Emery Law Office, Inc. v. Joel Franklin

• Court: Kentucky Supreme Court
• Decided: June 25, 2026
• Docket: 2024-SC-0306
• Status: Published

Opinion

RENDERED: JUNE 25, 2026 TO BE PUBLISHED

Supreme Court of Kentucky 2024-SC-0306-DG

EMERY LAW OFFICE, INC. APPELLANT

ON REVIEW FROM COURT OF APPEALS V. NO. 2023-CA-0586-MR JEFFERSON CIRCUIT COURT NO. 22-CI-002904

JOEL FRANKLIN APPELLEE

OPINION OF THE COURT BY JUSTICE THOMPSON

REVERSING

We determine whether a fee allocation provision contained in an attorney

employment agreement violates the Kentucky Rules of the Supreme Court

(SCR) 3.130(5.6) and whether our decision in Baker v. Shapero, 203 S.W.3d

697 (Ky. 2006), mandates a quantum meruit analysis whenever a lawyer leaves

a firm and continues representing some clients. The Court of Appeals

concluded that the agreement at issue violated SCR 3.130(5.6) and remanded

for further proceedings. We granted discretionary review.

I. FACTS AND PROCEDURAL HISTORY

The Emery Law Office (Emery) employed Joel Franklin as an associate

attorney in March 2020. Emery paid Franklin a salary with the possibility of

earning quarterly bonuses based on the revenue he generated. Emery and

Franklin also entered into a separation agreement that included a fee allocation

provision. The separation agreement provided that if Franklin’s employment

with the firm ended and clients of Emery elected to continue their representation with him, the firm would receive 75% of any contingency fee

ultimately earned in those cases, along with reimbursement of costs advanced

before his departure.

Franklin worked on a number of client matters that originated with the

firm. In performing this work, Franklin used the firm’s facilities, personnel, and

other resources.

Emery terminated Franklin’s employment in April 2022. Following his

departure, the clients whose cases had been assigned to him were notified and

given the option to remain represented by Emery, to continue their

representation with Franklin, or to select another attorney entirely.

Fourteen clients chose to have Franklin continue representing them.

Three cases resulted in no fee, and Emery waived the fee in one. This left ten

cases at issue, and two remain pending as of oral argument.

A dispute subsequently arose between the parties concerning the

enforceability of the fee allocation in the separation agreement. Franklin

notified Emery about one month after his termination that he would not divide

the fees according to the contract. Emery responded by suing Franklin for a

declaration of rights that the contract was valid and for breach of contract for

failure to pay fees owed. Following Franklin’s deposition, both parties filed

motions for summary judgment in the Jefferson Circuit Court. The circuit

court entered a judgment enforcing the fee allocation clause according to its

terms.

2 Franklin appealed, and the Kentucky Court of Appeals reversed the

circuit court’s judgment. The Court of Appeals concluded that the fee allocation

provision violated public policy as expressed in SCR 3.130(5.6) by imposing a

financial disincentive that could restrict Franklin’s ability to practice law.

Emery sought discretionary review, which this Court granted.

II. ANALYSIS

A. Standard of Review

Summary judgment should be granted if the evidence shows that there is

no genuine issue as to any material fact and that the moving party is entitled

to a judgment as a matter of law. Kentucky Rules of Civil Procedure (CR) 56.03;

Baumann Paper Co., Inc. v. Holland, 554 S.W.3d 845, 848 (Ky. 2018). A circuit

court may grant summary judgment “only where the movant shows that the

adverse party cannot prevail under any circumstances.” Steelvest, Inc. v.

Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 479 (Ky. 1991). Contract formation

and whether the terms of a contract violate public policy are questions of law to

be reviewed de novo. Baumann Paper Co., 554 S.W.3d at 848; State Farm Mut.

Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d 875, 878 (Ky. 2013).

B. Emery and Franklin Entered Into a Valid Contract That Does Not Violate Public Policy.

Emery argues that the fee allocation clause in Franklin’s separation

agreement is a valid and enforceable contractual term that does not violate

SCR 3.130(5.6) because it does not restrict Franklin’s ability to practice law or

impair client choice.

3 Franklin argues that the public policy of SCR 3.130(5.6) focuses on

protecting client choice, and that the separation agreement undermines that

choice by forcing an attorney to evaluate whether continued representation is

financially feasible under an unfair fee allocation.

Before evaluating the public policy challenge under SCR 3.130(5.6), we

begin with the general principles applied to contracts in Kentucky that

establish the context for evaluating whether the separation agreement violates

the rule. The ability of private parties to enter into contracts is a core value in

the Commonwealth of Kentucky: “competent persons shall have the utmost

liberty of contracting, and that their contracts, when entered into fairly and

voluntarily shall be held sacred.” Yellow Cab Co. of Ashland v. Murphy, 243

S.W.2d 42, 45 (Ky. 1951) (internal quotation marks omitted). Therefore,

“contracts voluntarily made between competent persons are not to be set aside

lightly.” Zeitz v. Foley, 264 S.W.2d 267, 268 (Ky. 1954). Zeitz emphasized that

courts generally enforce agreements unless a clear public policy doctrine

requires otherwise. Id.

