Dispute About Distribution of Profits from Contingent Fee Cases Pending at the Time of Law Partnership Dissolution
In Ellerby v. Spiezer, 138 Ill. App. 3d 77, 485 N.E.2d 413, 92 Ill. Dec. 602 (1985), a law partnership dissolved.
One of the partners, filed a complaint for an accounting.
The dispute concerned the distribution of profits from contingent fee cases pending at the time of the dissolution. Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 79, 485 N.E.2d at 415.
Spiezer, one of Ellerby's partners, argued on appeal that with respect to certain partnership contingent fee cases, the clients had discharged the partnership and retained him individually after the dissolution, thereby entitling him to the entire fees from those cases. Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 81, 485 N.E.2d at 416.
To resolve the issue of whether Speizer was entitled to the entire fee, the court turned to the provisions of the Uniform Partnership Act.
The court noted that under the Uniform Partnership Act, the partnership's dissolution did not terminate its contractual relations with its clients and, therefore, the pending contingent fee cases remained "affairs of the partnership" which required winding up. Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 81, 485 N.E.2d at 416.
The court reasoned that, as a result, the fees from those cases were assets of the partnership to be distributed under the provisions of the Uniform Partnership Act. Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 81, 485 N.E.2d at 416.
The court was "unimpressed" with and rejected Spiezer's contention that the clients had discharged the partnership and hired him individually. Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 81, 485 N.E.2d at 416.
The court held that the under the Uniform Partnership Act, because the contingent fee cases were "unfinished business" of the partnership at the time of dissolution, Spiezer, as a partner of the dissolved partnership, was not entitled to take any action with respect to the unfinished business leading to purely personal gain, such as having the client discharge the partnership and hire him individually. Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 81-82, 485 N.E.2d at 416-17.
The court cited policy concerns for rejecting Spiezer's contention that when the clients fired the dissolved partnership, the contingency contracts ceased to be assets of the dissolved partnership.
The court stated:
"The holding Spiezer suggests would encourage partners of a law partnership facing dissolution to make attempts to convince clients with cases having the most lucrative potential to hire them individually and discharge the partnership.
This sort of case-chasing by attorneys should not be encouraged.
Moreover, it places the clients of the dissolved law partnership precisely where they should not be placed; in the middle of a dispute among the partners over money." Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 82, 485 N.E.2d at 417.
The court further stated:
"It is true that a client has the right to discharge his attorney, at will.
This, however, does not require the result Spiezer seeks.
The clients of the partnership were free to be represented by any member of the dissolved partnership or by other attorneys of their choice.
This right of the client is distinct from and does not conflict with the rights and duties of the partners between themselves with respect to profits from unfinished partnership business since, once the fee is paid to an attorney, it is of no concern to the client how the fee is distributed among the attorney and his partners.
This does not result in improper fee splitting, as suggested by Spiezer, since, as we already noted, the partnership continues until the winding up of the partnership affairs has been completed, and it is perfectly proper for law partners to split fees among themselves." Ellerby v. Spiezer, 138 Ill. App. 3d 77 at 81, 485 N.E.2d at 416.
The Firm argues that based on Ellerby, the contingency fee on the Thompson wrongful death case remained an asset of the joint venture, notwithstanding the Firm's discharge by the Thompsons. We disagree.