Ferris, Thompson & Zweig, Ltd. v. Esposito , 2017 Ill. LEXIS 458 ( 2017 )

2017 IL 121297IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 121297)
FERRIS, THOMPSON & ZWEIG, LTD., Appellee, v.
ANTHONY ESPOSITO, Appellant.
Opinion filed May 18, 2017.
CHIEF JUSTICE KARMEIER delivered the judgment of the court, with
opinion.
Justices Freeman, Thomas, Kilbride, Garman, Burke, and Theis concurred in
the judgment and opinion.
OPINION
¶1 This appeal involves an action for breach of contract brought by one law firm
against another after the defendant law firm refused to honor the fee-sharing
provisions of the firms’ joint client retainer agreements. A single question of law is
presented: Are fee-sharing provisions in otherwise valid retainer agreements
between clients and two separate law firms void and unenforceable if the primary
service performed by one firm is the referral of the clients to the other but the
agreements fail to specifically notify the clients that the lawyers in each firm have
assumed joint financial responsibility for the representation?
¶2 Reversing the judgment of the circuit court of Lake County dismissing the
plaintiff law firm’s second amended complaint pursuant to section 2-615 of the
Code of Civil Procedure (735 ILCS 5/2-615 (West 2014)), the appellate court
answered that question in the negative, rejecting the defendant law firm’s argument
that the agreements’ lack of an express statement that the attorneys assumed joint
financial responsibility violated Rule 1.5(e) of the Illinois Rules of Professional
Conduct of 2010 (eff. Jan. 1, 2010) and thereby rendered the agreements invalid.
2016 IL App (2d) 151148. In reaching this result, the court declined to follow the
Appellate Court, First District’s decision in Donald W. Fohrman & Associates, Ltd.
v. Mark D. Alberts, P.C., 2014 IL App (1st) 123351, to the extent that case held that
fee-referral agreements must expressly inform clients that the attorneys are
assuming joint financial responsibility.
¶3 We allowed the defendant law firm’s petition for leave to appeal in order to
resolve the conflict between the appellate court’s decision in this case and
Fohrman. Ill. S. Ct. R. 315(a) (eff. Mar. 15, 2016). We also granted the Illinois
Trial Lawyers Association leave to file a brief amicus curiae. Ill. S. Ct. R. 345 (eff.
Sept. 20, 2010). For the reasons that follow, we affirm the judgment of the appellate
court and remand the cause to the circuit court for further proceedings.
¶4 BACKGROUND
¶5 Our review in this appeal is guided by the procedural context from which it
arose, a motion to dismiss under section 2-615 of the Code of Civil Procedure (735
ILCS 5/2-615 (West 2010)). Motions to dismiss under section 2-615 challenge the
legal sufficiency of a complaint based on defects apparent on its face. When
reviewing whether a motion to dismiss under section 2-615 should have been
granted, we accept as true all well-pleaded facts and all reasonable inferences that
may be drawn from those facts. The critical inquiry is whether the allegations of the
complaint, when construed in the light most favorable to the plaintiff, are sufficient
to establish a cause of action upon which relief may be granted. A cause of action
should not be dismissed pursuant to section 2-615 unless it is clearly apparent that
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no set of facts can be proved that would entitle the plaintiff to recover. Kanerva v.
Weems, 2014 IL 115811, ¶ 33. Whether the trial court erred in granting or denying
a section 2-615 motion presents a question of law. Our review is therefore de novo.
Imperial Apparel, Ltd. v. Cosmo’s Designer Direct, Inc., 227 Ill. 2d 381, 392
(2008).
¶6 The pleading at issue in this appeal is plaintiff’s second amended complaint.
That complaint contains 10 separate but similar counts alleging breach of written
contracts for the division of attorney fees earned in representing clients with claims
under the Workers’ Compensation Act (820 ILCS 305/1 et seq. (West 2014)). 1
Attached to the complaint were copies of each of the retainer agreements signed by
the various clients along with letters drafted by defendant and initialed by a
representative of the plaintiff law firm confirming the terms of their respective
obligations under each of the retainer agreements. Pursuant to section 2-606 of the
Code of Civil Procedure (735 ILCS 5/2-606 (West 2014)), those exhibits constitute
part of the pleadings and may be considered in evaluating whether the complaint is
sufficient to withstand a motion to dismiss under section 2-615. Napleton v. Village
of Hinsdale, 229 Ill. 2d 296, 321 (2008).