The liberty, freedom, and economic philosophy expressed in Yellow Cab

and Zeitz articulates the essence of contract law in Kentucky. In Cumberland

Valley Contractors, Inc. v. Bell Cnty. Coal Corp., 238 S.W.3d 644, 654 (Ky.

2007), we stated: “Given that the clause at issue was negotiated as part of an

arm’s-length transaction between two business corporations with presumably

equal bargaining power, we find no compelling reason to disturb their written

contract.” See Hopkinsville Motor Co. v. Massie, 228 Ky. 569, 15 S.W.2d 423,

4 424 (1929) (“Where the parties put their engagement in writing all prior

negotiations and agreements are merged in the instrument, and each is bound

by its terms unless his signature is obtained by fraud or the contract be

reformed on the ground of fraud or mutual mistake, or the contract is illegal”);

Superior Steel, Inc. v. Ascent at Roebling’s Bridge, LLC, 540 S.W.3d 770, 786

(Ky. 2017) (“Kentucky . . . has long respected freedom of contract and allowed

parties to allocate among themselves the foreseeable risks”).

Courts apply the public policy exception to void contracts only in narrow,

well‑defined circumstances. “Courts will not disregard the plain terms of a

contract between private parties on public policy grounds absent a clear and

certain statement of strong public policy in controlling laws or judicial

precedent.” Hodgkiss-Warrick, 413 S.W.3d at 880. Public policy, when used to

invalidate a contract, must be clearly grounded in established law rather than

derived from a court’s general notions of the public interest. Id. at 880–81. This

“power of courts to declare a contract void for being in contravention of sound

public policy, is a very delicate and undefined power, and . . . should be

exercised only in cases free from doubt.” Equitable Loan & Sec. Co. v. Waring,

44 S.E. 320, 343 (Ga. 1903); Stephens v. S. Pac. Co., 41 P. 783, 784 (Cal.

1895); Richmond v. Dubuque & S.C.R. Co., 26 Iowa 191, 202 (1868).

These principles regarding freedom to contract frame our analysis of

whether this particular agreement violates the ethical restriction embodied in

SCR 3.130(5.6). That rule—unlike general contract principles—imposes

5 professional limits on restricting an attorney’s ability to practice law. SCR

3.130(5.6) states:

A lawyer shall not participate in offering or making:

(a) a partnership or, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or

(b) an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.

The plain language of the rule in both sections (a) and (b) prevents an

agreement from restricting a lawyer’s right to practice. The rule is titled,

“Restrictions on Right to Practice.” This rule is in Chapter Five of the Rules of

Professional Conduct, which covers Law Firms and Associations. Thus, the rule

is focused on ensuring agreements do not unreasonably restrict the practice of

law.

In Kentucky Bar Ass’n (KBA) v. Truman, 457 S.W.3d 325, 326–27 (Ky.

2015), we publicly reprimanded Truman for entering into a highly restrictive

separation agreement with an associate that prevented the associate from

soliciting or even contacting clients if the associate left the firm. The basis for

the reprimand was that Truman violated SCR 3.130(5.6) by restricting the

former associate’s ability to practice law. Id. at 326-28. While the fee agreement

was part of the consideration, the absolute bar against contacting actual

clients contained in the agreement persuaded us to reprimand Truman for

executing the improper agreement.

6 The separation agreement here did not explicitly restrict Franklin’s

ability to practice law. The parties agree that all clients were informed of their

options to remain with Emery, continue with Franklin, or select new counsel.

Nothing in the record indicates that the agreement operated to prevent

Franklin from practicing law or accepting any representation he wished to

undertake.

The Court of Appeals reasoned that the fee allocation clause in the

separation agreement created a financial disincentive for an attorney leaving a

firm to retain clients, which unreasonably restricts the attorney’s practice. This

is rebutted by the record. Franklin did, in fact, continue representing fourteen

clients he was assigned while at Emery. Franklin failed to establish that

enforcing the fee allocation provision would restrict his ability to practice law.

These terms do not violate public policy. We reverse the Court of Appeals

and uphold the circuit court’s entry of summary judgment for Emery. In doing

so, we reiterate that SCR 3.130(5.6) controls attorney fee allocation

agreements, but the record here does not demonstrate an actual or functional

restriction of practice.

C. Baker v. Shapero Does Not Require Quantum Meruit Analysis Every Time an Attorney Leaves a Firm.

The Court of Appeals ruled that the fixed 75% fee share Emery would

receive lacked a rational relationship to work performed and created a

disincentive that could impair client choice and remanded the case for further

proceedings to determine a proper division pursuant to a quantum meruit

analysis. Emery argues that Baker, 203 S.W.3d 697, does not require a 7 quantum meruit trial because Baker dealt with a successive counsel fee

dispute, rather than the enforcement of a separation agreement.

In Baker, Shapero’s firm invested several months of work on the client’s

case before being discharged. When the case resolved, Shapero’s firm filed a

lien to collect the entire contingency fee from the original contract signed by the

client. We held that Shapero’s firm was limited to recovery in quantum meruit

instead of the full contract fee. Baker, 203 S.W.3d at 699.

