WILLIAM S. FRATES, APPELLANT,
v.
FERRY NICHOLS, WILLIAM C. GAITHER, WALTER H. BECKHAM, JR., WILLIAM R. COLSON AND J. B. SPENCE, APPELLEES; PETER T. FAY, APPELLANT, V. PERRY NICHOLS, WILLIAM C. GAITHER, WALTER H. BECKHAM, JR., WILLIAM R. COLSON AND J. B. SPENCE, APPELLEES; PERRY NICHOLS, WILLIAM C. GAITHER, WALTER H. BECKHAM, JR., WILLIAM R. COLSON AND J. B. SPENCE, APPELLANTS, V. WILLIAM S. FRATES, APPELLEE
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A Florida appellate court resolved disputes over legal fees totaling $200,577.70 earned by withdrawing law partners Frates and Fay after they left a law firm partnership. The court held that despite signing new retainer agreements with clients, the withdrawing partners' obligations to complete pending cases for the dissolved firm made those new agreements void, entitling Frates to his proportionate partnership share (16.27907%) of the fees rather than full recovery.
The court held that: (1) the new retainer agreements signed by Frates with existing clients were void because as a dissolving partner, Frates had a duty to wind up the old firm's pending cases without additional compensation; (2) the partnership agreement's Article X was not determinative because it did not contemplate a situation where the withdrawing partner completed pending cases; (3) Frates is entitled to his proportionate partnership share (16.27907%) of the net fees in each case, not as extra compensation for winding up but as his rightful share of income earned from firm assets being completed; and (4) Fay has no independent rights to these fees, as his rights depend entirely on his contract with Frates.
“Although never having been passed on by a Florida court, the proposition is universally accepted that a law partner in dissolution owes a duty to his old firm to wind up the old firm's pending business, and that he is not entitled to any extra compensation therefor.”
Establishes the fundamental duty of a dissolving partner to complete pending cases without additional compensation.
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Join FLexlaw to unlock all legal intelligencePrior to February 28, 1961, Frates was a capital partner in the law firm Nichols, Gaither, Green, Frates & Beckham. On that date, Frates and others le…
The full statement of facts, procedural history, and disposition for this case are member content.
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These consolidated appeals1 and cross-appeals are from orders of the chancellor determining the rights of the respective parties to legal fees in the amount of $200,-577.70.
Messrs. Nichols, Gaither, Green, Frates, Beckham, Colson & Spence, as capital partners in conjunction with Daniels, Fay and others as non-capital partners, were, prior to February 28, 1961 practicing law under the firm name of Nichols, Gaither, Green, Frates & Beckham pursuant to a written agreement. Green, Frates, Daniels and Fay all left the firm as of February 28, 1961. Frates and Fay went into practice together as partners. The remaining members of the firm, pursuant to the partnership agreement, continued in practice, under the name of Nichols, Gaither, Beckham, Colson & Spence. This successor firm retained all of the assets of the predecessor firm of Nichols, Gaither, Green, Frates & Beckham, including those clients that were clients of the old firm prior to February 28, 1961.
Frates took with him when he left ten negligence cases of clients of the old firm.2 Eight of these cases resulted in fees.3 These appeals challenge the propriety of the chancellor’s ruling in regard thereto.
The chancellor awarded fees to Nichols, Gaither, Beckham, Colson & Spence in six of the cases.4 In the Bowling case he awarded half of the fee ($4,558.225) to Frates & Fay, and the other half to Nichols, Gaither, Beckham, Colson & Spence. A fee of $120,000 in the Stewart case was awarded to Frates on the theory that the client had “cause” to discharge the old firm and hire Frates.
Frates appeals from the chancellor’s award of six fees to Nichols, Gaither, Beckham, Colson & Spence. Nichols, Gaither, Beckham, Colson & Spence appeal from the order granting one fee to Frates and half of the other fee to Frates. Fay appeals from the chancellor’s order which denies him any interest, as a partner in the firm of Frates & Fay, of the six fees earned by Frates & Fay, but given by the chancellor to Nichols, Gaither, Beckham, Colson & Spence.
