Sims v. Charness

In Sims v. Charness (2001) 86 Cal.App.4th 884, Division Three of this court considered the application of rule 2-200 where an outside lawyer who had been brought in to try cases sought a share of legal fees in the absence of client consent to the lawyers' fee-splitting agreement. The court first looked to the definition of "associate" under rule 1-100(B)(4): "an employee or fellow employee who is employed as a lawyer," and concluded that the disclosure and written consent requirements of rule 2-200 would not apply if the outside lawyer worked on the cases as an "associate." The court then considered the purpose for which rule 2-200 was conceived: "The history 'behind rule 2-200 and its predecessor, rule 2-108, indicate that the rule was intended to address concerns related to forwarding or referral fees, typically found in contingency fee situations. In the referral fee situation, one lawyer receives a portion of a fee for referring a client to a second lawyer to handle the case. Courts recognized the "pure referral" as one ". . . which compensates one lawyer with a percentage of a contingent fee for doing nothing more than obtaining the signature of a client upon a retainer agreement while the lawyer to whom the case is referred performs the work. . . ." Rule 2-200 and its predecessors were designed to provide consumer protection by regulating the practice of "brokering" cases through disclosure to the client and a prohibition on increasing a client's fee to compensate the referring lawyer who does not work on the matter. . . . There is nothing in the history of rule 2-200 that indicates it was targeted at compensation arrangements involving outside lawyers functioning on a particular matter essentially on the same basis as an employee of the law office.' (State Bar Formal Opinion No. 1994-138 . . . .) "Mindful of the objective of rule 2-200, which is consumer/client protection, it would appear that where an outside lawyer is employed for that lawyer's expertise in any given area of the law, including trial skills, and is paid for those services, whether based on a contingency or other mode of payment, no pure referral as discussed above is implicated. Rather, the outside lawyer is deemed an associate for purposes of the rule and is functioning as an employee of the law firm." ( Sims v. Charness, supra, 86 Cal.App.4th at pp. 890-891.) The Sims court concluded that the fee agreement was not governed by rule 2-200 because there had been no "pure referral," and the outside lawyer, Sims, had functioned as Charness's employee or associate when he was brought in to try Charness's cases. ( Sims v. Charness, supra, 86 Cal.App.4th at p. 891.)