When a firm screens a conflicted lawyer, must that lawyer be cut out of the whole fee or only the profit, and does notifying the former client violate the no-contact rule?

Plain-English summary

The opinion clarified RPC 1.10(e), the screening rule that lets a firm avoid imputed disqualification by walling off a personally disqualified lawyer, who must then be "apportioned no part of the fee" from the screened matter. Two questions arose: whether that means excluding the screened lawyer from the firm's gross fee or only from the profit, and whether the rule's notice requirement (RPC 1.10(e)(2)) conflicts with RPC 4.2's no-contact rule.

On the fee, the committee said the requirement reaches only the earnings or profit on the screened matter, drawing on the comments to ABA Model Rule 1.11(a), which bar directly tying a disqualified lawyer's compensation to the fee but allow a salary or partnership share set by prior independent agreement. So the firm may pay costs, expenses, and overhead (including attorney salaries) from the fee despite any indirect benefit to the screened lawyer; the screened lawyer is barred only from the profit portion. The committee illustrated with an example (on a $10,000 fee, roughly 30% wages/expenses, 30% overhead, and 40% profit, a 20% equity partner's share would be reduced by 20% of the $4,000 profit, or $800) and said an equity lawyer may keep separating equity and a disqualified associate may keep a regular salary but not a bonus tied to the screened matter's fee. It added that the firm bears the burden of putting accounting practices in place to ensure the disqualified lawyer does not share in the profit, that the profit can be determined at the end of the accounting period, and that the rule does not require segregating the profit into trust or a reserve.

On notice, the committee concluded that the RPC 1.10(e) notice to the former client does not violate RPC 4.2, because the notice is not the "subject matter of the representation" and is "authorized by law," since the Rules of Professional Conduct require it.

Currency note

This opinion was issued in 1993 and amended in 2009. The amended text references the current Washington Rules of Professional Conduct (RPC 1.10 and 4.2), and Washington's screening and imputation rules have since been revised and renumbered. Later rule amendments or opinions may have changed the analysis. Treat this page as historical context, not current guidance, and verify against the current rules before relying on any specific provision mentioned here.

Common questions

Q: When a firm screens a conflicted lawyer, does that lawyer lose all the fees from the matter?

A: The committee said no. The screened lawyer is cut out only of the profit on the matter; the firm may still pay salaries, overhead, and costs from the fee, and a screened lawyer may keep a salary or equity share not tied to that matter's fee.

Q: Can a screened associate still get a bonus?

A: The committee said a disqualified associate may be paid a regular salary and may receive a bonus based on a prior independent agreement or established firm criteria, but not a bonus directly based on the fee from the screened matter.

Q: Does the firm have to set the profit aside in trust?

A: The committee said no. The profit portion may be determined at the end of the accounting period, and the rule does not require segregating it into trust or a reserve account; the firm just bears the burden of accounting so the disqualified lawyer does not share in it.

Q: Does notifying the former client violate the no-contact rule?

A: The committee said no. The RPC 1.10(e) notice does not violate RPC 4.2 because the notice is not the subject of the representation and is authorized by law, since the rules require it.

Background and rules framework

The opinion interpreted Washington RPC 1.10(e) (the screening provision tied to Model Rule 1.10, imputation of conflicts), using the comments to ABA Model Rule 1.11(a) (former government lawyers; "part of the fee") as persuasive on what "apportioned no part of the fee" means, and addressed RPC 4.2 (Model Rule 4.2, communication with a represented person) as it bore on the required former-client notice.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.10 / Washington RPC 1.10(e), 1.10(e)(2) (imputation; screening; fee apportionment; notice)
• Model Rule 1.11(a) (former government lawyers; comments on "part of the fee," used by analogy)
• Model Rule 4.2 / Washington RPC 4.2 (communication with a represented person)

Cases:

• Manning v. Fort Deposit Bank, 619 F. Supp. 1327 (W.D. Tenn. 1985), adequacy of screening and sharing in firm earnings

See also

• WSBA Ethics Op. 1064: Former Agency Lawyer Screening
• WSBA Ethics Op. 2097: Conflict-Check Lookback
• WSBA Ethics Op. 1022: Lateral Lawyer, No Imputation

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1533

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 190
Year Issued: 1993
RPC(s): RPC 1.10(e), 4.2
Subject: Compliance with RPC 1.10 Re: Apportionment of Fees and Notice Requirement to Former Client

The purpose of this opinion is to clarify the meaning of the requirement in RPC 1.10(e) that a disqualified lawyer who is screened from participation in a matter is "apportioned no part of the fee therefrom."

