LawyersUSA

An attorney needn't forfeit reasonable fees he obtained in a case even though his misconduct toward his clients violated the state rules of professional responsibility, the 9th Circuit has ruled in affirming a U.S. District Court.

The clients claimed that the attorney violated a state rule of professional misconduct by agreeing to share the contingency fee obtained in their case with a non-attorney.

They sought disgorgement of $167,500 in fees they paid him, his firm and his non-attorney consultant, who was assisting with the clients' sale of gas stations.

The clients argued that the attorney breached his fiduciary duty to them by entering into the fee-splitting agreement in violation of the rules of professional misconduct.

But the court said that the attorney didn't have to forfeit the fees he was paid.

"[T]he $72,500 contingency fee paid to [the attorney and the consultant] was reasonable for the work done and value of the … transaction. … [The attorney and the consultant's] work led to a multi-million dollar rental deal, kept the six gas stations as [the clients'] property, and prevented [them] from having to file for bankruptcy," the court said.

"We acknowledge that disgorgement of attorney … fees … 'deters attorney misconduct, a goal worth furthering regardless of whether a particular client has been harmed.' … Of course, nothing herein is meant to excuse [the attorney] for any breach of his professional duties imposed by [the state rules], should that state's bar proceed against him for sanctions. … But, under [state] law, the award of disgorgement of fees is not mandatory even where the attorney who got the fees also violated [the state] rules of professional conduct for attorneys; instead, whether to order disgorgement is placed firmly within the discretion of the trial court."

U.S. Court of Appeals, 9th Circuit. Bertelsen v. Harris, No. 06-36020. Aug. 11, 2008. Lawyers USA No. 99310548. Click here for the full text of this opinion.