Summary: An attorney may, with the consent of the client involved, disclose the contents of the client's files to another attorney so that the latter may be prepared to protect the client's immediate legal interests in the event of the former's death. If the client chooses to retain the services of the second attorney after the death of the former attorney, the second attorney may compensate the estate of the deceased attorney, in accordance with a prearranged schedule, an amount which fairly and reasonably represents the value of the deceased attorney's services to the client prior to death. The second attorney may not purchase the good will of the deceased attorney.
Facts: Attorney A represents an insurance company in a "specialized" field, and wishes to maintain a continuity of representation in regard to the client's ("C") existing cases in the event of the attorney's decease. A proposes to enter into an agreement with attorney B in which, with the consent of the client, B is designated as A's "successor." A would acquaint B with the current cases and with the procedures acceptable to the client so that B would, at A's decease, not only succeed to the then current files, but also to the client's future legal business.
In return, B would pay A's estate a pre-determined amount of money over a period of time. Both the amount of money and the number of payments would be based on the extent of B's future relationship with C.
The attorneys seek our opinion as to the propriety of such an arrangement.
Discussion: The ethical questions presented by the facts may be broken down into questions that relate to the period before A's death and the period after A's death.
Insofar as A, before his death, wishes to open up C's files to B and familiarize B with the current cases and the procedures that A utilizes with respect to those cases, Disciplinary Rule DR 4-101 would stand as a bar to the disclosure of confidential information acquired through A's professional relationship with his client, C. However, C may consent to this arrangement after a full disclosure by A. DR 4-101(C)(1).
Our understanding is that during this period B will not be doing any of the legal work on behalf of the client nor will there be any division of fees between A and B. See DR 2-107.
Upon A's decease, B contemplates, again with the consent of C, "succeeding" to the then active cases of C in A's files and completing them. In addition, B contemplates that the client will refer new business in this specialized area to B as A's "successor." B will pay to A's estate a pre-determined amount of money for a period of time. As stated, both the amount and number of payments will be dependent upon the extent of B's continued professional relationship with C.
We view the proposed payments to A's estate as essentially representing payments for two distinct components: for services that A rendered prior to death on behalf of C and for the purchase of A's good will with respect to C.
To the extent that the payments to A's estate represent compensation for services on current cases that A rendered to C while alive, we believe that a proper arrangement for payments to A's estate may be made between A and B within the framework of the Code of Professional Responsibility. As a general rule, DR 3-102 prohibits a sharing of legal fees with a non-lawyer. See our Opinion No. 73-2. However, DR 3-102(A)(2) sets out a limited exception to this general prohibition in the case of a division of legal fees with the estate of an attorney: "A lawyer who undertakes to complete unfinished legal business of a deceased lawyer may pay to the estate of the deceased lawyer that proportion of the total compensation which fairly represents the services rendered by the deceased lawyer." See H. Drinker, Legal Ethics (1953) at 189: "[A] reasonable agreement to pay the estate a proportion of the receipts for a reasonable period is a proper practical settlement for the lawyer's services to his retirement or death."
Various methods may be used to reach a reasonable figure. For example, a provision in a partnership agreement that 42 monthly installments be paid to the estate of a deceased partner, based on the average sum paid to him or her as a partner during the three years prior to his death, has been held to be fair and reasonable. ABA Formal Opinion 308 (1963).
However, the proposed arrangement appears also to represent payments to A's estate for the purchase of A's good will in relation to client C. Whether the payments are in return for A having acquainted B with the procedure designed for C's benefit or symbolize the expectation of B in retaining C as a future client, we believe that the payments, to the extent they represent good will, are improper. We are bolstered in our determination that the payments to the estate partly represent good will by the proposed portion of the agreement in which the amount and number of B's payments to A's estate are made dependent upon the extent of the attorney-client relationship between B and C after A's death.
It is clear that it is unethical for an attorney to purchase the good will of another attorney. "A lawyer's clients are not merchandise nor is a law practice the subject of barter. The purchase of a lawyer's practice and good will and the payment therefor to him or to his estate by a percentage of the receipts from his business is improper, since this would constitute a division of his fee with laymen... ." H. Drinker, Legal Ethics (1953) at 189.
The distinction between purchasing the good will of an attorney and compensating an attorney (or his estate) for services already rendered is made clear in the following quotation from ABA Formal Opinion 266:
The deceased lawyer, has, however, a claim against his clients for the agreed or fair value of whatever services he may have performed for them up to the time of his death. His estate also owns his library, furniture, fixtures and the unexpired term and any renewal privilege on the lease of his office. These assets another lawyer may properly purchase from his estate at a reasonable agreed amount, payable either in a lump sum or in installments.
In summation, we believe that the proposed arrangement is improper to the extent that payments to A's estate exceed the reasonable value of A's services to C performed before A's death.
Any arrangement whereby an attorney makes provisions with another attorney to protect the immediate interests of the former's clients after the former's death, of course, should be made only after the informed consent of the client is given, since confidential information will inevitably be disclosed when the designated attorney gains access to the client's files.
As noted in ABA Formal Opinion 266, however, it is always the option of the client in such a situation to substitute counsel of his own choice.
Permission to publish granted by the Board of Delegates, 1976. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.