Firm’s Links to Both Sides in Divorce Result in Total Denial of Attorneys’ Fees

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By Lance J. Rogers  

A law firm that represented the wife in a divorce after initially consulting with the husband was tainted by a conflict of interest that voided its fee agreement with the wife from the outset and thus prevents the firm from collecting any compensation in this matter, the Illinois Appellate Court, First District, ruled in an opinion published Oct. 14 (In re Marriage of Newton, Ill. App. Ct. 1st Dist., No. 1-09-0683, 6/30/11, published 10/14/11).

Writing for the court, Justice Aurelia Pucinski rejected the lawyers' argument that at a minimum they are entitled to be paid for the work they did before they were disqualified. Both under the applicable statute and as a matter of public policy, Pucinski said, the retainer agreement was void ab initio and unenforceable due to the conflict.

He and She

In 2007 David Newton filed a motion to disqualify David J. Grund and the law firm Grund & Leavitt from representing his wife Hadley Newton in their divorce action. After hearing evidence from Grund and both spouses, the trial court disqualified Grund and the firm, concluding that Grund had previously represented David in the same matter.

According to the court, David Newton had met Grund at the lawyer's office for one or two hours and discussed his impending divorce, children, and financial situation.

Grund testified he told David that representation would not begin unless David actually signed a contract, that no attorney-client privilege would attach during their meeting, and that David should not disclose anything to Grund that could not appear in the public record. He stated that he didn't think David would actually hire him. The lawyer further said he couldn't recall anything that David told him and denied taking any notes.

Hadley Newton stated that when she approached Grund, the lawyer told her there was a conflict but nonetheless agreed to represent her and had her sign a retainer.

Disqualifying Conflict

The trial court concluded that the Newtons were credible and ruled that David's meeting with Grund created an attorney-client relationship that disqualified the firm from representing Hadley Newton in the divorce.

Finding that the representation violated Illinois Rule of Professional Conduct 1.9(a) on conflicts involving former clients, the court further announced that the firm could not even collect fees for the work it had done up until the moment it was disqualified (which, due to appeals, was not finally resolved until 2009) because the retainer agreement to represent Hadley was void and unenforceable from its inception.

The court later held the Grund & Leavitt attorneys in contempt when they refused to move away from the bench after the judge denied their fee petition and instructed them to step back. The appellate court ruled that the trial judge got it right on all counts.

Irrebuttable Presumption

The trial court correctly ruled that Grund & Leavitt should be disqualified for violating Rule 1.9, it said, because the Newtons' interests were so obviously in conflict. Rule 1.9(a), it noted, provides that a lawyer who has represented a client in a matter shall not take on a client in the same or a substantially related matter if the new client's interests are materially adverse to those of the former client, unless the former client consents.

David Newton's consultation with Grund created an attorney-client relationship, the court said. David was seeking advice about his impending divorce. And because David and Hadley Newton were adverse parties in the identical case, it added, there was clearly a substantial relationship between the two representations.

The existence of a substantial relationship between the prior and present representations created an irrebuttable presumption that David shared confidential information with Grund, the court continued, and therefore justified the disqualification order.

Good Faith Not Germane

The denial of fees was justified, the court said, on two grounds. First, because of the Rule 1.9 violation, the law firm's fee agreement with Hadley Newton did not qualify as a “contract which meets applicable requirements of court rules” as required by 750 Ill. Comp. Stat. 5/508(c)(3) which governs fee awards under the Illinois Marriage and Dissolution of Marriage Act.

Second, the court continued, the fee contract was void and unenforceable from the very beginning because it contravened the public policy of the state as reflected in Rule 1.9. Court precedent indicates that attorneys' fees will not be allowed if a lawyer is disqualified due to a conflict of interest, Pucinski observed.

The court found unavailing the lawyers' alternative argument that they are entitled to their requested fees because they acted in good faith. Lawyers are barred from accepting employment that creates a conflict of interest, no matter how honest their motives or intentions may be, the court said.

“Where the ethical rules have been violated and counsel has represented a party with conflicting, adverse interests, counsel's purported good faith is irrelevant,” Pucinski stated.

‘Inexplicable.'

The lawyers' argument that they should be allowed to recover compensation for services rendered (including the appeals) before they were disqualified also failed. Grund knew from the beginning that there was a conflict of interest, the court said.

In fact, the court found it “inexplicable that Hadley made it past screening” and that Grund agreed to represent her even though he acknowledged a conflict. In any event, it reasoned, no fees are allowable because the retainer agreement with Hadley Newton was void ab initio.

The lawyers “strenuously” argued that a negative ruling on their fee petition would undermine the purpose of the fee-award statute, which they said is to “level the playing field” by making it possible for an economically disadvantaged spouse to obtain counsel of choice. Pucinski's response to the lawyers was this: “They cannot ‘level the playing field' by rolling over the rights of their former client, David.”

Pucinski pointed out that although it was not in effect during the events in this case, Rule 1.18 on lawyers' obligations concerning initial consultations with prospective clients now provides further guidance on what attorneys should and should not do in a situation such as this.

The court also upheld the contempt order, rebuffing any contention that the lawyers' refusal to step away from the bench when ordered to could be justified as a good faith effort to secure clarification of an uncertainty. Rule 1.9 makes it abundantly clear that representing clients with conflicting interests is prohibited, the court said.

“Grund knew of the conflict before he agreed to represent Hadley and yet undertook to represent her anyway, thus paving his own road to the denial of fees,” Pucinski said.

Marvin J. Leavitt and David C. Adams of Grund & Leavitt, Chicago, represented their firm. Michael J. Berger, Leon I. Finkel, and Rebecca S. Berlin of Berger Schatz, Chicago, represented David Newton.

 


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