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Opinion 688

Question Presented

  1. When a lawyer retained under a contingent fee agreement withdraws from the representation due to a nonconsentable conflict of interest discovered shortly after he filed plaintiff’s lawsuit, is it a violation of the Texas Disciplinary Rules of Professional Conduct for the withdrawing lawyer to refer his client to a lawyer in another law firm and arrange for a division of fees between the withdrawing lawyer and the lawyer to whom the matter is referred?
  2. Is it a violation of the Rules for the withdrawing lawyer to reach an agreement with his former client that provides for the withdrawing lawyer to be reimbursed for costs and compensated for attorneys’ fees incurred before the lawyer realized he had a nonconsentable conflict? 

A lawyer signed a contingent fee agreement with a plaintiff who sustained serious injuries in a car accident.  Soon thereafter, the lawyer filed a lawsuit for the plaintiff against the defendant driver.  The defendant filed an answer and a third-party action against a third-party defendant, who was a long-time client of the plaintiff’s lawyer.  

The lawyer determined that to protect the plaintiff’s interests he would need to amend the petition to assert a claim against the third-party defendant and aggressively prosecute that claim. As a result, the lawyer concluded he had a conflict of interest under Rule 1.06(b)(2), in that his representation of the plaintiff appeared to be adversely limited by both his responsibilities to his long-time client and by his own interests in continuing a harmonious attorney-client relationship with that long-time client.  Additionally, because the lawyer believed that his representation of the plaintiff would in fact be materially affected by his relationship with the third-party defendant, the lawyer concluded the conflict of interest was “nonconsentable,” that is, he could not continue the representation even if he obtained the informed consent of the affected clients.  See Rule 1.06(c)(1).  Thus, he decided he was obligated to withdraw from representation of plaintiff.

Before the conflict was identified, the withdrawing lawyer had prepared, filed, and served the original petition.  He had spent less than ten hours on the case, and the only costs he had incurred were filing fees and fees related to service of process. 

Although he was withdrawing from the representation due to a conflict, the withdrawing lawyer wanted to retain a significant fee interest in the case and proposed a division of fees with the successor lawyer.  Specifically, the withdrawing lawyer proposed that he receive 75% of the fees on the first $1 million of any recovery and that the successor lawyer receive 25% of the fees, and he proposed that he and the successor lawyer divide the fees on any recovery above $1 million on a 50-50 basis.  

Alternatively, the withdrawing lawyer wanted to recoup case expenses and the reasonable value of the legal services performed before the conflict was discovered.

The lawyer sought guidance as to whether he could refer the case to another lawyer and agree to the proposed division of fees provided for by a contingent fee agreement or, alternatively, whether he could be reimbursed for his expenses and the reasonable value of the services he had provided as of the date the conflict was discovered.  

Bluebook Citation

Tex. Comm. On Professional Ethics, Op. 688 (2020)