¶7 According to the allegations of plaintiff’s second amended complaint and the
attached exhibits, plaintiff, Ferris, Thompson & Zweig, Ltd., is a Gurnee, Illinois,
law firm. Between 2007 and 2010 it was retained by 10 clients to represent them on
their Workers’ Compensation Act claims. Plaintiff, in turn, contracted with the law
offices of defendant, Anthony S. Esposito, for assistance in representing the clients
before the Illinois Workers’ Compensation Commission (Commission).
¶8 A letter of understanding was drafted by defendant for each of the 10 cases.
Those letters confirmed that the cases had been referred to defendant by plaintiff,
outlined the parties’ respective responsibilities regarding representation of the
clients, and specified that, among other things, the attorney fees obtained in each
case would be split between plaintiff and defendant. Defendant would retain 55%
1
For the reasons discussed in an earlier opinion involving the same parties, the circuit
court rather than the Workers’ Compensation Commission had jurisdiction to hear and
decide the dispute between the law firms based on the referral agreements. Ferris,
Thompson & Zweig, Ltd. v. Esposito, 2015 IL 117443.
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of the fee plus reimbursement for costs his office had advanced. The remaining
45% of the fee would be paid to plaintiff. The letters of understanding further
provided that the terms and conditions of the agreement between plaintiff and
defendant were to be disclosed to the clients and were subject to the clients’
approval and consent. As requested by defendant, a representative of the plaintiff
law firm signed each of the letters of understanding to affirm that those letters
properly stated “the essential terms and agreement reached between [the parties’]
offices.”
¶9 The terms and conditions of the referral agreements, including the provision for
division of attorney fees, were disclosed to and approved by each of the 10 affected
clients through written “attorney-client agreements.” 2 When the client was more
proficient in Spanish, the agreement was written in that language, but the
substantive provisions were identical. The agreements began by specifying that
plaintiff had contracted with defendant’s law firm to pursue the client’s workers’
compensation claim. They then detailed the particular responsibilities plaintiff and
defendant would assume with respect to the representation.
¶ 10 According to the agreements, plaintiff would do the following: (1) assist
defendant with initial interviews and document preparation, (2) assist defendant
with client contact and communication, (3) provide translation services,
(4) represent the client in any related third-party action (with continued
representation by defendant in certain circumstances), and (5) maintain a duplicate
file containing any correspondence or filings associated with the client’s claim. In
return, plaintiff would be entitled to 45% of all attorney fees recovered on the
claim.
¶ 11 The attorney-client agreements further provided that defendant would be
responsible for (1) preparing any documents and obtaining all records necessary to
disposing of the claim; (2) representing the client before the Workers’
2
The 10 clients are Juanita E. Garcia, Leoncio Morales, Dolores Hernandez, Eduardo
Sajuan, José L. Rodriguez, Beatriz Ventura, Miguel Salgado, Fernando Colunga, Maria
Tovar, and Carlos Duarte.
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Compensation Commission 3 and conducting any investigations, negotiations, and
processing necessary for concluding the claim; and (3) forwarding status reports to
plaintiff at specified intervals or when significant developments occurred in
connection with the claim. For these services, defendant was to receive 55% of all
attorney fees recovered on the claim, plus reimbursement for costs advanced by
defendant.
¶ 12 All 10 attorney-client agreements concluded with the statement “I understand
and agree to the above terms and conditions” (“Yo entiendo y estoy de acuerdo con
*** las condiciones escritos arriba” in the Spanish language versions) and were
signed and dated by the client, by a representative of plaintiff, and by defendant.
¶ 13 According to plaintiff’s second amended complaint, settlements were obtained
for each of the 10 clients, yielding attorney fees ranging from $700 to $46,000. The
total fees for all 10 cases amounted to $109,390.89. Under the terms of the
attorney-client agreements, plaintiff was entitled to 45% of this sum. Defendant,
however, refused to pay plaintiff its share of the fees. Plaintiff therefore sued
defendant for breach of contract to recover the unpaid fees it was owed, plus
prejudgment interest pursuant to the Interest Act (815 ILCS 205/0.01 et seq. (West
2010)).