It will serve no purpose to detail the events which lead up to and immediately *80precede the dissolution date of February-28, 1961.5
We first decide that in regard to all of these eight fees, there is no significant distinction, and therefore, whatever disposition is subsequently determined to apply, this result will be in regard to all of the fees. The chancellor treated two of the eight fees differently. In one he found that there was no contract between the old firm and Bowling, and therefore, Article X of the partnership agreement (to be discussed infra) did not control the disposition of this case. Accordingly the chancellor decreed that the fee should be divided evenly. We do not agree.
In regard to the Stewart fee of $120,000 the chancellor found that the client had “cause” to discharge the firm of Nichols, Gaither, Green, Frates & Beck-ham, accordingly, her contract with Frates & Fay is valid. The only “cause” for discharge relied upon by Mrs. Stewart took place in her home after she had retained Frates & Fay. When a member of the old firm visited her, she had already written a note indicating that she wanted Frates & Fay to represent her. The attempted retention of Frates & Fay occurred at the time this note was written, and any later developing “cause” could not operate ab initio. A formal signing of a retainer agreement by Mrs. Stewart with Frates & Fay thereafter, had no legal effect, as it was only a formality.
Now that we have arrived at the proposition that all eight fees are to be disposed of in the same manner, we must determine the manner.
At the outset, in order to determine the outer limits of the controversy, we hold that the retainer agreements the clients signed with the firm of Frates & Fay were a nullity.
Frates has energetically contended that upon the dissolution of the firm of Nichols, Gaither, Green, Frates & Beck-ham on February 28, 1961 the retainer agreements between that firm and its clients were dissolved. As a result, the subsequent agreements signed with ten of the clients by Frates superseded any rights which the old partnership might have had in the fees subsequently recovered, exclusive of a quantum meruit fee in behalf of the old firm prior to succession.
Although never having been passed on by a Florida court, the proposition is universally accepted that a law partner in dissolution owes a duty to his old firm to wind up the old firm’s pending business, and that he is not entitled to any extra compensation therefor.6
The dissolution date of February 28, 1961 did not put an immediate end to the partnership, it continued for the purpose of winding up its affairs,7 and inasmuch as Frates had a duty to wind up the affairs of the partnership, his signing of a retainer agreement with an already existing client was without consideration and void.
It is true, as Frates contends, that these clients could have discharged the firm at any time and retained new lawyers, but that did not occur here. All these clients, who signed retainer agreements with Frates, did, was to manifest their intention of retaining Frates to fulfill the continuing obligation of the firm of Nichols, Gaither, Green, Frates & Beckham,8 to them.
*81We adopt the rule recognized by our sister states that the retention of a law firm obligates every member thereof to fulfilling that contract, and that upon a dissolution any of the partners is obligated to complete that obligation without extra compensation.9
Inasmuch as we have now rejected Frates’ contention that he is entitled to retain all of the fees, we must deal with his former partners’ contention that he is entitled to none of the fees. Based upon the previously stated proposition, and absent a partnership agreement to the contrary, Frates would be entitled to his partnership interest of 16.27907% in the fees here involved. Frates’ former partners claim that these cases were assets of the firm, not net-accrued fees,10 therefore, he is not entitled to any part. We agree that these cases were assets of the old firm, and that they were not net-accrued fees as of February 28, 1961, but we do not agree that Frates is entitled to nothing.
Nichols, Gaither, Beckham, Colson & Spence claim that these fees are controlled by Article X of the partnership agreement.11
It is evident from the manner in which this portion of the agreement was drawn that the parties hoped by this agreement to induce the partners to refrain from volun*82tarily withdrawing1. In a firm largely devoted to litigation, such as this, where almost all of the fees are contingent, a withdrawing partner would be giving up a great financial expectation by simply receiving his net accrued fees. By far, the greater portion of the firm’s assets would be, and actually were, in the cases then pending in the office. This intention, of curtailing voluntary withdrawal, was further manifested by the fact that Article X provided for a larger payment to an involuntarily withdrawing partner than to a voluntarily withdrawing partner.
Article X further provided that the withdrawing partner would have no other interest in the cases of the firm, than was provided by the agreement. It is obvious that the contracting parties intended that the withdrawing partner would leave all of tire pending cases for the remaining partners to complete. The parties did not foresee, nor did they provide for the situation where, as here, the withdrawing partner completed some of the pending cases. We therefore are of the opinion that the partnership agreement is not determinative of the fees involved in the present litigation.
