Case Title: Chambers v. Kay

Citation: 

Docket Number: S098007

State: california

Court: California Supreme Court

Date: 2002-11-04T00:00:00Z

Document:
1
Filed 11/4/02 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
ARTHUR CHAMBERS, 
) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S098007 
 
v. 
) 
 
 
) 
Ct.App. 1/1 A091362 
PHILIP KAY, 
) 
 
) 
San Francisco County 
 
Defendant and Respondent. 
) 
Super. Ct. No. 303 824 
___________________________________ ) 
 
This matter arises from a dispute between two attorneys over contingent 
fees generated from the successful prosecution of a client’s lawsuit against third 
parties.  Rule 2-200(A)(1) of the California Rules of Professional Conduct (all 
further references to rules are to these rules), which this court approved to protect 
the public and to promote respect and confidence in the legal profession, provides 
in pertinent part that a member of the State Bar “shall not divide a fee for legal 
services with a lawyer who is not a partner of, associate of, or shareholder with the 
member unless . . . [¶] . . . [t]he client has consented in writing thereto after a full 
disclosure has been made in writing that a division of fees will be made and the 
terms of such division . . . .”  Here, the plaintiff attorney seeks a division or 
apportionment of fees despite noncompliance with the rule’s written client consent 
requirement.  We conclude, based on the uncontroverted record before us, that rule 
2-200(A)(1) is binding on plaintiff and precludes him from sharing in the subject 
fees.  Accordingly, we affirm the judgment of the Court of Appeal. 
 
2
FACTUAL AND PROCEDURAL BACKGROUND 
Attorneys Arthur Chambers and Philip Kay had separate law practices in 
San Francisco.  They had individual office letterheads; Kay listed his home law 
office on 43d Avenue as his professional address, while Chambers listed his office 
address as 1388 Sutter Street, suite 510.  Kay also maintained a separate 
professional liability insurance policy for his practice.  Except perhaps as 
otherwise noted below, Chambers and Kay did not list each other as employees or 
partners in any official documents. 
In 1992 and 1993, Kay paid Chambers $200 per month to use a conference 
room in Chambers’s office on Sutter Street for depositions and client meetings.  
Kay used Chambers’s office telephone service, law library, and postage and copy 
machines.  Kay also maintained files and a computer in the office, rented a 
monthly space in the building parking lot, and was listed as a co-tenant on the 
building directory.  Chambers assisted Kay with his work on a few cases.  
Additionally, Chambers’s staff regularly provided assistance to Kay with case-
related documents. 
In 1992, at Kay’s request, Chambers began serving as cocounsel in a sexual 
harassment action that Kay had previously filed on behalf of his client, Rena 
Weeks, against Martin Greenstein and the law firm of Baker & McKenzie 
(hereafter Weeks or the Weeks case).  Chambers’s responsibilities in the case 
included maintaining the files, conducting discovery that Kay assigned to him, 
conferring with Weeks in the office, and appearing as cocounsel on her behalf at 
pretrial hearings.  Both Chambers and Kay were listed in the Weeks case pleadings 
as plaintiff’s counsel, at the Sutter Street office address, and Chambers advanced 
costs and expenses of $3,356.32 in the case.  Chambers, however, continued to 
work on other cases he had at the time. 
 
3
During discovery in Weeks, a dispute arose between Chambers and Kay 
over the disclosure of certain documents and Chambers’s alleged efforts to 
persuade Weeks to settle.  On September 29, 1993, Kay notified Chambers by 
letter that Chambers was removed effective immediately from the Weeks case with 
the client’s approval.  Kay’s letter confirmed that Chambers would “receive the 
compensation agreed upon,” that is:  in the event the case was settled before 
depositions, “16.5% of the attorney’s fees called for under my agreement with 
[Weeks], which is 40% of the monies recovered”; thereafter, an “increase to 28%” 
of the fees specified under the agreement with Weeks; and reimbursement of the 
costs Chambers had advanced to date.  Kay sent a copy of the letter to Weeks, but 
never sought or obtained her written or oral consent to the proposed fee division 
with Chambers. 
Chambers sent a letter to Kay accepting his compensation offer.  On 
September 30, 1993, Kay filed a “Notice of Association and Disassociation of 
Counsel” in Weeks, stating that Alan B. Exelrod had been “associated as counsel 
of record” in place of Chambers. 
On November 1, 1993, Kay wrote to Chambers complaining of his 
“malfeasance” and violation of fiduciary duties to Weeks.  Kay reiterated that 
Chambers would receive the “payment as originally agreed upon of one-sixth of 
the attorney’s fees of forty-percent (40%)” recovered in Weeks upon submission of 
his time records.  Unlike the September 29 letter, this letter did not show a copy to 
the client. 
The Weeks case eventually was tried to a jury, resulting in a large award of 
compensatory and punitive damages for Weeks and a significant award of attorney 
fees.  Counsel for Kay then wrote to Chambers informing him that his “failure to 
perform legal services” in the Weeks case, the “wholly improper accounting” 
provided in his attorney fees billing statement, and unforeseen “changed 
 