¶ 14 Defendant moved to dismiss plaintiff’s second amended complaint pursuant to
section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2010)). The
sole basis for the motion was that the attorney-client agreements failed to comply
with Rule 1.5(e) of the Illinois Rules of Professional Conduct of 2010 (eff. Jan. 1,
2010) and were therefore invalid because they failed to expressly state that the
plaintiff assumed joint financial responsibility for representing the clients.
¶ 15 In response to defendant’s motion, plaintiff did not dispute that where one
lawyer refers a case to another not in the same firm and the primary service
performed by the first lawyer is the referral, Rule 1.5(e) requires the attorneys to
3
The English language version of the agreements actually referred to the Commission
by its former name, the Industrial Commission. The Commission’s named changed to the
Workers’ Compensation Commission when Public Act 93-721 (eff. Jan. 1, 2005) took
effect in 2005, several years before the oldest of the agreements was signed. The correct
name was used in the Spanish version of the agreements.
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assume joint financial responsibility for the representation if they wish to retain the
right to divide the fee. Although the agreements called for plaintiff to perform
various services with respect to the cases, plaintiff likewise did not dispute the
primary service it was to perform under each of the agreements was the referral to
defendant and that, by entering into the agreement, it therefore assumed joint
financial responsibility under Rule 1.5(e). Plaintiff contended, however, that
nothing in the rule required that its assumption of joint financial responsibility be
expressly stated in the attorneys’ contracts with the clients. In plaintiff’s view, the
absence of such an express statement therefore did not render void and
unenforceable what were otherwise proper agreements. Plaintiff further argued that
defendant should be collaterally estopped from challenging the validity of the
agreements based on failure to comply with Rule 1.5(e) because defendant had
raised the identical argument in an earlier, related case, the circuit court had
rejected it, and defendant then elected not to challenge the circuit court’s ruling in
an earlier appeal.
¶ 16 In a written order filed July 2, 2015, the circuit court granted defendant’s
motion to dismiss. The court rejected plaintiff’s estoppel argument and concluded
that the language of Rule 1.5(e) required the parties’ agreements with their clients
to include a provision expressly providing that each lawyer would assume joint
financial responsibility for the representation. It based this interpretation of the rule
on the Appellate Court, First District’s opinion in Donald W. Fohrman &
Associates, Ltd. v. Mark D. Alberts, P.C., 2014 IL App (1st) 123351, ¶¶ 36, 41, 55,
which held (1) that referral agreements involving the division of fees between
lawyers who are not in the same law firm are not enforceable unless they strictly
comply with the provisions of Rule 1.5(e) and (2) that the requirement of strict
compliance was not met in the matter before it where, among other things, the
attorney-client agreements failed to provide that the lawyers had assumed joint
financial responsibility for the matters. Because none of the 10 fee agreements at
issue in this case specifically addressed the joint financial responsibility of the
attorneys, the circuit court here held that the agreements were likewise fatally
defective and that plaintiff’s complaint must therefore be dismissed with prejudice.
¶ 17 Plaintiff appealed. The appellate court agreed with the holding in Fohrman that
for a fee-sharing agreement to be enforceable, the attorneys involved in the
agreement must strictly comply with Rule 1.5(e) of the Illinois Rules of
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Professional Conduct of 2010. 2016 IL App (2d) 151148, ¶ 11. Contrary to the
Fohrman court, however, the appellate court rejected the view that strict
compliance required referral agreements involving fee sharing to expressly provide
that the lawyers assume joint financial responsibility. Id. ¶¶ 12-13. The lawyers did
have to assume joint financial responsibility; there was no dispute about that. That
they were doing so, however, did not need to be specifically laid out in their
agreement with the client. Under the appellate court’s reading of Rule 1.5(e), taking
into account the rule’s language (id.), committee comments (id. ¶ 14), and history
(id. ¶¶ 15-18), “the only thing that the written referral agreement must contain is an
express statement that the client agrees to the referral and the proportion of attorney
fees that each attorney involved in the referral agreement will receive” (id. ¶ 13).
Both requirements were satisfied in each of the 10 agreements at issue in this
litigation. The appellate court therefore reversed the judgment of the circuit court
granting defendant’s motion to dismiss and remanded to the circuit court for further
proceedings.
¶ 18 Defendant filed no brief when this matter was before the appellate court. Id. ¶ 7.
