Saggese v. Kelley

837 N.E.2d 699, 445 Mass. 434, 2005 Mass. LEXIS 577
CourtMassachusetts Supreme Judicial Court
DecidedNovember 30, 2005
StatusPublished
Cited by15 cases

This text of 837 N.E.2d 699 (Saggese v. Kelley) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Saggese v. Kelley, 837 N.E.2d 699, 445 Mass. 434, 2005 Mass. LEXIS 577 (Mass. 2005).

Opinion

Spina, J.

Following a jury-waived trial, a judge in the Superior Court found the defendants James Michael Kelley, Kathleen M. Kelley, and Kelley Law Associates, P.C., liable to the plaintiff, Alfred E. Saggese, Jr., pursuant to an oral fee-sharing agreement, for one-third of the legal fees they received for professional legal services rendered to a client referred to them by Saggese. The judge also denied their motion to alter or amend the judgment, which sought relief for the Kelleys individually from a liability that they contend is an obligation of their professional corporation alone.

On appeal the Kelleys argue that the judge erred by finding that there was an enforceable oral agreement, where (1) there was no present consideration for the agreement; (2) the agreement falls under the Statute of Frauds, G. L. c. 259, § 7,2 and thereby is unenforceable; and (3) the agreement is void and unenforceable because Saggese did not obtain the client’s prior consent to the fee sharing in violation of both the Canons of Ethics and Disciplinary Rules Regulating the Practice of Law, S.J.C. Rule 3:07, Canon 2, DR 2-107 (A) (1), 382 Mass. 773 (1981),3 and Mass. R. Prof. C. 1.5 (e), 426 Mass. 1315 [436]*436(1998).4,5 The Kelleys also argue that (4) Saggese was not entitled to relief because of an incident that they claim invokes the clean hands doctrine; and (5) the individual attorneys cannot be liable for debts of the corporate defendant through which they were openly engaged in the practice of law. We conclude that the parties entered into an enforceable fee-sharing agreement and affirm the judgment in all respects. We also decide that hereafter, in order to satisfy professional ethical requirements, lawyers who participate in a fee-sharing agreement must obtain the client’s consent in writing before the referral is made.

1. Background. We summarize the facts found by the trial judge, and note that her findings of fact are not challenged as clearly erroneous. See Mass. R. Civ. P. 52 (a), as amended, 423 Mass. 1402 (1996). See also New England Canteen Serv., Inc. v. Ashley, 372 Mass. 671, 674 (1977).

Saggese is a seasoned trial lawyer specializing in criminal and personal injury work. He was admitted to practice in 1972. Kathleen Kelley was admitted to practice in 1988. James Kelley, her brother, was admitted to practice in 1992. The Kelleys were members of the same small firm in 1992. By March 1, 1996, they were members of the firm Kelley & Donovan, P.C., and on May 1, 1997, the name of the firm was changed to Kelley Law Associates, P.C.

In 1996, Saggese was looking for attorneys to lease space with him in a suite of offices at 11 Beacon Street in Boston. The Kelleys were looking for space for their firm. The parties met for the first time in late fall of 1996 and eventually executed [437]*437a three-year lease in December, 1996. The tenants of the premises were Saggese and Kelley & Donovan, P.C. To facilitate the transaction, Saggese and Kelley & Donovan, P.C., entered into a real estate partnership whereby they would lease the space together but maintain separate law practices: the Kelleys as Kelley & Donovan, P.C., and Saggese under his own name.

In January, 1997, Jan Doe6 consulted Saggese about a matter. Saggese told Doe he had little experience in the field for which Doe sought his representation, but that the Kelleys had such experience. Later that month he introduced Doe to Kathleen Kelley. On February 10, 1997, Kathleen Kelley sent Doe a written fee agreement that specified an hourly rate and a retainer. A copy of the agreement was sent to Saggese.

As of that time Saggese and Kelley had not discussed sharing fees for client referrals from Saggese. By late February or early March, 1997, Saggese had referred other clients to the Kelleys, and he made it clear that he expected a referral fee of one-third of any attorney’s fees the Kelleys generated in cases he referred, including the Doe matter. The Kelleys acquiesced in this arrangement: they voiced no objection to the retroactive inclusion of the Doe matter, and they began paying Saggese one-third of fees received in cases he had referred to them. On May 6, 1997, and September 3, 1997, they sent him checks totaling $2,512.50 related to the Doe matter. The checks bore a notation written by one of the Kelleys that the payment represented referral fees. Periodically, Saggese and James Kelley would review cases that Saggese had referred, discussing referral fees paid and owed on each case, including the Doe case. The Kelleys were inexperienced and happy to get the referrals, and they did not express any objection to the arrangement.

In March, 1999, Doe owed the Kelleys more than $150,000 in fees for services rendered. In addition, Doe owed the Kelleys for expenses they incurred, which amounted to $33,253.97 by April, 1999. Doe’s case consumed a substantial portion of the Kelleys’ time. Frustrated by the financial burden of Doe’s case, the Kelleys stopped paying Saggese one-third of whatever fees Doe would pay. Rather than attempt to renegotiate the referral [438]*438fee agreement on the Doe case, the Kelleys instead chose not to tell Saggese whenever Doe made a payment.

In the summer of 1999, Doe’s case went to trial and the Kelleys were successful. They eventually obtained an order for attorney’s fees and costs in the amount of $309,498, to be paid by September 30, 1999. They did not inform Saggese of the result they obtained, and were not forthcoming when he inquired about the status of the case.

On September 1, 1999, Saggese learned that the Kelleys had, on that day, received a large sum in the Doe matter. He inquired of James Kelley, who denied knowledge of the check. That same day, Kathleen Kelley telephoned Doe and discussed Saggese’s expectation of receiving a referral fee. This was the first that Doe had heard about the fee-sharing arrangement. Kathleen Kelley told Doe that she would not pay Saggese if Doe objected. Doe went to the Kelleys’ law office on September 22 and discussed the fee-sharing issue with Kathleen Kelley. On September 30, Doe sent a letter to Kathleen Kelley authorizing her to pay Saggese his referral fee. The Kelleys received legal fees of $272,794.50 in the Doe case. One-third of that amount ($90,931.50), less the two payments received by Saggese ($2,512.50), is $88,419.

The judge found that the parties formed an oral agreement to share legal fees from cases referred by Saggese to the Kelleys, including the Doe case. She further found that the course of conduct between the parties supported the existence of an agreement to pay Saggese a one-third referral fee. The judge rejected the Kelleys’ argument that because the agreement violated Mass. R. Prof. C. 1.5 (e), it was unenforceable. She concluded that the Kelleys had not shown that there was a violation of rule 1.5 (e) because the rule does not speak to when disclosure to the client must be made, who must make the disclosure, or when consent must be given. She further concluded that even if the rule were violated, the agreement nevertheless would be enforceable because the rule was intended to protect the client from excessive fees, and here the client was not harmed because the referral fees came directly out of the Kelleys’ hourly rate, which had not been adjusted upward as a result of the referral. The judge rejected the other issues raised by the Kelleys, which we will [439]

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Bluebook (online)
837 N.E.2d 699, 445 Mass. 434, 2005 Mass. LEXIS 577, Counsel Stack Legal Research, https://law.counselstack.com/opinion/saggese-v-kelley-mass-2005.