4
circumstances” all served “as a basis for abrogation of any agreement” between 
them as to a fee division.  This letter contained an offer to compensate Chambers 
for his services in Weeks in the amount of $200 per hour for the total number of 
hours specified in his prior billing statement.  Chambers declined Kay’s offer and 
proposed mediation of their fee dispute. 
The judgment in favor of Weeks, including the attorney fee award, was 
affirmed on appeal in 1998.  After that judgment was satisfied and Kay obtained 
his attorney fees, Chambers initiated this action alleging one cause of action for 
breach of contract and one common count.  The trial court granted summary 
judgment in favor of Kay on grounds that:  (1) the parties’ alleged agreement for a 
division of fees violated rule 2-200 and therefore was unenforceable; and (2) the 
governing statutes of limitations (Code Civ. Proc., §§ 337, 339) barred the 
common count seeking quantum meruit recovery.  The Court of Appeal reversed 
the judgment in favor of Kay on the quantum meruit claim, but otherwise affirmed 
the judgment.  We granted Chambers’s petition for review. 
DISCUSSION 
As relevant here, rule 2-200 provides:  “(A)  A member shall not divide a 
fee for legal services with a lawyer who is not a partner of, associate of, or 
shareholder with the member unless:  [¶] (1)  The client has consented in writing 
thereto after a full disclosure has been made in writing that a division of fees will 
be made and the terms of such division; and [¶] (2)  The total fee charged by all 
lawyers is not increased solely by reason of the provision for division of fees and 
is not unconscionable as that term is defined in rule 4-200.” 
Both the trial court and the Court of Appeal below determined that 
Chambers cannot prevail on his breach of contract cause of action because it is 
premised on a fee-splitting agreement that failed to comply with rule 2-200.  
Chambers challenges those determinations on the grounds that:  (1) rule 2-200 
 
5
governs fee divisions between attorneys only where “pure referral fees” are at 
issue and therefore does not apply here; (2) even if rule 2-200 is not limited in 
application to pure referral fees, the arrangement here falls within the rule’s 
express exemption for fees divided between a member of the State Bar and “a 
partner of, associate of, or shareholder with” the member; and (3) in any event, 
noncompliance with rule 2-200 does not render the fee-splitting agreement invalid 
and unenforceable.  Additionally, Chambers contends that the Court of Appeal 
erred in concluding that a quantum meruit award could not be predicated on the 
apportionment of the contingent fee paid to Kay.  We shall address these issues in 
order. 
A.  Applicability of Rule 2-200 
The interpretation of rule 2-200 presents a question of law that is subject to 
our independent review.  (Margolin v. Shemaria (2000) 85 Cal.App.4th 891, 895 
(Margolin).) 
As noted, rule 2-200 states that a member of the State Bar “shall not divide 
a fee for legal services with a lawyer who is not a partner of, associate of, or 
shareholder with the member” unless the requirements specified in the rule have 
been met.  (Rule 2-200(A), italics added.)  Significantly, the rule does not limit its 
application to “pure referral fees” (hereafter referral fees), in which one lawyer 
receives “ ‘a percentage of a contingent fee for doing nothing more than obtaining 
the signature of a client upon a retainer agreement while the lawyer to whom the 
case is referred performs the work.’ ”  (Moran v. Harris (1982) 131 Cal.App.3d 
913, 921.)  Nor does it purport to categorically exempt fee divisions among 
attorneys who work jointly on behalf of a client.  Rather, rule 2-200’s language, 
reasonably read, appears to encompass any division of fees where the attorneys 
 