After the appellate court ruled in favor of plaintiff, however, defendant petitioned
for leave to appeal to our court. Ill. S. Ct. R. 315(a) (eff. Mar. 15, 2016). We
allowed that petition. As noted at the outset of the opinion, we also granted the
Illinois Trial Lawyers Association leave to file a brief amicus curiae. Ill. S. Ct.
R. 345 (eff. Sept. 20, 2010).
¶ 19 ANALYSIS
¶ 20 As grounds for this appeal, defendant contends that the appellate court’s
construction of Rule 1.5(e) in this case was erroneous; that the interpretation of
Rule 1.5(e) followed by the appellate court in Donald W. Fohrman & Associates,
Ltd. v. Mark D. Alberts, P.C., 2014 IL App (1st) 123351, was the correct one; that
under Fohrman, all 10 of the agreements involved in this case were invalid and
unenforceable; and that the circuit court therefore properly dismissed plaintiff’s
cause of action in its entirety.
¶ 21 Rule 1.5(e) is part of the Rules of Professional Conduct of 2010, a
comprehensive set of rules adopted in July 2009 and effective January 1, 2010, to
replace the Illinois Rules of Professional Conduct. Because the Illinois Rules of
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Professional Conduct of 2010 are a component of the Illinois Supreme Court Rules,
we interpret its provisions, including Rule 1.5(e), just as we would other supreme
court rules. See, e.g., People v. Santiago, 236 Ill. 2d 417, 428 (2010).
¶ 22 The applicable standards are well established. Illinois Supreme Court Rules are
construed using the same principles that govern the interpretation of statutes.
People v. Roberts, 214 Ill. 2d 106, 116 (2005). When construing a rule of the
supreme court, a court’s primary goal is to ascertain and give effect to the intent of
the drafters. The most reliable indicator of that intent is the language used, given its
plain and ordinary meaning. In determining the plain meaning of the rule’s terms, a
court must consider the rule in its entirety, keeping in mind the subject it addresses
and the apparent intent of the drafters in enacting it. Courts will also interpret the
rule so that no part of it is rendered meaningless or superfluous and will not depart
from the plain language of the rule by reading into it exceptions, limitations, or
conditions that conflict with the expressed intent. People v. Dominguez, 2012 IL
111336, ¶ 16. 4
¶ 23 Rule 1.5(e) is one of five subsections of Rule 1.5, the portion of the Rules of
Professional Conduct governing fees attorneys may charge their clients. Ill. R.
Prof’l Conduct (2010) R. 1.5(e) (eff. Jan. 1, 2010). Subsection (a) of Rule 1.5
requires fees and expenses to be reasonable and sets out the factors to be considered
in determining the reasonableness of a fee. Ill. R. Prof’l Conduct (2010) R. 1.5(a)
(eff. Jan. 1, 2010). Subsection (b) addresses the obligation of attorneys to
communicate to their clients the scope of the representation, the basis or rate of the
fee and expenses for which the client is responsible, and any subsequent changes in
the basis or rate of the fees and expenses. Ill. R. Prof’l Conduct (2010) R. 1.5(b)
(eff. Jan. 1, 2010). Subsection (c) authorizes contingent fees, except in certain
circumstances, and lays out the procedures that must be followed when an attorney
charges a client on a contingent fee basis. Ill. R. Prof’l Conduct (2010) R. 1.5(c)
(eff. Jan. 1, 2010). Subsection (d)(2) specifies when contingent fees are not
permitted. Ill. R. Prof’l Conduct (2010) R. 1.5(d)(2) (eff. Jan. 1, 2010). Subsection
4
And of course, when this court is called upon to interpret one of its own rules, as we
are here, we have an obvious advantage in discerning the drafters’ intent. That is
particularly true when, as with Rule 1.5(e), the rule is recent enough that most of the
present members of the court participated in its adoption.
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(e), the provision at issue in this case, addresses the division of fees between
lawyers who are not in the same firm. Ill. R. Prof’l Conduct (2010) R. 1.5(e) (eff.
Jan. 1, 2010).
