Wednesday, December 29, 2010

Olsen v. Harbison (Cal. Ct. App. - Dec. 28, 2010)

I wish this one had remained unpublished.  Or, better yet, had been decided the other way.

It's not that Justice Hull necessarily analyzes precedent inaccurately.  Mind you, the cases don't require a decision one way or the other, so it's really up to the court.

But the Court of Appeal holds that when Lawyers A and B jointly represent a client agree on a fee-split (here, in a typical referral situation), and comply with the formalities of getting valid client consent, A can't get his agreed-upon fees from B -- on any basis -- as long as Client fires A and stays with B.

This is incredibly bad policy, and I think the wrong rule to adopt.

Justice Hull concludes -- and precedent is clear -- that if A and B agree upon a fee split and don't get the required consent, A can sue B in quantum merit for the work.  The California Supreme Court has held as much.  But according to the Court of Appeal, if the lawyers actually comply with their ethical duties and get the client's consent, A is suddenly out of luck:  now he can't sue B.  This creates exactly the opposite incentive from what we want.  It doesn't work for me.

Justice Hull also leaves open the possibility of A suing the client.  But why should we want that?  It's B who refused to give the agreed-upon money to A, not the client.  Why bring the client into it?  Plus, the client has a right to fire whoever she wants.  It isn't obvious to me that the client has done anything wrong -- and hence A might be totally out of luck and unable to sue anyone, which is clearly the wrong result -- and even if she has, it seems to me that the principal (or at least partial) wrongdoer is B.

B got brought into the case by A.  B agreed that A would get 40%.  Then B shoves A out of the picture by having the client fire A and gets to keep 100%?  That's wrong.  It's inequitable.  It shouldn't be the result.

Look, one can have various takes on California's referral rules.  I could easily see tightening them up.  But given what our rules are, once lawyers comply with them, they shouldn't be screwed.  They especially should not be worse off for complying with them -- e.g., by getting client consent -- than had they simply ingored them.

So I was sad to see this result.  Which is also a stark warning to all you co-counsel out there.

Watch out for your colleagues stabbling you in the back.  'Cause the Court of Appeal is fine with it.