Justice Loughry: Court shouldn't have passed on deciding ethics issue

CHARLESTON – The recent majority opinion in a lawsuit that alleged an engineering firm had entered into a fee-sharing agreement with a law firm fails to address a necessary issue, state Supreme Court Justice Allen Loughry says.

Loughry, who was a part of a majority of justices who felt no such agreement existed and ruled Gaddy Engineering was not owed one-third of the $4 million in fees earned by the firm Bowles Rice, filed a concurring opinion June 14. Justice Robin Davis joined in the opinion.

He said he found it necessary to write separately to fault the majority for not addressing the illegality of a fee-sharing agreement between a lawyer and a nonlawyer.

“From the outset of this case, the respondents (Bowles Rice) sought to dismiss the case on the grounds that the alleged fee-sharing agreement was an illegal contract and, thus, unenforceable,” Loughry wrote.

“In denying the motion, the trial court found the lack of precedent on the issue to be determinative.

“Despite the clear invitation from the trial court to resolve this previously unaddressed issue, the majority opted not to decide that a fee-sharing agreement between a lawyer and a nonlawyer that is in violation of Rule 5.4 of the Rules of Professional Conduct is unenforceable as being contrary to the public policy of this state.

“In so doing, I believe that the majority did a serious disservice to both the bench and the bar of this state.”

Loughry said other courts faced with the issue have determined that the rules of professional conduct contain explicit declarations of a state’s public policy. He cited decisions from California, Texas, Michigan, Georgia and Illinois.

Also mentioned was a recent decision from the U.S. Court of Appeals for the Sixth Circuit that voided a fee-sharing contract between a physician and an attorney.

Loughry said the Sixth Circuit rejected the argument that public policy can only be created by the Kentucky Legislature.

An Indiana Supreme Court decision said an attorney can’t share legal fees with a nonlawyer because of the agreement’s potential effect on the attorney-client relationship.

“For example, fee-splitting with a nonlawyer provides the incentive for a nonlawyer to recommend an atorney’s service for their own pecuniary interests rather than the client’s legal best interests,” the court ruled in 1997.

Gaddy Engineering’s appeal of a Roane Circuit Judge Thomas C. Evans III decision was heard April 17.

The lawsuit alleged Gaddy Engineering was promised one-third of the fees Bowles Rice attorney Tom Lane would receive from a verdict in a case against Columbia Natural Resources.

A class action lawsuit resulted in a $404 million verdict, one of the largest in state history. In exchange for dropping the appeal, Columbia agreed to a $380 million settlement.

Attorneys were awarded $125 million, though only $4 million of it went to Bowles Rice, which claimed there was no fee-sharing agreement.

At the conclusion of his opinion, Loughry cited former Justice George M. Scott.

“For the majority to completely fail to tackle at least an examination of the ethical considerations of the… fee [sharing agreement]… undermines this court’s responsibility to uphold the ethical principles of the legal profession and sends the wrong message to the members of our Bar,” Scott wrote in a 2000 dissent.

From the West Virginia Record: Reach John O’Brien at jobrienwv@gmail.com.