¶ 24 The language of Rule 1.5(e) is simple and straightforward. It provides:
“(e) A division of a fee between lawyers who are not in the same firm may
be made only if:
(1) the division is in proportion to the services performed by each
lawyer, or if the primary service performed by one lawyer is the referral of
the client to another lawyer and each lawyer assumes joint financial
responsibility for the representation;
(2) the client agrees to the arrangement, including the share each lawyer
will receive, and the agreement is confirmed in writing; and
(3) the total fee is reasonable.” Id.¶ 25 Subsection (e) is the most recent in a series of supreme court rules concerning
the propriety of fee sharing among lawyers not in the same firm. Comparing the
language of the various rules is helpful in understanding what this court meant to
convey when it adopted current Rule 1.5(e).
¶ 26 For much of its history, Illinois prohibited the sharing of fees between lawyers
who were not in the same firm where the only service provided by one attorney was
the referral of a client to the other. Corti v. Fleisher, 93 Ill. App. 3d 517, 531-32
(1981). That changed when this court adopted the Illinois Code of Professional
Responsibility (Ill. S. Ct. Code of Prof’l Resp. R. 1-101 et seq. (eff. July 1, 1980))
in 1980. Holstein v. Grossman, 246 Ill. App. 3d 719, 731-32 (1993). Section 2-107
of the Code of Professional Responsibility removed the outright prohibition against
fee sharing based solely on a client referral but made fee-sharing arrangements in
such cases permissible only if they satisfied various safeguards designed to protect
the client. Id. at 733. The rule provided:
“(a) A lawyer shall not divide a fee for legal services with another lawyer
who is not a partner in or associate of his law firm, unless
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(1) the client consents in a writing signed by him to employment of the
other lawyer, which writing shall fully disclose (a) that a division of fees
will be made, (b) 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 (c) the responsibility to be assumed by the other lawyer for
performance of the legal services in question;
(2) the division is made in proportion to the services performed and
responsibility assumed by each, except where the primary service
performed by one lawyer is the referral of the client to another lawyer and
(a) the receiving lawyer fully 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 (b) the referring lawyer agrees to
assume the same legal responsibility for the performance of the services in
question as if he were a partner of the receiving lawyer; and
(3) the total fee of the lawyers does not exceed reasonable compensation
for all legal services they rendered to the client.
(4) For purposes of this rule, ‘economic benefit’ shall include (a) the
amount of participation in the fee received with regard to the particular
matter; (b) any other form of remuneration passing to the referring lawyer
from the receiving lawyer, whether or not with regard to the particular
matter; and (c) an established practice of referrals to and from or from and
to the receiving lawyer and the referring lawyer.
(b) This disciplinary rule does not prohibit payment to a former partner or
associate pursuant to a separation or retirement agreement.” Ill. S. Ct. Code of
Prof’l Resp. R. 2-107 (eff. July 1, 1980).
¶ 27 Under subsection (a)(1) of this rule, the validity of an agreement to share fees
required the written consent of the client, and the written consent was required to
disclose to the client certain specific information, namely, the fact that the fees
would be divided, the basis on which the division would be made, and “the
responsibility to be assumed by the other lawyer for performance of the legal
services in question.” Ill. S. Ct. Code of Prof’l Resp. R. 2-107(a)(1) (eff. July 1,
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1980). Joint financial responsibility for the representation was not included among
the mandatory disclosures.
¶ 28 The only place the rule touched on the issue was in a different subsection,
(a)(2)(b), which stated that in cases where the primary service performed by one
lawyer was the referral of the client to another lawyer, the referring lawyer had to
agree to assume “the same legal responsibility for the performance of the services
in question as if he were a partner of the receiving lawyer.” Ill. S. Ct. Code of Prof’l
Resp. R. 2-107(a)(2)(b) (eff. July 1, 1980). The quoted language referred to a
different obligation than the responsibility for performance of legal services
referenced in subsection (a)(1) of the rule. It described the financial responsibility
of the referring lawyer for potential malpractice actions against the receiving
lawyer. In re Storment, 203 Ill. 2d 378, 392 (2002). But while the rule therefore did
broach the subject of joint financial responsibility between the lawyers, the
referenced responsibility was an obligation for which agreement had to be obtained
from the referring lawyer. The terms of subsection (a)(2)(b) itself contained no
language requiring express notice to or agreement by the client to the lawyers’ joint
financial responsibility, nor is there any language in that subsection that can be read
as requiring that the referring lawyer’s agreement to assume potential financial
responsibility be incorporated into the written client consent mandated by
subsection (a)(1) (Ill. S. Ct. Code of Prof’l Resp. R. 2-207(a)(1) (eff. July 1, 1980)).
