Appeal from a judgment of the Superior Court of Orange County, Kim Garlin Dunning, Judge. (Super. Ct. No. 30-2009-00125160)
The opinion of the court was delivered by: Ikola, J.
CERTIFIED FOR PUBLICATION
In class actions, an attorney's agreement to share legal fees is governed by Rules of Professional Conduct, rule 2-200 (rule 2-200) and California Rules of Court, rule 3.769 (rule 3.769). Rule 2-200 permits an attorney to share legal fees with another lawyer only with the client's informed, written consent. Rule 3.769 requires an applicant seeking court approval of a class action settlement to inform the court of any fee-sharing agreement.
In this case, we hold that an attorney may be equitably estopped from claiming that a fee-sharing contract is unenforceable due to noncompliance with rule 2-200 or rule 3.769, where that attorney is responsible for such noncompliance and has unfairly prevented another lawyer from complying with the rules' mandates.
Plaintiff Barnes, Crosby, Fitzgerald & Zeman, LLP, filed its operative complaint for declaratory relief against defendants Jerome L. Ringler, his law firm Ringler, Kearney & Alvarez, LLP (RKA), and McNicholas & McNicholas, LLP (M&M). The complaint alleged, inter alia, that in 2004 or 2005, plaintiff referred to Ringler a potential class action suit against RSM EquiCo, Inc. (EquiCo). At the time, Ringler was a class action specialist at the law firm of Robins, Kaplan, Miller & Ciresi, LLP (Robins). In a December 2005 written agreement, Ringler promised to pay plaintiff one-third of any legal fees recovered. Two months later, Ringler left Robins and formed his own law firm, RKA. In February 2006, Ringler confirmed to plaintiff in writing that RKA would honor the prior fee-splitting agreement. In July 2006, RKA and M&M filed the class action originally proposed by plaintiff. RKA and M&M agreed between themselves to "'share on a 50-50 basis any and all referral fees to other attorneys'" in the class action. For over three years, defendants led plaintiff to believe that defendants would honor the fee-splitting agreement. In April 2009, defendants obtained court certification of the class, using information obtained from plaintiff. In May 2009, Ringler informed plaintiff that although plaintiff had referred the EquiCo matter to him, Ringler had learned that plaintiff had signed a nondisclosure agreement with EquiCo which, in Ringler's view, posed a potential "'risk, however de minimis, that . . . might somehow compromise [Ringler's] representation of the class . . . .'" Ringler refused to disclose the fee-splitting agreement to the class representatives or the court because the fee division was no "'longer contemplated.'" Because plaintiff was not in direct contact or privity with the class representatives, defendants "had the exclusive means and opportunity to" disclose the fee-splitting agreement to the class and the court. Defendants threatened that if plaintiff tried to notify the class representatives of the fee-splitting agreement, defendants would consider such action to be tortious interference with defendants' attorney-client relationship. Finally, plaintiff alleged the fee-splitting agreement did not contemplate any increase in the total legal fees charged to the class.
In its prayer for relief, plaintiff asked the court to declare, inter alia, (1) whether a fee-splitting agreement existed between plaintiff and defendants, (2) whether defendants had a duty to inform the court and the class representatives of the fee-splitting agreement, (3) whether defendants were entitled to rely on their own wrongdoing and noncompliance with disclosure rules as a defense to the enforcement of their fee-splitting commitment, and (4) whether, given defendants' lack of compliance with their duties, plaintiffs now had the right to directly inform the court and the class representatives of the fee-splitting agreement.
The Summary Judgment Motion
Defendants moved for summary judgment on the ground that the class representatives had "already been made aware of and refused to consent to any fee-splitting agreement between Plaintiff and Defendants." Plaintiff disputed defendants' assertion, arguing there was no evidence defendants had disclosed to the class representatives that (1) a written fee-splitting agreement existed; (2) the agreement would not increase the amount of attorney fees charged or collected; and (3) the agreement would not change the class's current legal representation.
Judge Thierry Patrick Colaw denied defendants' summary judgment motion. The court found a triable issue of material fact existed "as to whether Defendants' purported disclosure of the fee-splitting agreement to the RSM EquiCo class action plaintiffs was sufficient under" rule 2-200. The court also noted defendants had provided "no legal authority to support their argument that [rule] 2-200 trumps the court's authority granted by [rule] 3.769 to determine attorney fee awards . . . ."
In a bench trial before Judge Kim Garlin Dunning, the attorneys gave their opening statements. In plaintiff's counsel's opening statement, he summarized the operative complaint's allegations, as well as the following additional ones. In the fall of 2005, plaintiff referred a client, Cordell Meredith (a disgruntled EquiCo client), to Ringler as "the proposed" class representative; Meredith consented in writing to the referral fee; in October 2005, Ringler e-mailed plaintiff that his office would "move forward with a class action against EquiCo" only if the referral fee was one-third or another sum acceptable to plaintiff; Robins (Ringler's then law firm) filed an individual action on behalf of Meredith against EquiCo, but reserved the right to turn the Meredith lawsuit into a class action; and, plaintiff provided Ringler with a list of disgruntled former clients of EquiCo.
After Ringler started his new firm (RKA), plaintiff (to ensure that RKA had sufficient funding and staffing to handle the class action) acted as the "matchmaker" to obtain the agreement of Patrick McNicholas (of M&M) to participate in and invest in the class action. McNicholas was aware of the one-third referral fee to plaintiff.
In February 2006, Ringler's former law firm (Robins) filed a lien in the Meredith lawsuit.
In March 2006, plaintiff settled a wrongful termination claim against EquiCo by a whistle-blower employee and signed a nondisclosure agreement. The nondisclosure agreement was prospective in effect, i.e., it could only operate to prohibit plaintiff from making any future disclosures.*fn2 The information plaintiff provided defendants for the class action "occurred before" the nondisclosure agreement went into effect.
In June 2006, Ringler informed Cordell Meredith, without explanation, that Ringler would no longer act as Meredith's attorney and referred Meredith to another lawyer. One month later, Ringler filed the "Do Right"*fn3 class action that "was basically a cookie cutter of the prior work product," and named class representatives originally identified by plaintiff in the list of disgruntled former EquiCo clients. (Plaintiff's counsel stated the evidence would show defendants filed a new lawsuit, rather than converting the Meredith case into a class action, due to Robins's lien on the Meredith action.) The Meredith action was ultimately dismissed with a stipulation that Cordell Meredith "would be regarded as a member of the class" in the Do Right class action.*fn4
In October 2006, RKA and M&M agreed to "share on a 50/50 basis any . . . referral fees to other attorneys." Throughout 2008, plaintiff repeatedly asked Ringler when and how he planned to inform the court and the new class representatives of the fee-sharing agreement. Ringler ...