Nichols, Gaither, Beckham, Colson & Spence’s contention that our previous opinion in regard to another aspect of this litigation is determinative of this issue as “law of the case” is not accepted. It is true that this court previously construed Article X of the partnership agreement, but it was with regard to another unrelated part. In the prior litigation, we determined that Frates was a voluntarily withdrawing partner, not as he claimed, an involuntarily withdrawing partner, and therefore was only entitled to receive that amount of money, in dissolution, provided for by Article X of the partnership agreement.
This court did not pass upon, nor was the question before it, as to- the distribution of the fees here involved.
Inasmuch as the partnership agreement is not applicable for purposes of resolving this dispute we must apply common law principles.
As previously noted a partner is under a duty to wind up the partnership affairs without being entitled to receive extra compensation for so doing.12 But the proposition that a partner is not entitled to extra compensation for winding up the partnership affairs, does not mean, as Nichols, Gaither, Beckham, Colson & Spence contended, that this partner is entitled to no compensation. He is entitled to some compensation.
To argue as Nichols, Gaither, Beckham, Colson & Spence do, that payment of over $45,000 to Frates for net-accrued fees is compensation for his winding up cases for the old firm, is incorrect. That money was paid not for services performed to the partnership, but in lieu of his partnership interest or capital account. Stated in accounting terms, Frates was paid that money for his assets in the firm, and his winding up the cases entitled him to income for his services. The partners by paying him for his share of the net-accrued fees were paying for past services, not the present services expended in earning $200,577.70 in fees.
We agree with the trial court that these cases were assets of the old firm13 being wound up by Frates for them, and inasmuch as Article X of the partnership agreement does not control, Frates is entitled to receive his partnership share (16.27907%) of the net fee in each such case.
Insofar as Fay’s appeal is concerned, we affirm the trial court’s action. *83As previously noted, it was stipulated that Fay had nothing to do with bringing any of these clients to Frates & Fay. It necessarily follows that any rights Fay would have depend on and are no better than Frates’ rights thereto, and are a matter of contract between Frates and Fay.
Accordingly the orders appealed are affirmed in part, reversed in part and remanded for proceedings consistent herewith.
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Welsh v. Carroll, 378 So. 2d 1255 (Fla. 3d DCA 1979)…e entire depositions of the parties. The parties are in agreement that the merits of this appeal must be determined under the general law and the holdings of this court in Kreutzer v. Wallace, 342 So. 2d 981 (Fla.3d DCA 1977); and Frates v. Nichols, 167 So. 2d 77 (Fla.3d DCA 1964). The appellant’s argument under the first point is directed to several particulars. First, it is urged that the employment contracts were terminated by the parties at the time that they agreed to take in no new business and began…
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Kreutzer v. Wallace, 342 So. 2d 981 (Fla. 3d DCA 1977)…kholders in proportion to their stockholdings, to-wit: “MILTON J. WALLACE 60% “FRANKLIN D. KREUTZER 40% “4. The parties stipulated, and the Court so finds and orders, that the issues of law herein are controlled by the case of Frates vs. Nichols, 167 So. 2d 77 ((Fla. App.) 3 DCA 1964). “5. The parties stipulated that the sole issue, as a matter of law, to be determined by this Court, is the disposition of legal fees arising out of client matters pending as of March 31, 1974. “6. Counsel for Wallace urge…1 / 2
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Robert A. Shupack, P.A. v. Marcus, 606 So. 2d 466 (Fla. 3d DCA 1992)…nd agreement in no way affected fee client contracted to pay); Watson v. Pietranton, 178 W.Va. 799, 364 S.E. 2d 812, 816 (1987) (fee-splitting agreement enforceable between law firms even [*470] if violated disciplinary rule). See Frates v. Nichols, 167 So. 2d 77 (Fla. 3d DCA 1964). It is ironic indeed that the Code of Professional Responsibility — which is designed to raise the professionalism of the practice — has been employed to lower the responsibilities of attorneys toward each other below even the “m…
Previewing 3 of 8 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Tischler v. Kurtz Bros., 35 Fla. 323 (Fla. 1895)
- Miles Price v. Drew, 18 Fla. 670 (Fla. 1882)
- Frates v. Nichols, 140 So. 2d 321 (Fla. 3d DCA 1962)