Md. appeals court upholds fee agreement, orders attorney to pay $700K in withheld fees
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A fee-sharing agreement that used a sliding-scale approach is enforceable and did not violate the Maryland Attorneys’ Rules of Professional Conduct, the Maryland Appellate Court found.
In a reported opinion written by Judge Kevin Arthur filed on Friday, the Maryland Appellate Court affirmed in part the judgment of the Prince George’s County Circuit Court, holding that a prenuptial agreement entered into between an attorney and her former employer law firm should be upheld. The appeals court ordered the attorney to pay the more than $700,000 that she withheld in fees due to the firm under the agreement.
The Maryland Appellate Court also vacated the portion of the circuit court judgment that failed to award a pre-judgment interest of $81,212.10 to the firm.
In April 2011, at the outset of her employment, Jamie Bennett signed a prenuptial agreement with her then-law firm Ashcraft & Gerel governing the division of fees between the firm and Bennett in the event of her departure from the firm.
The agreement, in summary, specified that the firm’s share of the fee ranges from 55 percent to 75 percent, depending on two factors: the amount of time between when the client retained the firm and when Bennett departed, and the amount of time between when Bennett departed and when a fee was generated.
Approximately six months after signing the agreement, Bennett determined the agreement to be unethical and in violation of the Maryland Attorneys’ Rules of Professional Conduct because the agreement places “a burden on a departing lawyer’s ability to practice law and a client’s choice of counsel.”
In September 2015, approximately three months after Bennett left the firm, one of Bennett’s clients, who retained Bennett after her departure, entered into a settlement agreement from which he would receive more than $5 million. Of that, more than $2 million was subject to a contingent fee. Although Bennett and the firm disagreed on the enforceability of the prenuptial agreement, the parties reached a negotiated agreement in accordance with the terms of the prenuptial agreement, eventually allocating 75 percent of the fees to the firm and 25 percent to Bennett.
Bennett paid the firm its 75 percent share through July 2018, but then stopped paying the firm and instead deposited the firm’s share into her operating account. In October 2018, Bennett filed a complaint against Ashcraft & Gerel, requesting, among other claims, a declaration that the prenuptial agreement was unenforceable.
In finding the agreement enforceable, the Maryland Appellate Court examined the ethics behind this type of agreement and looked to a variety of attorneys’ rules and ethics opinions in other jurisdictions. The appeals court ultimately concluded that the agreement “does not purport to restrict the right of a departing attorney to practice law” or “limit the freedom of clients to choose to utilize the services of a departing attorney.”
Rather, the appellate court noted that the agreement benefits both the firm and the departing attorney by defining in advance the division of fees, and similarly benefits clients by preventing them from being placed in the center of a dispute between lawyers.
Stanley Reed, co-counsel representing Ashcraft & Gerel, said he is pleased with the outcome.
“We’re confident the Appellate Court of Maryland made the right decision, and we don’t believe there’s any sound basis for Ms. Bennett to seek certiorari in the Supreme Court,” Reed said.
Bennett, who represented herself before the Maryland Appellate Court, was not immediately available for comment.
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