEES- Division of fees with deceased partner's estate
The following factual situation is submitted to the Committee for consideration: A and B formed an unincorporated partnership and signified same by memorandum of understanding. A died. The memorandum did not address the issue of how the estate would be compensated for work in progress. B is under the impression that revenue generated by the time charged to files prior to the death of A will be prorated to A's estate as per the memorandum. How does B deal with the revenue generated by the time expended by B from the point of A's death in files that were in the offices of A and B prior to the time A died?
Previously, Canon 34 governed the division of fees for legal services - No division of fees for legal services is proper, except with another lawyer, based upon a division of service or responsibility.
Based upon this Canon, Informal Opinion No. 509, ABA, was drafted. The facts of that opinion involved a partnership which existed under the name of A, B, and C. Members of the firm were A, B, D and E. Because A did not devote all his time to the partnership work, he was compensated by negotiation at the end of every year. The other members of the firm were compensated on a percentage basis. B died and A and E formed a new partnership with D practicing law in his own name. The partnership agreement of the old firm requires a division of all fees ultimately collected for all business entrusted to the old partnership at the time of B's death, including fees for professional services rendered by D or by the firm of A and E subsequent to B's death. The Committee determined that a division of fees with the estate of B would violate the Canon because the parties would divide fees for work done subsequent to B's death with B's estate, a non-lawyer. The Committee encouraged considerable latitude in determining what portion of the total charge for completion of unfinished work of the old firm was attributable to work done by the old firm on matters prior to B's death. It was pointed out that no fixed rule could be laid down for this and that the circumstances of each case would be controlling.
Presently, we operate under the guidance of DR 3- 102 (2) which provides: A lawyer or law firm shall not share legal fees with a non-lawyer except that:
A lawyer who undertakes to complete unfinished legal business of a deceased lawyer may pay to the estate of the deceased lawyer that proportion of the total compensation which fairly represents the services rendered by the deceased lawyer.
The exception to the rule of DR 3-102 (2) is set forth fully in Formal Opinion 308, ABA, as follows:
Many partnership agreements provide that active partners, on the death of any one of them, are to make payments to the estate or to the nominee of a deceased partner on a pre-determined formula. It is only where the effect of such an arrangement is to make the estate or nominee a member of the partnership along with the surviving partners that it is prohibited by Canon 34. Where the payments are made in accordance with a pre-existing agreement entered into by the deceased partner during his lifetime and providing for a fixed method for determining their amount based upon the value of services rendered during the partner's lifetime and providing for a fixed period over which the payments are to be made this is not the case.
These principles are well supported in Mississippi law. See Clifton, et al v. Clark, Hood & Co. 83 Miss. 446, 36 So. 251 (1903) and Newman v. Melton Truck Lines, Inc., 443 F. 2d 896 (5th Cir. 1971).
Construction of these opinions along with DR 3- 102 (2) requires the Committee to find that in the present factual situation, B may not compensate A's estate with any division of fees other than from cases chat the partnership worked on with compensation on a quantum meriut basis.