¶ 29 In 1990 this court repealed the Illinois Code of Professional Responsibility and
adopted the Illinois Rules of Professional Conduct (Ill. R. Prof’l Conduct R. 1.5
(eff. Aug. 1, 1990)) in its place. The Rules of Professional Conduct combined
fee-related issues into a single rule, as do the 2010 Rules under examination in this
case. The new rule, designated as Rule 1.5, included successor provisions to Rule
2-107 of the Illinois Rules of Professional Conduct. As with Rule 2-107, Rule 1.5
permitted fee sharing between lawyers who are not in the same firm, but only under
specified conditions.
¶ 30 Those conditions were broken down into five separate subsections. The
relevant subsections stated:
“(f) Except as provided in Rule 1.5(j), a lawyer shall not divide a fee for
legal services with another lawyer who is not in the same firm, unless the client
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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 performance
of the legal services in question.
(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.
(h) The total fee of the lawyers shall be reasonable.
(i) For purposes of Rule 1.5 ‘economic benefit’ shall include:
(1) the amount of participation in the fee received with regard to the
particular matter;
(2) any other form of remuneration passing to the referring lawyer from
the receiving lawyer, whether or not with regard to the particular matter;
and
(3) an established practice of referrals to and from or from and to the
receiving lawyer and the referring lawyer.
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(j) Notwithstanding Rule 1.5(f), a payment may be made to a lawyer
formerly in the firm, pursuant to a separation or retirement agreement.” Ill. R.
Prof’l Conduct R. 1.5(f)-(j) (eff. Aug. 1, 1990).
¶ 31 As with Rule 2-107(a) of the Illinois Code of Professional Responsibility, Rule
1.5 of the Illinois Rules of Professional Conduct required written client consent to
fee-sharing arrangements. The content of those agreements was specified in
subsection (f) of Rule 1.5 and included the same three elements mandated by Rule
2-107(a). As the text quoted above indicates, the document was required to disclose
that the fees would be divided with another lawyer, the basis upon which that
division would be made, and the responsibility to be assumed by the other lawyer
for performance of the legal services in question. Ill. R. Prof’l Conduct R. 1.5(f)
(eff. Aug. 1, 1990). Subsection (f) of Rule 1.5 made no reference to joint financial
responsibility, much less make it a requirement of the client’s written consent. As
with Rule 2-107, Rule 1.5 touched on the subject only in a different subsection,
(g)(2), which stated that the referring lawyer must agree to assume “the same legal
responsibility for the performance of the services in question as would a partner of
the receiving lawyer.” Ill. R. Prof’l Conduct R. 1.5(g)(2) (eff. Aug. 1, 1990). As
was the case under Rule 2-107, nothing in Rule 1.5 required that obligation to be
included in the written consent signed by the client.
¶ 32 When this court repealed the Illinois Rules of Professional Conduct in 2010 and
replaced them with the Illinois Rules of Professional Conduct of 2010, which
remain in effect today, it again continued to permit division of fees between
lawyers who are not in the same firm provided that certain conditions are met. The
applicable conditions, however, have been reduced to three. First, the division must
be in proportion to the services each attorney actually rendered or, in cases where
the primary service provided by one lawyer was the referral of the client to another
lawyer, both lawyers must assume joint financial responsibility for the
representation as a whole. Ill. R. Prof’l Conduct (2010) R. 1.5(e)(1) (eff. Jan. 1,
2010). Second, the client must agree in writing to the arrangement, including the
share each attorney is to receive. Ill. R. Prof’l Conduct (2010) R. 1.5(e)(2) (eff. Jan.
1, 2010). Third, the total fee charged to the client must be “reasonable” (Ill. R.
Prof’l Conduct (2010) R. 1.5(e)(3) (eff. Jan. 1, 2010)), a determination governed by
factors set out in subsection (a) of Rule 1.5 (Ill. R. Prof’l Conduct (2010) R. 1.5(a)
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(eff. Jan. 1, 2010)). Ill. R. Prof’l Conduct (2010) R. 1.5, Comment, Division of Fee
(eff. Jan. 1, 2010).
