By Kelly Caplan
BridgeTower Media Newswires
DETROIT —- A metro Detroit attorney will get another chance to collect an additional referral fee from a $10 million award for a motor vehicle accident in Ohio after a unanimous decision by the Michigan Supreme Court clarified the rule regarding fee splitting.
The high court ordered a new trial and the defendant law firm that fought the fee sharing will have to offer evidence to show that the plaintiff attorney never established an attorney-client relationship — directly or indirectly — with a second accident victim.
The central question in the case was whether, in order to enforce a fee-splitting agreement, MRPC 1.5(e) requires a referring attorney to have an attorney-client relationship with the individual he refers.
Justice David F. Viviano, writing for the court, said it does “but that the relationship can be limited to the act of advising the individual to seek the services of the other attorney if the referring attorney and client expressly or impliedly demonstrate their intent to enter into a professional relationship for this purpose.”
As such, the court upheld the Court of Appeals’ ruling that the defendant law firm bears the burden of proving noncompliance with MRPC 1.5(e) when it raised the violation of the rule as a defense against enforcement of the referral agreement.
“The result in this case is that the trial court properly instructed the jury that an attorney-client relationship was required but erroneously instructed the jury about the burden of proof,” the high court wrote.
“This error requires a new trial as to only one of the potential clients at issue ...”
The case is Law Offices of Jeffrey Sherbow v. Fieger & Fieger. Viviano’s opinion was joined by Chief Justice Bridget M. McCormack, and Justices Brian K. Zahra, Richard H. Bernstein, Elizabeth T. Clement, Megan K. Cavanagh and Elizabeth M. Welch.
The facts of the case were detailed in the high court’s opinion.
Sole practitioner Jeffrey Sherbow consulted with Charles Rice on some legal matters for Rice’s nonprofit in 2011. Additional meetings were set for July 2012, but Rice was killed in a car accident in Ohio on July 13.
Others in the car were Mervie Rice, Phillip Hill and Dorothy Dixon, who was Rice’s partner and mother of his son, Dion.
Dion called his dad’s nonprofit on the day of the accident, asking for Sherbow’s contact information. Employee Jennifer Hatchett gave Dion the information, and then called Sherbow to tell him about the accident and let him know Dion wanted to speak with him.
After speaking briefly with Hatchett, Sherbow called Jeffrey Danzig, a partner and head of the intake department at Fieger & Fieger PC — now known as Fieger Law — to tell him about the potential car accident case.
Three letters between Danzig and Sherbow make up the referral agreement: two confirm that Sherbow was entitled to one-third of the attorneys’ fees, and the last was a downward adjustment to 20%.
When Danzig left the Fieger firm in 2014, Sherbow confirmed the agreements with Robert Giroux, another partner at the Fieger firm. Giroux assured Sherbow that he would get paid.
Sherbow, who did no work on the case, learned in 2015 that the Fieger firm won a $10,225,000 award with a $3,408,333.34 contingency fee.
Sherbow asked about his portion of the fee. According to the opinion, Geoffrey Fieger indicated the referral fee would not be paid. He got four identical affidavits from each of the accident victims saying Sherbow never represented them, they didn’t want him to get a referral fee, he didn’t work on the case, and that he didn’t refer them to the Fieger firm.
Sherbow filed the present complaint in June 2015.
In July 2016, the Fieger firm sought partial summary disposition under MCR 2.116(C)(10), claiming that the fee agreement violated MRPC 1.5(e).
The Oakland County Circuit Court denied the motion, saying MRPC 1.5(e) did not require the referring attorney to have a written agreement with the client in order to
split a fee. The trial court pointed out that the Fieger firm’s argument that the agreement was void as against public policy was an affirmative defense on which the Fieger firm carried the burden.
During the 2017 trial, however, the lower court instructed the jury the opposite — Sherbow had to prove that each client was his in order to recover a referral fee for that client.
The jury verdict form asked if a professional relationship existed, and if Sherbow made a referral to the Fieger firm. The jury held that Sherbow’s only client was Dion, on behalf of Rice’s estate. Sherbow was awarded $93,333.33.
When Sherbow appealed, the Court of Appeals said the lower court erred in its jury instructions on MRPC 1.5(e); the rule doesn’t require the referring attorney to have an attorney-client relationship with the client.
As for the burden of proof, the appellate court held that the public-policy argument is an affirmative defense and the defendant bears the burden of offering supporting evidence. Both parties sought leave to appeal.
MRPC 1.5(e) eliminated the services-and-responsibility requirement decades ago. While that opened the door for pure referral fees, there are some rules, namely that a referring attorney has to participate in the matter as a lawyer by establishing a professional relationship with a client in order to share fees.
This, Viviano pointed out, is an agency relationship that grows from the parties’ agreement, and it can be express or implied through their conduct.
An “attorney-client relationship cannot exist unless the client seeks to obtain legal advice or services from an attorney either directly or indirectly through an intermediary,” he said. “If the attorney and client expressly or impliedly intend to enter into a professional relationship, the referral can form the basis for that relationship, which need not extend beyond that referral.”
The Oakland County Trial Court’s instruction to the jury that a professional relationship was required for the fee-split to be allowed under MRPC 1.5(e) was correct.
Where it erred, though, was in its jury instruction saying that Sherbow had the burden of proving that he had an attorney-client relationship with each of the clients.
“[W]e hold that the Fieger Firm’s argument challenging the referral agreement as void as against public policy constitutes an affirmative defense for which the Fieger Firm, as defendant, bears the burden of proof. The trial court’s instruction that Sherbow, as plaintiff, bore the burden of proof on this point was erroneous,” Viviano wrote.
There was evidence to support Sherbow’s argument that his referral of Dion to the Fieger firm created a sufficient relationship between Sherbow and both the estate and Dixon.
For example, Dion agreed to the Fieger firm’s representation of Dixon even though she remained in a coma. And Dion agreed at trial that he was looking for guidance as it related to his family when he spoke with Sherbow.
“Given this evidence and the fact that the jury found that Sherbow’s interactions with Dion were enough to create an attorney-client relationship with Rice’s estate, we cannot say with any certainty that a jury properly instructed on the burden of proof would find that those same interactions with Dion were insufficient to establish an attorney-client relationship with Dixon,” Viviano said. “Accordingly, we conclude that the erroneous jury instructions prejudiced Sherbow as it relates to Dixon. A new trial is therefore warranted as to Sherbow’s claim regarding a referral fee for Dixon.”
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