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North Carolina Appeals Court Rules In Law Firms' Fight Over Contingent Fees

There's invariably a fight between lawyers over the division of a fee when a lawyer who left the firm generates a fee at his new firm from a preexisting contingent fee relationship. There's at least one case of that type in the Business Court (Mitchell, Brewer, Richards, Adams, Burge & Boughman, PLLC v. Brewer), and the Court of Appeals tangled with one [April 3], in Crumley & Associates, P.C. v. Charles Peed & Associates [enhanced version available to subscribers].

The Crumley Firm had an employment agreement with Snyder, an associate who left the firm. The agreement said that Snyder would pay it 70% of the fees he realized from clients who followed him from the Firm. He was also required to reimburse the Crumley Firm for any funds it had advanced to the clients.

Approximately 30 clients followed Snyder with their workers' compensation claims to his new firm, Peed & Associates, and substantial fees (more than $300,000) were generated. After the Crumley Firm sought its 70% cut, Snyder went to the NC State Bar, asking for an opinion on the enforceability of the agreement. In a Formal Ethics Opinion, 2008 FEO 8, the Bar ruled the agreement unenforceable, and said it was in violation of Rule 5.6 of the Rules of Professional Conduct.

That wasn't the end of the matter. The Crumley Firm then sought recovery on a quantum meruit basis.

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Read this article in its entirety on North Carolina Business Litigation Report, a blog for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.

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