Arbitration & Mediation

Florida Lawyer Violates Bar Rules With Paralegal Fee Sharing Contract, Claims Public Policy Defense

By Christopher B. Hopkins, Esq.

The Fourth District handed down an opinion where it declined to void a contract which violates Florida Bar rules because it would "discourage attorney compliance with the rule in question" and because public policy was not at stake. While the Court leapt through some mental gymnastics to keep the $87k claim alive against a lawyer who appears to have violated Bar fee-sharing rules, the Court likewise dropped clear disclaimers seeking to narrow the precedential value of the case. At least that's how we interpreted the opinion.

We pick up the case of Patricia A. Patterson v. Law Office of Lauri J. Goldstein, P.A., in light of the question of whether public policy can unwind a private contract. This, of course, is a frequent issue in the compulsion of arbitration agreements and is a favored legal principle of the Fourth DCA, which decided the case (Panel: Stevenson, Stone, and Taylor).

Patterson was a paralegal at the Stuart area law firm where she drew not only a salary but a bonus calculated as 10% of the firm's fees from cases on which the paralegal worked. Patterson was paid her salary but a dispute arose over unpaid portions of the bonus which totaled over $87,000 (incidentally, the firm boasts that, among its top 10 strengths, it has a "capable staff"). Ultimately, during suit, the law firm defended itself claiming that the bonus agreement was not enforceable because the firm's own promise to pay the paralegal a bonus was "unethical and thus void against public policy."

According to the opinion, before suit arose, the attorney told the paralegal that she promised to pay the remainder of the bonus but could not put it in writing because of a problem with "the Bar." Indeed, the described bonus arrangement violates Rule 4-5.4(a) which prohibits an attorney from sharing fees with a non-lawyer. According to the opinion, at the time, the paralegal did not know that the bonus agreement violated any rules; during the course of the case, neither side disputed that the arrangement violated Bar Rules.

The Court held that the restriction on fee-sharing was enacted to protect the lawyer's professional independent judgment so that there would be no risk of pressure to resolve the case based upon a nonlawyer's financial interest. Unlike other rules, decided the Court, this regulation had less to do with protecting the public and more to do with employment issues.

The Court indicated that, where both parties to an "offensive" contract are in equal fault (in pari delicto), relief will not be granted because of public interest. The corollary to that principle is that, where the parties are not in pari delicto, the innocent party may recover. Presumably, for example, the Fourth District employed this public policy theory to deflate arbitration and remedial limitation provisions in contracts under the notion that the parties offering such contract were in violation of public policy -- whereas the signing party would be "innocent." See, e.g., Romano v. Manor Care and Lacey v. Health Care & Retirement.

In this case, the Panel wrote, the paralegal was not regulated by the Bar and was unaware of the restriction which made her an "innocent party." Thus, she could enforce the bonus agreement despite the fact that the terms implicate Bar Rules. The court noted that the Rules Regulating the Florida Bar generally exist to promote public interest and that "the public interest is not advanced if an attorney is permitted to promise a bonus arrangement that violates the fee-sharing rule and then invoke the Rules as a shield from liability under that arrangement."

As mentioned above, we interpreted the remaining lines of the opinion to be intended to marginalize this case's precedential value. Take a look if you are interested. Meanwhile, we will follow to see if this case does create some future precedent in the private contract/public policy arena.

Full post as published by Florida Arbitration Law on May 09, 2008 (boomark / email).