¶ 33 The reference to “joint financial responsibility” in the first of these three
conditions “entails financial responsibility for the representation as if the lawyers
were associated in a general partnership.” It is the same as the “legal responsibility”
referenced in Rule 2-107(a)(2)(b) of the Illinois Code of Professional
Responsibility (eff. July 1, 1980) and Rule 1.5(g)(2) of the previous Illinois Rules
of Professional Conduct (eff. Aug. 1, 1990). See Ill. R. Prof’l Conduct (2010) R.
1.5, Comment, Division of Fee (citing In re Storment, 203 Ill. 2d 378 (2002)).
¶ 34 Defendant’s appeal in this case turns on the proposition that under the current
version of our fee-sharing rule, the existence of an agreement between the referring
and receiving lawyers to assume joint financial responsibility is something that
must be expressly included in the attorneys’ agreements with their clients. History
and the language of the rule do not support defendant’s position. As with the prior
versions of our fee-sharing rules, the current joint financial responsibility
requirement is included in a different subsection of the rule than the provision
addressing what the client must agree to. Consistent with its predecessors, the client
consent provision, now set forth in Rule 1.5(e)(2), makes no mention of the
attorneys’ assumption of joint financial responsibility. Indeed, in contrast to the
prior versions of the rule, it no longer even requires an explanation to the client of
the attorneys’ respective responsibilities with respect to the legal services to be
rendered on the client’s behalf or the basis on which the fees will be divided. Now
all the written consent must include is that the client has agreed to the
“arrangement,” i.e., the referral of the case and the division of fees between the
referring and receiving lawyers, including how much each lawyer will receive. Ill.
R. Prof’l Conduct (2010) R. 1.5(e)(2) (eff. Jan. 1, 2010). The 10 client retainer
agreements in this case contained considerably more information than that.
¶ 35 Because Rule 1.5(e)(2) does not, itself, directly address the joint financial
responsibility lawyers are required to assume if they wish to divide fees under a
referral agreement, defendant can prevail only if the client consent requirement in
Rule 1.5(e)(2) can be read as incorporating the joint responsibility obligation,
which is set forth in Rule 1.5(e)(1). We reject that construction. Rule 1.5(e)(2) does
not incorporate Rule 1.5(e)(1). To the contrary, now, as before, each of Rule 1.5’s
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three subsections constitutes a separate condition that must be satisfied in order for
a fee-sharing agreement to be enforceable. They are in the nature of a checklist in
which each of the enumerated items must be crossed off before moving to the next,
and all must be checked off before the fees may be divided. First, when the primary
service performed by one lawyer is the referral of the client to another, both lawyers
must assume joint financial responsibility for the representation. Second, the client
has to agree to the referral and fee-sharing arrangement, including how much each
lawyer will get, and the client’s agreement must be confirmed in writing. Third and
finally, the total fee charged to the client must be reasonable. The steps proceed in a
manner that is both chronological and logical.
¶ 36 To hold otherwise would require a finding that when we enacted the current
version of the fee-sharing rule, we intended its provisions to operate differently
than its predecessors and to expand the required content of written client consent to
fee-sharing arrangements in situations where the primary service performed by one
lawyer is the referral of the client to the other. As we have already described,
however, the current rule actually reduced the conditions which must be satisfied in
order for fees to be divided between lawyers who are not in the same firm. In light
of that change, which is apparent in the text of the rule, and absent any supporting
evidence in either the rule itself or elsewhere, it is difficult to see what possible
basis we would have for now holding that the rule should be read more expansively
to include the additional requirement on which defendant’s position depends.
¶ 37 In urging a contrary interpretation, defendant, like the trial court, looks for
support in Donald W. Fohrman & Associates, Ltd. v. Mark D. Alberts, P.C., 2014
IL App (1st) 123351. That decision, however, will not carry the analytical weight
defendant has asked it to bear. The appellate court in Fohrman did agree that a
fee-sharing agreement that failed to include a provision advising the client that the
attorneys had assumed joint financial responsibility failed to strictly comply with
Rule 1.5(e) and was therefore unenforceable. The agreements in that case,
however, suffered from numerous deficiencies, and the attorney seeking to enforce
them did not dispute that they failed to conform to Rule 1.5(e). Id. ¶ 36. In the face
of that concession, the appellate court refrained from undertaking any analysis
whatever as to whether Rule 1.5(e) actually requires the agreement from the client
to include a provision regarding the attorneys’ acceptance of joint financial
responsibility. It simply took such a requirement as a given. Its focus, instead, was
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on whether the fee-sharing agreements could be enforced notwithstanding the
failure to strictly comply with Rule 1.5(e) (id. ¶¶ 37-56), a point not contested here.