When a client discharges an attorney without cause before the case is

resolved and hires new counsel who completes the representation, quantum

meruit is the available method to measure appropriate compensation between

prior and current counsel. Nothing in Baker suggests that a quantum meruit

trial is required every time a lawyer leaves a firm. Rather, Baker applies only

when there is no valid agreement governing fee allocation between successive,

unaffiliated counsel. Where, as here, the fee allocation concerns clients whose

matters originated within the firm and is addressed in a freely negotiated

separation agreement, the analysis is governed by contract principles.

III. CONCLUSION

Our holding today in reversing the Court of Appeals and reinstating the

Jefferson Circuit Court’s grant of summary judgment to Emery is narrow. First,

we conclude that the fee allocation provision at issue in a separation

agreement—negotiated as part of an employment relationship between a law

firm and an associate—is not, on these facts, a per se violation of SCR

3.130(5.6). The agreement imposed no direct restriction on Franklin’s ability to

8 practice law, and the record does not demonstrate that it impaired any client’s

freedom to choose counsel. Second, we clarify that Baker does not require a

quantum meruit proceeding every time an attorney departs a firm. Baker

supplies a default rule for disputes between successive, unaffiliated counsel in

the absence of a governing agreement and does not displace a valid contract

between a firm and an associate. We express no view on either the validity of

other fee allocation terms or separation agreements not before us, or on

contract law defenses not raised in this case. Accordingly, we reverse and

remand for enforcement of the separation agreement.

All sitting. Bisig, Goodwine, and Keller, JJ., concur. Conley, J., dissents

by separate opinion which Lambert, C.J.; and Nickell, J., join.

CONLEY, J., DISSENTING. The Court declares that the fee allocation

provision does not “on these facts” violate public policy expressed through SCR

3.130(5.6). Respectfully, while I do not disagree that Franklin has failed to

demonstrate how enforcement of the fee allocation provision restricted his

ability to practice law, the inquiry is one of public policy and not of individual

merits. Accordingly, I must dissent as the Court has misapplied the correct

test.

“[F]indings of fact are not at issue” when considering whether a

contractual provision violates public policy. Cumberland Valley Contractors, Inc.

v. Bell Cnty. Coal Corp., 238 S.W.3d 644, 647 (Ky. 2007). The question is

whether the contractual provision “is inherently vicious as being against public

policy,” not whether it was actually vicious against the party seeking its non-

9 enforcement. Ky. Ass'n of Highway Contractors v. Williams, 213 Ky. 167, 280

S.W. 937, 939 (1926). Regardless of the sanctity of contracts and the freedom

of contract, “if the consideration is to do something opposed to the public

policy of the state or nation, it is illegal and absolutely void, however solemnly

made.” Id. The true test for whether a contractual provision violates public

policy is thus:

Where a contract belongs to this class, it will be declared void,

although in the particular instance no injury to the public may have

resulted. In other words, its validity is determined by its general

tendency at the time it is made, and, if this is opposed to the

interests of the public, it will be invalid, even though the intent of

the parties was good and no injury to the public would result in

the particular case. The test is the evil tendency of the contract

and not its actual injury to the public in a particular instance.

Id.

I agree with the Court of Appeals below that the fee allocation provision

under consideration, while perhaps resulting in no injury in this particular

instance, does oppose the interests of the public generally. As the Court of

Appeals observed, it

provides no formula or procedure for dividing fees on any given

case reasonably calculated to compensate the firm for the

resources expended by the firm on the representation as of the

date of the lawyer's departure. Rather, it arbitrarily assesses the

10 same fee percentage – “together with the repayment of all costs” –

to any case Franklin chose to take with him upon departing the

firm.

The unsurprising result is that in some other instance the fee allocation could

“end up being an amount so high as to discourage the attorney from taking the

case, thereby denying the client the attorney of his or her choice – particularly

in a case that might require a lengthy and complicated trial to obtain recovery.”

That violates public policy.

Because the Court has focused on whether the fee allocation provision

actually injured Franklin, rather than whether it would injure the public

interest generally, I cannot agree with its resolution of this case. The Court’s

own disposition demonstrates this. It professes its ruling to be narrow and

based on the facts, unambiguously implying that in another case the same fee

allocation provision could be held violative of public policy if the attorney could

demonstrate injury. That is not how public policy doctrine works. “The test is

the evil tendency of the contract and not its actual injury to the public in a

particular instance.” Id. That the Court has even acknowledged, albeit

impliedly, that the fee allocation provision could be violate of SCR 3.130(5.6) in

another case under different facts demonstrates there is an evil tendency in the

fee allocation provision. A correct application of the public policy doctrine

necessitates declaring it void now, rather than waiting for some other case

where an individual attorney could demonstrate actual harm.

11 I would affirm the Court of Appeals.

Lambert, C.J.; and Nickell, J., join.

COUNSEL FOR APPELLANT:

Peter Lucas Ostermiller Peter Ostermiller Attorney at Law

Andrew Scott Epstein, Bahe, Cook, Cantley, & Nefzger PLLC

COUNSEL FOR APPELLEE:

Joseph E. Blandford, Jr.