Was the Referral Fee Agreement Between the Guardian of a Estate and the Counsel Compromised Due to Conflict of Interest
In Eagan v. Jackson, 855 F. Supp. 765, 779 (1994), the United States District Court granted forfeiture of a $ 75,000 referral fee paid to the guardian of an incompetent's estate by counsel who represented the estate in personal injury litigation.
Under those parties' referral fee agreement, counsel would pay the guardian a percentage of fees he collected from the estate as continuing compensation for the referral.
The district court recognized readily the potential conflict posed by such an agreement.
As the guardian of the decedent's estate, the guardian's interest was in maximizing the funds recoverable by the estate as a result of this litigation, net of all costs including attorneys' fees.
As a lawyer receiving a referral fee from outside counsel, the guardian's position was compromised, since his interest was in maximizing counsel's overall fee, of which he would receive one-third.
Clearly, the guardian's duty to superintend the litigation, including his willingness to terminate counsel's representation if it proved to be inadequate, was compromised by this arrangement Id. at 780.