Richards v. SSM Health Care, Inc.

• Decision Date: 26 January 2000
• Docket Number: No. 1-99-0195.,1-99-0195.
• Citation: Richards v. SSM Health Care, Inc., 311 Ill. App. 3d 560, 724 N.E.2d 975, 244 Ill.Dec. 87 (Ill. App. 2000)
• Parties: Barry RICHARDS, et al., Plaintiffs, v. SSM HEALTH CARE, INC., d/b/a St. Francis Hospital and Health Center, et al., Defendants (Becky Lynn Dahlgren, et al., Appellants; West Suburban Bar Association, Appellee).
• Court: Appellate Court of Illinois

724 N.E.2d 975

311 Ill. App.3d 560

244 Ill.Dec. 87

Barry RICHARDS, et al., Plaintiffs, v. SSM HEALTH CARE, INC., d/b/a St. Francis Hospital and Health Center, et al., Defendants (Becky Lynn Dahlgren, et al., Appellants; West Suburban Bar Association, Appellee).

No. 1-99-0195.

Appellate Court of Illinois, First District, Third Division.

January 26, 2000.

McDermott, Will & Emery, Chicago (Steven F. Pflaum, of counsel), for Amicus Curiae The Chicago Bar Association.

David A. Novoselsky & Associates, Chicago (David A. Novoselsky, and Kevin S. Besetzny, of counsel), for Appellee.

Becky Lynn Dahlgren, Law Offices of Becky Lynn Dahlgren, Ltd., Oak Brook (Arletta J. Markham, of counsel), for Appellants.

Justice WOLFSON delivered the opinion of the court:

Some people do not know where to find competent lawyers. Others can find them, but cannot afford them when they do. Making available to the public competent and affordable representation is a subject the legal profession has struggled with. This case concerns a typical solution reached by bar associations around the country. It also raises a serious ethical issue that is rarely addressed by courts of review.

The West Suburban Bar Association (WSBA) operates a nonprofit lawyer referral service (the Service). Members of its lawyer referral panel are required to remit to the WSBA a portion of the fee earned for services to the referred client. In this case, attorney Becky L. Dahlgren (Dahlgren) agreed in advance to remit a certain percentage of her earned fee to the WSBA. When the case was completed, she refused to remit a percentage of the contingent fee she collected. She contended in the trial court and argues on appeal that doing so would constitute improper fee-splitting. She raises an issue of first impression in the courts of this state.

The trial court decided against Dahlgren on her petition to adjudicate lien. We find the fee remittal agreement between Dahlgren and the WSBA was legally and ethically proper. For that reason we agree with the trial court and we affirm.

FACTS

Our account of the underlying facts in this case is hampered by a sketchy record. We are guided by the trial court's factual findings and uncontradicted assertions of fact in the various pleadings and documents filed in the trial court and made part of the record.

On October 13, 1993, the WSBA, through the Service, referred Barry and Eunice Richards to Dahlgren for a consultation regarding a possible medical malpractice action. The Richards' paid the WSBA a $25 fee for that consultation. After that first consultation, the Richards' retained Dahlgren to pursue their claim. They agreed to pay Dahlgren her usual fee in these matters—one third of the gross amount received in settlement or verdict.

The record contains a document used by the Service when referrals are made. One part of it is signed by Barry Richards and releases the WSBA and the Service from any liability in connection with the referral. The bottom half of the document is addressed to the attorney who received the referral. It contains four questions which were answered by Dahlgren:

"A. Did the client contact you?

B. Was there a consultation with client?

C. Did referral result in fee arrangement?

D. Is the Total Fee under $500.00?"

Dahlgren answered "Yes," "Yes," "Yes— 1/3 contingency," and "No."

The referral form also includes words that are at the core of this controversy:

"3. If the referral resulted in a fee arrangement remit to the Lawyer Referral Service the following, upon closing the file: Up to and including $500.00— 10%; $501 to $1,500—20%; $1,501 and over 25%. YOU MUST SUBMIT THE GOLD "LAWYER REFERRAL SERVICE STATISTICAL COPY" WITH YOUR REMITTANCE."

We note Dahlgren was no stranger to the Service. Since 1979 she accepted about 182 referrals and paid referral fees based on the applicable graduated scale. But whether this was the first time or the 183rd time does not affect our decision in this case.

On February 14, 1995, Dahlgren brought suit in the circuit court of Cook County on behalf of the Richards'. On April 8, 1997, Dahlgren negotiated a structured settlement of the case. Pursuant to that agreement, the cause of action was dismissed on May 14, 1997. The present cash value of the settlement was $375,000, making Dahlgren's one-third contingency fee $125,000. The Service then claimed it was entitled to 25% of Dahlgren's fee, or $31,250.

Dahlgren refused to pay the referral fee. Instead, she filed a petition to adjudicate lien. In that petition, and here, she claims the fee agreement with the Service was void and unenforceable. She bases her position on the Illinois Supreme Court Rules of Professional Conduct (134 Ill.2d R. 1.1 et seq.) (RPC) that prohibit certain kinds of fee-splitting among lawyers and the sharing of fees by a lawyer with a nonlawyer in most instances. She also contends the charge of 25% of the contingent fee was excessive and unreasonable.

