EMPLOYMENT AGREEMENTS AND THE RULES OF PROFESSIONAL CONDUCT
As the attorney that successfully handled Becker v. Cellino & Barnes, P.C. regarding ethical considerations in employment agreements, I have come across many cases in my research in which the agreements involved do not to comply with the ethical code for attorneys. Much of the misunderstanging concerning such agreements revolves around language of the cases that state the “courts will not inquire into the precise worth” of the services performed by the parties as long as each party actually contributed to the legal work and there is no claim that either “refused to contribute more substantially”. The litany of cases quoting this language deals with fee sharing agreements made between two firms “at the time of substitution” of an attorney or in referal cases. It does not deal with arrangements contained in employment agreement that discuss what the fee division will be if an attorney leaves a firm and then represent firm clients.
The case law regarding employment agreements can seem confusing at first, but is easily distinguishible after a comparison between leading cases.
In Benjamin v. Koeppel, 85 N.Y.2d 549 (1985) the action arose out of an incident in which plaintiff referred a potential client with a real property tax matter to defendant law firm. They agreed that the plaintiff would receive 1/3 of the fee at the time of referal. The defendant then refused to pay based in part on DR 2-107. The Court held “It has long been understood that in disputes among attorneys over the enforcement of fee-sharing agreements the courts will not inquire into the precise worth of the services performed by the parties as long as each party actually contributed to the legal work and there is no claim that either refused to contribute more substantially. (Sterling v Miller, 2 AD2d 900, affd 3 N.Y.2d 778; see, Witt v Cohen, 192 AD2d 528; Oberman v Reilly, 66 AD2d 686; Rozales v Pegalis & Wachsman, 127 AD2d 577; Jontow v Jontow, 34 AD2d 744, 745; Fried v Cahn, 239 App Div 213; Carter v Katz, Shandell, Katz & Erasmous, 120 Misc 2d 1009, 1018-1019; see also, Stissi v Interstate & Ocean Transp. Co., 814 F.2d 848, 852). ” These lines of cases appear to be referal cases and cases where two firms both represented the client simulataneously.
Obviously this law is applicable to referal situations. How could a firm “contribute more substantially” after they have been discharged? Secondly, and most importantly, the agreement was made at the time of the referal. These cases clearly to do not refer to employment agreements. Even in the cases that deal with discharged firms, the agreements were made at “the time of substitution.” Therefore cases discussing the language that “courts will not inquire into the precise worth of the service performed” has nothing to do with employment agreements.