Smith v. Regas

574 N.E.2d 767, 214 Ill. App. 3d 988, 158 Ill. Dec. 654, 1991 Ill. App. LEXIS 928
CourtAppellate Court of Illinois
DecidedJune 5, 1991
DocketNos. 1—89—2886, 1—89—3433 cons.
StatusPublished
Cited by1 cases

This text of 574 N.E.2d 767 (Smith v. Regas) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Regas, 574 N.E.2d 767, 214 Ill. App. 3d 988, 158 Ill. Dec. 654, 1991 Ill. App. LEXIS 928 (Ill. Ct. App. 1991).

Opinion

JUSTICE WHITE

delivered the opinion of the court:

These consolidated appeals involve a client-attorney dispute over attorney fees in connection with a marriage dissolution proceeding heard in the circuit court of Cook County.

The attorney, William T. Regas, appeals from dismissal of his petition for a fee award against the client, Carol J. Ziemann, now known as Carol J. Smith. Smith appeals from dismissal of her petition for an award against Regas of fees for defending against his fee appeal.

For the reasons that follow, we reverse and remand on Regas’ appeal and affirm on Smith’s appeal.

Facts

Smith signed a fee agreement with Regas, who replaced her earlier attorney. Regas told Smith that Leslie Poole, another lawyer whom Regas called his “associate,” would be primarily responsible for her case. Poole was not a formal member of a law firm with Regas but shared an office suite, equipment, and staff with Regas. Smith accepted Poole’s services, praised them, subsequently promised to pay Regas, and did pay him nearly $3,000 on account. She also initially expressed satisfaction with the outcome of the dissolution proceedings handled by Regas’ office. However, she failed to pay the balance of his bill and retained other counsel for post-judgment proceedings.

Regas filed a fee petition under section 508(a) of the Illinois Marriage and Dissolution of Marriage Act (the Act) (Ill. Rev. Stat. 1987, ch. 40, par. 508(a)). The petition sought an award of $12,070, representing the unpaid balance of a total fee bill of $14,870. The fee petition was dismissed on Smith’s motion because of Regas’ alleged violation of Rule 2—107 of the Code of Professional Responsibility (107 Ill. 2d R. 2—107) through participation in an allegedly undisclosed and unconsented-to arrangement for division of fees with lawyers who were not partners in or associates of his firm. The lawyers in question were Poole and Michael Ek, another lawyer who shared the office suite with Regas.

REGAS’ APPEAL, No. 1-89-2886

Regas raises issues pertaining to trial-court procedure, standing, law office organization, and fee arrangements. Because we decide in his favor on the issue of fee arrangements, we need not address his other contentions.

Regas contends that he paid the lawyers whom he engaged a flat hourly rate and that their pay depended on how many hours they worked, not on whether he received payment from the client. Accordingly, he says, regardless of whether they were his “associates” in terms of Rule 2—107, his payments to them did not constitute a division of fees, and thus, he did not violate Rule 2 — 107.

Regas cites ABA Committee on Ethics and Professional Responsibility, Formal Opinion 88—356 (1988), on temporarily hired lawyers. The passage that he cites reads as follows:

“Assuming that a law firm simply pays the temporary lawyer reasonable compensation for the services performed for the firm and does not charge the payments thereafter to the client as a disbursement, the firm has no obligation to reveal to the client the compensation arrangement with the temporary lawyer. Rule 1.5(e), relating to division of a fee between lawyers, does not apply in this instance because the gross fee the client pays the firm is not shared with the temporary lawyer. The payments to the temporary lawyer are like compensation paid to nonlawyer employees for services and could also include a percentage of firm net profits without violation of the Rules or the predecessor Code. See ABA Informal Opinion 1440 (1979).
If, however, the arrangement between the firm and the temporary lawyer involves a direct division of the actual fee paid by the client, such as percentage division of a contingent fee, then Rule 1.5(e)(1) requires the consent of the client and satisfaction of the other requirements of the Rule regardless of the extent of the supervision.
The requirement of Rule 1.5(a) that the total fee be reasonable is, of course, a restriction only on the fee charged to the client and not on how much is paid to the temporary lawyer. That requirement must be satisfied in all events.”

Though the cited ethics opinion pertained to lawyers hired temporarily by a firm, rather than lawyers working more or less permanently as independent contractors with another lawyer as in the present cause, Regas persuasively contends that the enunciated fee-division principles apply here as well.

Regas argues that his fee arrangement with Poole and Ek did not constitute a division of fees such as has been addressed in numerous cited cases (e.g., O'Hara v. Ahlgren, Blumenfeld & Kempster (1989), 127 Ill. 2d 333, 537 N.E.2d 730; Kravis v. Smith Marine, Inc. (1975), 60 Ill. 2d 141, 324 N.E.2d 417; Schniederjon v. Krupa (1987), 162 Ill. App. 3d 192, 514 N.E.2d 1200; Hofreiter v. Leigh (1984), 124 Ill. App. 3d 1052, 465 N.E.2d 110), but rather that it constituted a flat compensation arrangement with Poole and Ek not dependent on Regas’ receipt of payment from Smith.

Smith cites Phillips v. Joyce (1988), 169 Ill. App. 3d 520, 523 N.E.2d 933, as support for invalidating Regas’ fee arrangement under Rule 2—107. Phillips was a dispute between two wholly unrelated law firms that had collaborated with each other in representing class plaintiffs. One of the firms attempted to disavow its own fee contract with the other by terming it illegal under Rule 2—107, because the disavowing firm had failed to disclose the fee contract’s details to the clients. Yet the arrangement between the two firms had been disclosed in general terms to most of the class representatives, who had then agreed to it.

The Phillips court wrote:

“Apparently, [the disavowing firm] advocates the disclosure of every facet of the division of work and fees before a fee-sharing contract could be upheld under DR 2—107.
We believe, however, that a standard of substantial compliance is preferable because it comports with practical realities. In fact, such a standard is consonant with the Illinois Supreme Court’s opinion in Kravis v. Smith Marine, Inc. [(1975), 60 Ill. 2d 141, 324 N.E.2d 417,] and other cases that have considered the scope of the disclosure requirement. One court, faced with a similar question involving the disclosure of a fee-sharing agreement to a client, found that the client presumably knew of the arrangement, if not the details, stating, ‘This method of dealing admittedly may not strictly comport with the guidelines of section DR 2 — 107 of the Code of Professional Responsibility, but it certainly does not fall far from this section’s ethical parameters.’ Carter v. Katz, Shandell, Katz and Erasmous (1983), 465 N.Y.S.2d 991, 997, 120 Misc.

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Bluebook (online)
574 N.E.2d 767, 214 Ill. App. 3d 988, 158 Ill. Dec. 654, 1991 Ill. App. LEXIS 928, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-regas-illappct-1991.