On April 6, 1998, the circuit court ruled in Dahlgren's favor, finding the agreement between Dahlgren and the Service unenforceable because it was harmful to the public interest. However, after reconsideration, the trial court issued a new order on December 10, 1998, vacating the April 6, 1998, order and entering judgment in favor of the WSBA. Dahlgren was ordered to remit $31,250 to the Service. She now appeals from the December 10, 1998, order.

DECISION

First, we must determine which rule in the RPC applies to this case. Dahlgren contends the letter and policy of Rules 1.5(f) and (g), which prohibit certain fee-sharing arrangements between lawyers, or of Rule 5.4(a), which prohibits lawyers from sharing legal fees with nonlawyers, apply. See 134 Ill.2d Rs. 1.5(f), (g), and 5.4(a). Either way, she says, the referral agreement cannot be enforced.

The WSBA and the Chicago Bar Association, as amicus curiae, maintain Rule 7.2(b), with its specific reference to "a not-for-profit lawyer referral service," requires enforcement of the referral agreement. 134 Ill.2d R. 7.2(b).

We set out the relevant portions of the rules relied on by the parties:

Rule 1.5(f):

"* * * a lawyer shall not divide a fee for legal services with another lawyer who is not in the same firm, unless the client consents to employment of the other lawyer by signing a writing which discloses:

(1) that a division of fees will be made;

(2) the basis upon which the division will be made, including the economic benefit to be received by the other lawyer as a result of the division; and

(3) the responsibility to be assumed by the other lawyer for the performance of the legal services in question." 134 Ill.2d R. 1.5(f).

Rule 1.5(g):

"A division of fees shall be made in proportion to the services performed and responsibility assumed by each lawyer, except where the primary service performed by one lawyer is the referral of the client to another lawyer and

(1) the receiving lawyer discloses that the referring lawyer has received or will receive economic benefit from the referral and the extent and basis of such economic benefit, and

(2) the referring lawyer agrees to assume the same legal responsibility for the performance of the services in question as would a partner of the receiving lawyer." 134 Ill.2d R. 1.5(g).

Rule 5.4(a):

"A lawyer or law firm shall not share legal fees with a nonlawyer, except that * * * [no applicable exception]"

Rule 7.2(b):

"A lawyer shall not give anything of value to a person for recommending or having recommended the lawyer's services, except that a lawyer * * * may pay the usual charges of a not-for-profit lawyer referral service or other legal service organization." 134 Ill.2d R. 7.2(b)

Rule 1.5 centers on the interests of the client, reflecting "the long-standing public policy of this state." Albert Brooks Friedman, Ltd. v. Malevitis, 304 Ill.App.3d 979, 985, 238 Ill.Dec. 46, 710 N.E.2d 843 (1999). That is, "The Rule's historical antecedents demonstrate that the client's rights rather than the lawyer's remedies have always been this state's greatest concern." Albert Brooks Friedman, Ltd., 304 Ill.App.3d at 985, 238 Ill.Dec. 46, 710 N.E.2d 843.

Requiring written client consent to the referral arrangement after full disclosure is designed to protect the client. Albert Brooks Friedman, Ltd., 304 Ill.App.3d at 985-86, 238 Ill.Dec. 46, 710 N.E.2d 843. So is the requirement that the referring lawyer assume legal responsibility for the performance of services. Elane v. St. Bernard Hospital, 284 Ill.App.3d 865, 220 Ill. Dec. 3, 672 N.E.2d 820 (1996). Contracts between lawyers that violate Rule 1.5 are against public policy and cannot be enforced. Holstein v. Grossman, 246 Ill.App.3d 719, 186 Ill.Dec. 592, 616 N.E.2d 1224 (1993) (intra-attorney fee-sharing agreement based primarily on client referral unenforceable as a matter of public policy where client did not agree to arrangement in writing). Here, where attorney conduct is at issue, we look to the supreme court rules for expressions of public policy. Marvin N. Benn & Associates, Ltd. v. Nelsen Steel & Wire, Inc., 107 Ill.App.3d 442, 447, 63 Ill.Dec. 251, 437 N.E.2d 900 (1982).

The ethical concerns reflected in Rule 1.5 and its predecessor, Disciplinary Rule 2-107 (107 Ill.2d R. 2-107, effective July 1, 1980), are real, not trivial. The rule ensures the "client's right to representation of her choosing * * *." Albert Brooks Friedman, 304 Ill.App.3d at 984, 238 Ill. Dec. 46, 710 N.E.2d 843. Even where a referral fee to a lawyer is authorized, "the total fee shall be reasonable." 134 Ill.2d R. 1.5(h).

Experience informs us of potential undesirable byproducts of lawyer fee-sharing: stirring up litigation, improper methods of solicitation, unauthorized practice of law, excessive fees, referrals to incompetent lawyers, and unethical litigation practices. See ABA Formal Op. 93-374 (1993)(not ethically improper for a lawyer who undertakes pro bono litigation to agree in advance to share court-awarded fees...