6
working for the client are not partners or associates of each other, or are not 
shareholders in the same law firm. 
The history of rule 2-200 supports this construction.  Rule 2-200 was 
preceded by former rule 2-108, which in turn was preceded by former rule 22.  
Before 1972, the Rules of Professional Conduct did not specifically prohibit fee 
sharing among lawyers.  (Breckler v. Thaler (1978) 87 Cal.App.3d 189, 195, fn. 
4.)  That changed in November of 1972, when former rule 22 was adopted.  
Notably, former rule 22 forbade attorneys to divide fees unless the division was 
“in proportion to the services performed or responsibility assumed by each” (id., 
subd. (a)(2)), the terms of the division were disclosed to the client, and the client 
consented to them (id., subd. (a)(1)), and the total fee did not clearly exceed 
reasonable compensation for all legal services rendered (id., subd. (a)(3)).1  Thus, 
under former rule 22, dividing a fee on the basis of a referral was absolutely 
banned, while dividing a fee between attorneys working jointly for the client was 
permitted if certain conditions were satisfied.  Former rule 22 was renumbered as 
rule 2-108 and was then revised in 1979 to eliminate the ban on referral fees.  At 
the same time, the rule retained the client consent requirement and total fee 
restrictions for fee divisions.  It further specified that disclosure to the client and 
                                             
 
1  
Former rule 22 provided in relevant part:  “ ‘(a)  A member of the State Bar 
shall not divide a fee for legal services with another attorney who is not a partner 
in or associate of his law firm or law office, unless:  [¶] (1) the client consents to 
employment of another attorney after a disclosure that a division of fees will be 
made; and [¶] (2) the division is made in proportion to the services performed or 
responsibility assumed by each; and [¶] (3) the total fee of the attorneys does not 
clearly exceed reasonable compensation for all legal services they render to the 
client.’ ”  (Altschul v. Sayble (1978) 83 Cal.App.3d 153, 161, fn. 5, quoting former 
rule 22.) 
 
7
the client’s consent must both be in writing.2  The 1979 amended version of 
former rule 2-108 is very similar to current rule 2-200 on these points.  In sum, 
this history indicates that the rule governing fee divisions among attorneys, from 
its inception as former rule 22 in 1972 to its current embodiment in rule 2-200, 
was never limited in application to fee divisions involving only referral fees. 
Our construction also is consistent with Formal Opinion No. 1994-138 of 
the State Bar Standing Committee on Professional Responsibility and Conduct 
(State Bar Formal Opinion No. 1994-138), which describes criteria relevant to 
ascertaining whether a fee division falls within the scope of rule 2-200.  
Specifically, State Bar Formal Opinion No. 1994-138 considers various scenarios 
in which a principal law office periodically might use an outside lawyer to assist 
the office’s clients in specific matters, for example, to meet temporary staffing 
needs or to provide special expertise not available in the office and needed for 
work on a specific matter.  In analyzing the issue, the opinion assumes that the 
outside lawyer has no formal relationship with the law office or the client other 
than working on particular matters, and that neither the law office nor the outside 
lawyer contemplates a permanent relationship.  Under such circumstances, the 
opinion concludes, rule 2-200’s requirements apply if the compensation 
                                             
 
2  
As revised in 1979, former rule 2-108(A) provided in pertinent part:  “ ‘A 
member of the State Bar shall not divide a fee for legal services with another 
person licensed to practice law who is not a partner or associate in the member’s 
law firm or law office, unless:  [¶] (1) The client consents in writing to 
employment of the other person licensed to practice law after a full disclosure has 
been made in writing that a division of fees will be made and the terms of such 
division; and [¶] (2) The total fee charged by all persons licensed to practice law is 
not increased solely by reason of the provision for division of fees and does not 
exceed reasonable compensation for all services they render to the client.’ ”  
(Moran v. Harris, supra, 131 Cal.App.3d at p. 916, fn. 2, quoting former rule 2-
108.) 
 
