Legal Ethics Opinion No. 1370

  Fees--Law Firms: Dissolution of Firm; Non-Withdrawing Members
Enforcing Firm Policy to Split Fees Among All Members of Former
Firm

A professional legal corporation is retained by a client
concerning an ongoing investigation which may lead to the
client's indictment.  The client signs a retainer agreement with
the law firm and pays a substantial retainer upon engaging the
firm.  The retainer agreement provides that the client will not
be billed until the firm has spent the necessary hours in excess
of those covered under the original retainer amount.  In addition
you have stated that the law firm's policy or agreement among the
lawyers is that the fee generated by the case would be
distributed by way of salary to all lawyers in the firm; not just
those lawyers responsible for the case.

You have stated that, subsequent to undertaking the criminal
representation in question, certain members withdraw from the
firm and, at the client's request, the attorneys who withdrew
from the firm were asked to continue the representation of the
client.  Just prior to the break-up of the firm, the hours
expended by the attorneys amounted to approximately half of the
retainer amount.

You wish to know whether, under the facts as you have stated them
in the inquiry, there is any ethical restriction or proscription
against the non-withdrawing firm members, who are not currently
representing the client, enforcing the agreement to distribute
all fees generated by the case among all members of the firm and
not just among those working on the case.

The appropriate and controlling Disciplinary Rules relative to
your inquiry are DR 2-105(D), DR 2-108(D) and DR 9-102(B)(4). 
Disciplinary Rule 2-105(D) is responsive to those instances in
which the employment of additional counsel is contemplated or
necessary.  The Rule permits a division of fees between lawyers
who are not of the same firm only if the client consents to the
employment of additional counsel; both attorneys expressly assume
responsibility to the client; and the client consents to the
terms of the division of fees after full disclosure. 
Disciplinary Rule 2-108(D) provides in part that upon termination
of the representation of a client, a lawyer shall take reasonable
steps for the continued protection of a client's interests,
including, in pertinent part, refunding any advance payment of
fee that has not been earned.  Similarly, DR 9-102(B)(4) states
that a lawyer must promptly pay or deliver to the client or
another as requested by the client the funds, securities, or
other properties in the possession of the lawyer which such
person is entitled to receive.

The committee directs your attention to LEO #1178 in which the
committee made the distinction between an "advanced legal fee"
and a "retainer."  The committee stated that the terms were not
synonymous and that fees paid in advance for services on a
specific matter, which are entrusted to the lawyer, are deemed
the property of the client except for that which may be
considered the property of the lawyer pursuant to DR 9-102(A)(2)
and DR 9-102(D).  However, a "retainer" or periodic payment made
to an attorney to insure his availability to the client is
rightfully deemed the property of the lawyer or the law firm as
consideration for the lawyer's unavailability to potential
adversary parties.  The committee has previously opined that it
is the duty of an attorney to refund so much of a retainer fee as
has not been earned by performance of the services for which the
attorney was retained.  See LEO #646, #510, #988 and Heinzman v.
Fine, Fine, Legum and Fine, 217 Va. 958 (1977).  In addition,
Legal Ethics Opinion #681 states in part that an attorney who is
paid a substantial portion of an agreed fee in a criminal matter
and whose services are terminated prior to the conclusion of the
case must, upon demand by the client, provide an accounting of
fees received and expended which fees claimed must be reasonable. 
See DR 9-102, DR 2-105(A) and (B).      

The committee believes that, because of the splitting of the firm
and upon the client requesting the continued legal representation
by the withdrawing partners, the employment by the original firm
under the retainer agreement would have been terminated.  The
committee opines therefore that under DR 2-108(D) and DR
9-102(B)(4), provided that none of the members of the remaining
firm are still representing the client, any portion of the
retainer or advanced fee payment that had not been earned by the
firm as compensation for legal services to the client must be
returned to the client.  Therefore, attempting to enforce the
agreement with regard to the unearned fees in the possession of
the original firm would be improper.  Any sharing of fees between
the non-withdrawing members of the firm and the attorneys
representing the client in the criminal matter is permissible
only if the requirements under DR 2-105(D) have been met.

Committee Opinion
July 24, 1990