Issues:

(A) Recent inquiries from members of the Bar have asked whether RPC 1.10(e) requires a disqualified lawyer who is screened from a particular matter pursuant to RPC 1.10 to exclude from the lawyer’s compensation the "gross fee" received by the law firm in the screened matter, or only the portion of the fee from the screened matter that represents the firm’s "profits."

(B) Inquiries have also been made by members of the Bar as to whether compliance with the notice requirement of RPC 1.10(e)(2)violates the prohibition of communicating with a person represented by counsel contained in RPC 4.2.

Discussion:

A. Interpretation of RPC 1.10(e)

The underlying rationale of RPC 1.10(e)is to allow law firms and their nonscreened lawyers to fully participate in a matter in which the law firm would otherwise be disqualified and to fully participate in the fee from such matter. The rule only prohibits the screened lawyer’s compensation being directly tied to the fee from the screened matter. The comments to ABA Model Rule 1.11 (a), which prohibits a former government lawyer from receiving any "part of the fee" from the screened matter, supports this rationale:

[The rule] do[es] not prohibit a lawyer from receiving a salary or partnership share established by prior independent agreement. [The rule] prohibit[s] directly relating the attorney’s compensation to the fee in the matter in which the lawyer is disqualified. (emphasis added.)

See, Manning v. Fort Deposit Bank, 619 F. Supp, 1327 (WD TN 1985) (wherein the court stated that one of the elements to be considered in evaluating whether the screening procedure is adequate is whether the disqualified lawyer "shares in firm earnings" from the screened matter.)

It is the Rules of Professional Conduct Committee’s opinion that RPC 1.10(e) allows the law firm to pay its costs, expenses, and overhead (including attorneys’ salaries) from the fee received from the screened matter, despite any indirect benefit that a disqualified lawyer may receive from such payments. The disqualified lawyer would be barred from participating in the distribution of the "profit" portion of the fee from the screened matter.

Because there almost as many financial arrangements among law firms as there are law firms, a rule of reason and good faith in calculating the screened lawyer’s compensation must be applied by the law firm, consistent with the purpose and spirit of RPC 1.10(e). As the comments to ABA Model Rule 1.11(a) indicate, the purpose of the rule is to prohibit law firms from including any part of the fee from the screened lawyer in determining the amount of the disqualified lawyer’s compensation, whether such compensation is structured as disguised salary, bonus, or other arrangement.

1. Disqualified Equity-Holding Lawyers

Regarding a personally disqualified partner, shareholder, or other equity-holding lawyer in a law firm, it is the Committee’s opinion that the requirement in RPC 1.10(e) that a disqualified lawyer be "apportioned no part of the fee" from the screened matter means the "earnings" or "profits" received from such matter. The Committee is also of the opinion that a personally disqualified lawyer should not receive less compensation than would otherwise be paid to the disqualified lawyer solely because the law firm takes on the representation of a screened matter.

To illustrate the foregoing, assume that a law firm’s fee from a screened matter is $10,000. Assume further that approximately 30% of the fee represents wages actually paid to firm employees or expenses actually incurred on the matter; another 30% represents a fair apportionment of the firm’s overhead; and the remaining 40% represents earnings or profit on the screened matter. Lastly, assume that the screened partner is normally entitled to receive 20% of firm profits. Thus, the screened lawyer’s share of the firm’s profits would be reduced by 20% of the firm’s profit of $4,000 from the screened matter (i.e., 40% of $10,000) or $800.

2. Associates or Other Non-Equity Lawyers

In the case of a disqualified associate or other non-equity holding lawyer in the law firm, it is the Committee’s opinion that such lawyer may be paid a regular salary, but may not share in any bonus, distribution, or other additional compensation that is directly based upon the fee received from the matter in which the lawyer is screened. A disqualified associate or other non-equity holding lawyer in a law firm may receive a bonus, distribution, or other benefit that is based upon a prior independent agreement or other previously established criteria by the law firm for determining compensation for similarly situated lawyers, provided such compensation does not include any part of the profit from the screened matter.

3. Accounting Obligations

It is the Committee’s opinion that the law firm must put into place such accounting practices and procedures that are necessary to insure that the profits received from a screened matter are identified in such a manner that the personally disqualified lawyer does not share in it. The burden of proof of compliance is upon the law firm.

It is also the Committee’s opinion that the determination of the profit portion of the fees received by the law firm from a screened matter may be made at the end of the law firm’s accounting period. The law firm is not required by RPC 1.10(e) to segregate or otherwise place the "profit" portion of the screened fee into trust, a reserve account, or other such arrangement.

B. Notice Requirements

It is the Committee’s opinion that the notice requirement of RPC 1.10(e) does not violate RPC 4.2 because (1) the notice to be provided to the former client is not the "subject matter of the representation," and (2) the notice is "authorized by law" within the meaning of RPC 4.2 because the Rules of Professional Conduct require it.

[amended 2009]