8
arrangement between the law office and the outside lawyer involves a direct 
division of the actual fees the client pays to the law office.  For instance, the 
opinion explains, rule 2-200 applies if “the client pays $1,500 for a project and the 
outside lawyer receives 30 percent of that amount.”  (State Bar Formal Opn. No. 
1994-138, pp. 1, 3.)  Here, the undisputed facts parallel the cited example:  (1) 
Chambers and Kay neither had nor contemplated a formal or permanent 
relationship with each other; (2) they merely worked together in a few cases; and 
(3) Chambers seeks a percentage of the contingent fee that Kay and Weeks 
negotiated as compensation for his legal services in the Weeks case. 
In sum, the language, the history, and State Bar Formal Opinion No. 1994-
138 all point to the conclusion that rule 2-200 applies to fee divisions where, as 
here, work for the client is also divided. 
B.  Rule 2-200’s Exemption for Partners and Associates 
Rule 2-200, by its terms, does not restrict the division of fees between a 
State Bar member and a lawyer who is “a partner of, associate of, or shareholder 
with” that member.  We next consider Chambers’s contention that, although he 
and Kay maintained separate law practices when acting as Week’s cocounsel, their 
arrangement to divide fees in Weeks was not subject to restriction because 
Chambers was Kay’s partner or associate. 
Chambers first argues that, once he and Kay put their names jointly on 
pleadings in the Weeks case, made joint court appearances on Weeks’s behalf, and 
acted as “true co-counsel” in the lawsuit, they functioned as partners within the 
meaning of rule 2-200’s exemption.  He additionally asserts that the agreement 
between Kay and him to work jointly, to contribute to the lawsuit’s costs, and to 
defer any compensation for work performed for several years removed their 
agreed fee division from the ambit of rule 2-200.  We disagree.  Although rule 2-
 
9
200 does not define the terms “partner” and “associate,” the rule’s language and 
history indicate these terms are not meant to apply in the circumstances 
established here. 
Rule 1-100(B)(1)(a) defines a “ ‘[l]aw [f]irm’ ” as “two or more lawyers 
whose activities constitute the practice of law, and who share its profits, expenses, 
and liabilities.”  The record in this case indisputably establishes that although 
Chambers and Kay shared certain office space and facilities, with Kay paying 
Chambers for their use, the two maintained independent law practices with 
separate identities, separate addresses of record with the State Bar, and separate 
clients, expenses, and liabilities.  Thus, even though Chambers and Kay worked 
together in Weeks and a few other cases, they were not members of the same law 
firm as defined by the Rules of Professional Conduct. 
Although the rules omit a definition of the term “partner,” Chambers and 
Kay were not in a partnership and were not each other’s partner as those terms are 
commonly understood.  The Corporations Code defines a partnership as “an 
association of two or more persons to carry on as coowners a business for profit 
under Section 16202, predecessor law, or comparable law of another jurisdiction.”  
(Corp. Code, § 16101, subd. (7).)3  Generally, a partnership connotes co-
ownership in partnership property, with a sharing in the profits and losses of a 
continuing business.  (Nelson v. Abraham (1947) 29 Cal.2d 745, 749.)4  Here, no 
                                             
 
3  
Corporations Code section 16202, in turn, provides that in determining 
whether a partnership is formed, the following rule, among others, applies:  “A 
person who receives a share of the profits of a business is presumed to be a partner 
in the business, unless the profits were received for any of the following reasons:  
. . . .  [¶] . . .  In payment for services as an independent contractor or of wages or 
other compensation to an employee.”  (Corp. Code, § 16202, subd. (c)(3)(B).) 
4  
Nothing in the Corporations Code excepts lawyers from its terms; nor have 
the parties here directed us to any legislative history or other authority indicating 
 
(footnote continued on next page) 
 
10
evidence suggests that Chambers and Kay acted as co-owners of a law firm or law 
office, or that they contemplated sharing in the profits and losses of a continuing 
business engaged in the practice of law. 
In Bank of California v. Connolly (1973) 36 Cal.App.3d 350, the Court of 
Appeal explained that “[a] joint venture exists where there is an ‘agreement 
between the parties under which they have a community of interest, that is, a joint 
interest, in a common business undertaking, an understanding as to the sharing of 
profits and losses, and a right of joint control.’ ”  (Id. at p. 364.)  In comparing 
joint ventures with partnerships, the court commented that “the incidents of both 
relationships are the same in all essential respects.”  (Ibid., italics added.)  Here, 
Chambers asserts that the Weeks case essentially represented a joint venture in 
which he and Kay agreed to work together, share in the costs, and defer any 
compensation for work performed for several years in the hopes of splitting profits 
when the case was concluded.  In Chambers’s view, rule 2-200’s partner 
exemption properly applies because, as joint venturers, he and Kay functioned as 
partners for that single transaction.  We disagree. 
Whereas a partnership ordinarily involves a continuing business for an 
indefinite or fixed period of time, it is commonly understood that a joint venture is 
usually formed for a single business transaction or enterprise.  (See Weiner v. 
Fleischman (1991) 54 Cal.3d 476, 482; Bunn v. Lucas, Pino & Lucas (1959) 172 
Cal.App.2d 450, 461 (Bunn).)  But while rule 2-200 expressly exempts fee 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
that these general principles pertaining to partnerships were intended to apply to 
all partners except those who happen to be lawyers. 
 