Defendant’s reliance on Fohrman is therefore unavailing.
¶ 38 Rule 1.5 and its predecessor provisions have required disclosure of fee-sharing
arrangements in order to preserve a client’s right to be represented by the attorney
of his or her choosing. Canel & Hale, Ltd. v. Tobin, 304 Ill. App. 3d 906, 915
(1999). That right was fully protected by the joint client retainer agreements
executed in this case. The rule’s joint financial responsibility requirement, as the
appellate court in this case correctly recognized, is directed to protection of a
different value, insuring that if one of the lawyers involved in the referral is sued for
malpractice, the other will also be liable as would be lawyers in a general
partnership. Ferris, Thompson, & Zweig, Ltd. v. Esposito, 2016 IL App (2d)
151148, ¶ 14. This protection exists whether it is included in the notice to the client
or not. Id. Defendant has cited no authority to the contrary. Its inclusion in the
notice and client consent is therefore not necessary in order to give effect to the
attorneys’ joint financial responsibility.
¶ 39 We note, moreover, that if the clients in this case had retained a single law firm
with multiple partners, our Rules of Professional Conduct would not have required
the retainer agreements to expressly notify the clients, in writing, as a precondition
to enforcement of the fee agreement, that the partners would be subject to liability
along with the attorney providing the actual legal services if that attorney
committed malpractice. Defendant has not explained, and we do not see, why the
situation should be any different where, as here, the lawyers involved have agreed
to assume the very same joint financial responsibility but simply do not practice in
the same firm. As we have pointed out, the clients are protected either way.
¶ 40 If this court had intended to require that the assumption of joint financial
responsibility by the attorneys be included among the items for which the client is
required to give express written consent, we could readily have done so. Indiana
law provides an example of such an approach. In a now-superseded counterpart to
Rule 1.5(e), the Indiana Supreme Court included written client consent in the initial
provision dealing with joint responsibility. The rule provided:
“A division of fee between lawyers who are not in the same firm may be
made only if:
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(1) the division is in proportion to the services performed by each
lawyer or, by written agreement with the client, each lawyer assumes joint
responsibility for the representation;
(2) the client is advised of and does not object to the participation of all
the lawyers involved; and
(3) the total fee is reasonable.” (Emphasis added.) In re Hailey, 792
N.E.2d 851, 862 (Ind. 2003).
Under the Indiana rule, the assumption of joint responsibility by the lawyers was
expressly, directly, and unambiguously linked to a requirement of written client
consent. Our version of the rule, by contrast, contains no such language. To read it
as if it did would require us to depart from the rule’s plain language and insert a
condition we did not express when the rule was adopted. Under basic rules of
construction, that is something we may not do. See Gaffney v. Board of Trustees of
the Orland Fire Protection District, 2012 IL 110012, ¶ 56.
¶ 41 We therefore agree with plaintiff that the fee-sharing provisions of the 10 joint
client retainer agreements at issue in this case were not fatally defective under Rule
1.5(e) of the Illinois Rules of Professional Conduct of 2010 simply because they
did not contain language specifically stating that plaintiff and defendant had agreed
to assume joint financial responsibility for the representation. The circuit court
therefore erred as a matter of law when it dismissed plaintiff’s second amended
complaint on that basis, and its judgment was properly reversed by the appellate
court. In light of this conclusion, we need not address plaintiff’s additional
contentions that certain of the retainer agreements were not subject to the current
version of Rule 1.5(e) because they were signed before the Rules of Professional
Conduct took effect or that defendant should be estopped from contesting the
validity of the agreements under Rule 1.5(e) based upon his failure to pursue the
question in an earlier appeal.
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¶ 42 CONCLUSION
¶ 43 For the foregoing reasons, the judgment of the appellate court is affirmed, and
the cause is remanded to the circuit court for further proceedings consistent with
this opinion.
¶ 44 Appellate court judgment affirmed.
¶ 45 Cause remanded.
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