Referral Agreements: Suing Attorney Cannot Sue Client For Noncontractual Recovery

Fourth District, Division Three Affirms Determination on First Impression Issue.

            In our category “Cases:  Referral Agreements,” we have surveyed past cases on requirements governing enforcement of referral agreements by which attorneys agree to fee sharing agreements in the prosecution of a case on behalf of a client.  One of the most conspicuous requirements is that the client must consent in writing to the referral agreement between attorneys; if not, an attorney cannot enforce the contractual agreement against either the client or other attorney.  (Chambers v. Kay, 29 Cal.4^th 142, 156, 159 (2002), relying on rule 2-200 of the Rules of Professional Conduct of the State Bar.) 

            However, the harshness of this requirement was ameliorated somewhat in Huskinson & Brown v. Wolf, 32 Cal.4^th 453, 458-459 (2004).  There, our state supreme court decided that rule 2-200 did not prevent an aggrieved attorney from obtaining quantum meruit recovery against the other attorney failing to honor the referral agreement. 

            This brings us to the first impression issue faced by our local Santa Ana Court of Appeal:  can the aggrieved attorney seek quantum merit recovery for rendered services against the client?  Answer:  No.

            Presiding Justice Sills, the author on behalf of a 3-0 panel, found that quantum meruit recovery should not be allowed in this context because the financial arrangement for the suing attorney was with the attorney failing to honor the referral arrangement, not the client.  Because rule 2-200 was adopted for protection of the client, “[i]t makes no sense to allow an attorney whose only connection to the client is through an unenforceable fee-sharing agreement to recovery fees directly from that client.  [Suing attorney’s] recourse is against [the attorney failing to honor the referral arrangement].” 

(As an aside, suing attorney’s case against the other attorney was still ongoing, because the appeal only focused on the trial court’s sustaining of a demurrer without leave as to the claims against client.  Suing attorney alleged that she was entitled to at least $75,000 for her work.)

            The case is Strong v. Beydoun, Case No. G039758 (4^th Dist., Div. 3 Sept. 19, 2008) (certified for publication).