11
divisions between attorneys who are partners, it makes no mention of an 
exemption for fee divisions between attorneys who are joint venturers. 
Moreover, even though the law generally pertaining to partnerships may 
sometimes apply to joint ventures (Weiner v. Fleischman, supra, 54 Cal.3d at p. 
482), our sole concern here is the proper interpretation of rule 2-200.  We 
conclude that, even assuming Chambers correctly characterizes his relationship 
with Kay as a joint venture (but see Bunn, supra, 172 Cal.App.2d at p. 463 
[plaintiff attorneys’ acquiescence in defendant attorneys’ power to terminate their 
services in a client matter appeared inconsistent with the plaintiffs’ claim that their 
relationship with the defendants was in the nature of a joint venture]), it would be 
unreasonable to construe the exemption for partners as implying an additional 
exemption for joint venturers. 
As discussed, the language and history of rule 2-200 make evident that its 
requirements have always applied to fee divisions where work on the client’s 
behalf is divided among attorneys from separate law firms or law offices.  But 
were we to imply a joint venturer exemption, we essentially would stretch the 
rule’s exemptions “so as to cover situations which were not contemplated by the 
rule” (Jorgensen v. Taco Bell Corp. (1996) 50 Cal.App.4th 1398, 1401), with the 
effect that the rule’s exemptions would appear to swallow the rule itself.  Indeed, 
not only would the implied exemption severely limit rule 2-200’s application to 
fee divisions involving attorneys working jointly, but it would seem to eliminate 
the rule’s application to all fee divisions, including those involving referral fees. 
We next consider whether Chambers was Kay’s “associate” within the 
meaning of rule 2-200.  Although rule 2-200 does not define what it means by the 
term, the Rules of Professional Conduct elsewhere provide that an associate is “an 
employee or fellow employee who is employed as a lawyer.”  (Rule 1-100(B)(4).) 
 
12
Here, the record is undisputed that Chambers was never Kay’s salaried 
employee and that Chambers did not expect Kay to pay him a salary or other 
wages as compensation for his work in Weeks.  On the contrary, all of the 
evidence shows that the parties agreed Chambers would be compensated based 
solely on a percentage of any contingent fee that Weeks paid to Kay.  The 
evidence also establishes that Chambers advanced costs in the Weeks case, 
reflecting additional conduct inconsistent with his claim to have been Kay’s 
employee.  Viewed together, these uncontroverted facts establish a “division of 
fees” governed by rule 2-200, not an agreement to employ Chambers as an 
associate.  (State Bar Formal Opn. No. 1994-138, p. 2.) 
While Kay may have controlled Chambers’s involvement in the Weeks case 
and supervised his work, it remains undisputed that Chambers’s compensation was 
linked to the client’s ultimate payment of a contingent fee.  That being the case, 
Kay’s authority over Chambers’s involvement in the case did not transmute the 
parties’ compensation arrangement from one based on a division of fees to one 
reflecting an employer-employee relationship.  (Accord, ABA Formal Opn. No. 
88-356 [if “the arrangement between the firm and the temporary lawyer involves a 
direct division of the actual fee paid by the client, such as percentage division of a 
contingent fee, then Rule 1.5(e)(1) [of the American Bar Association Model Rules 
of Professional Conduct] requires the consent of the client and satisfaction of the 
other requirements of the Rule” regardless of the degree to which the firm 
supervised the temporary lawyer].)5 
                                             
 
5  
American Bar Association Model Rule 1.5(e) assumes that referral fees are 
not at issue. 
 
The California Rules of Professional Conduct provide that ethics opinions 
and rules and standards promulgated by other jurisdictions and bar associations, 
 
(footnote continued on next page) 
 
13
We recognize that Sims v. Charness (2001) 86 Cal.App.4th 884 (Sims) 
came to a contrary conclusion.  In that case, one attorney agreed to share 
contingency fees in several client matters with a second attorney, who agreed to 
try the matters.  Sims found that the requirements of rule 2-200 did not apply 
because the attorneys’ fee-sharing agreement did not involve an arrangement for 
fees on a pure referral basis and because the first attorney continued to work on 
the client matters while retaining control over the second attorney’s involvement, 
just as he would have in the case of an associate or an employee in his office.  
(Sims, supra, 86 Cal.App.4th at p. 892.) 
We are not persuaded by the Sims decision, for it reaches a result that is 
inconsistent with the very authority on which it purports to rely, i.e., State Bar 
Formal Opinion No. 1994-138.  Sims correctly observes the formal opinion 
explains that the history “ ‘behind rule 2-200 and its predecessor, rule 2-108, 
indicate[s] that the rule was intended to address concerns related to forwarding or 
referral fees, typically found in contingency fee situations. . . .  Rule 2-200 and its 
predecessors were designed to provide consumer protection by regulating the 
practice of “brokering” cases through disclosure to the client and a prohibition on 
increasing a client’s fee to compensate the referring lawyer who does not work on 
the matter.  [Citations.] [¶] . . .  There is nothing in the history of rule 2-200 that 
indicates it was targeted at compensation arrangements involving outside lawyers 
functioning on a particular matter essentially on the same basis as an employee of 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
while not binding, may be considered in determining when conduct is prohibited 
under the rules.  (Rule 1-100(A), 3d par.) 
 
14
the law office.’ ”  (Sims, supra, 86 Cal.App.4th at p. 890, quoting State Bar Formal 
Opn. No. 1994-138, italics added by Sims.) 
But unlike Sims, we do not read the foregoing passage as authority for the 
proposition that rule 2-200 applies only to pure referral fees.  State Bar Formal 
Opinion No. 1994-138 correctly finds that a primary aim of the rule and its 
predecessor is to address concerns related to referral fees, but nowhere does it 
imply that restriction of referral fees is the rule’s sole aim or that arrangements 
involving the division of both work and fees fall outside the rule’s scope.  On the 
contrary, the opinion specifically addresses the rule’s application to such 
arrangements. 
In acknowledging that rule 2-200 does not target compensation of outside 
lawyers who function “essentially on the same basis” as an employee or associate 
of the law office, State Bar Formal Opinion No. 1994-138 determines no division 
of fees occurs under rule 2-200 where the following three criteria are met:  “(1) the 
amount paid to the outside lawyer is compensation for the work performed and is 
paid whether or not the law office is paid by the client; (2) the amount paid by the 
attorney to the outside lawyer is neither negotiated nor based on fees which have 
been paid to the attorney by the client; and (3) the outside lawyer has no 
expectation of receiving a percentage fee.”  (State Bar Formal Opn. No. 1994-138, 
p. 2.)6  But in finding rule 2-200 inapplicable to the fee agreement before it, Sims 
                                             
 
6  
The formal opinion lists the following three examples of compensation 
arrangements that would not constitute a division of fees under rule 2-200:  (1) the 
outside lawyer is paid an hourly rate that is less than the hourly rate for the outside 
lawyer’s services billed to the client (e.g., the outside lawyer is paid $50 an hour 
but is billed at $70 per hour to the client); (2) the outside lawyer is paid a flat rate 
per day or week (e.g., the outside lawyer is paid $150 per day); and (3) the outside 
lawyer is paid the amount billed to the client for her time as the fees are paid by 
the client (e.g., the outside lawyer’s rate is $100 per hour for a project, and every 
 
(footnote continued on next page) 
 
15
overlooked the fact that the agreement demonstrated none of these three criteria.  
To the extent Sims relies on the formal opinion to reach its contrary views, then, 
such reliance was misplaced.7 
As in Sims, the arrangement between Chambers and Kay meets none of the 
criteria set forth in State Bar Formal Opinion No. 1994-138 for determining 
whether a lawyer functions essentially as an employee:  (1) Chambers and Kay did 
not agree that Chambers would be compensated for work performed whether or 
not the client paid Kay; (2) Chambers’s compensation was both negotiated and 
based on fees that the client would pay to Kay; and (3) under the agreed 
arrangement, Chambers expected to receive a percentage fee.  The combination of 
these undisputed facts leads us to conclude that Chambers did not render his 
professional services in the Weeks case essentially as an employee of Kay and that 
he therefore falls outside of rule 2-200’s exemption for associates. 
Chambers next relies on Bunn, supra, 172 Cal.App.2d 450, to urge that if 
attorneys associating on a case do not stand in the relationship of joint venturers, 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
dollar paid to the law office for work performed on that project is immediately 
paid to the outside lawyer).  (State Bar Formal Opn. No. 1994-138, pp. 1, 3.)  
According to the formal opinion, the first two examples do not involve a division 
of fees because the amount paid to the outside lawyer is not tied to specific legal 
fees the law office receives, and the office must pay the outside lawyer whether or 
not the client pays the office.  In such situations, the payments to the outside 
lawyer are “similar to compensation paid to non-lawyer employees such as law 
students and paralegals.”  (Id. at p. 3.)  The opinion concludes that the third 
example is not a fee division because the outside lawyer receives all the fee that is 
charged, and the law office receives no portion of the fee.  (Ibid.) 
7  
We disapprove Sims, supra, 86 Cal.App.4th 884, insofar as it is inconsistent 
with the views expressed herein. 
 
16
then one is the employee of the other for purposes of rule 2-200’s associate 
exemption.  In Bunn, the plaintiff lawyers contended that they had a joint venture 
relationship with the defendant attorneys, and that, as joint venturers, they were 
entitled to share equally in whatever fee the defendant lawyers received under 
their agreement with the client.  Bunn rejected this contention and determined that 
the plaintiffs and the defendants stood in an employer-employee relationship 
because, among other things:  (1) the defendants had hired the plaintiffs to provide 
legal assistance in a probate litigation, and the plaintiffs accepted employment for 
the sum of $15,000, contingent on the litigation’s success; (2) the defendants 
remained the client’s only attorneys of record; (3) when a new matter not 
contemplated by the original employment contract arose, the parties spoke in 
terms of “readjusting” the existing fee amount rather than sharing or dividing any 
fee to be received from the client; and (4) the defendants retained authority to fire 
and did fire the plaintiffs after a dispute arose over the fees due.  (Bunn, supra, 
172 Cal.App.2d at pp. 461-464.) 
Bunn fails to aid Chambers’s position.  The finding of an employer-
employee relationship in Bunn was due in part to the circumstance that the 
plaintiff lawyers never expected to share or divide the fee that the defendant 
attorneys were to receive from the client.  (See Bunn, supra, 172 Cal.App.2d at pp. 
461, 463.)  Here, however, the evidence uniformly discloses that Chambers agreed 
to compensation based solely on a percentage of any contingent fee the client paid 
to Kay — this key factual difference undermines the attempted analogy to the 
employer-employee relationship found in Bunn.  In any event, Bunn long preceded 
the adoption of rule 2-200 and its predecessors; consequently, its analysis did not 
 
17
address the rule-related issues posed here.8  Finally, because neither the language 
nor the history of the rule supports an exemption for fee divisions among joint 
venturers, Bunn’s discussion of joint ventures does not help Chambers. 
C.  The Effect of Noncompliance with Rule 2-200 
The record shows that on September 29, 1993, Kay wrote a letter notifying 
Chambers that he was being removed from the Weeks case with the client’s 
approval.  That letter, which noted a “cc” to the client, also confirmed that 
Chambers would “receive the compensation agreed upon,” namely, in the event 
the Weeks case settled before depositions, “16.5% of the attorney’s fees called for 
under my agreement with [the client], which is 40% of the monies recovered”; 
thereafter, an “increase to 28%” of the fees specified under the agreement with the 
client; and reimbursement of Chambers’s costs. 
Even assuming, for purposes of argument, that Kay’s letter to Chambers 
raises a triable issue of material fact regarding satisfaction of rule 2-200’s 
requirement that clients be given full written disclosure of fee divisions, the letter 
furnishes no basis whatsoever for inferring compliance with the rule’s written 
consent requirement.  Notably, nothing in the record contradicts Kay’s evidence 
that no one ever sought or obtained Weeks’s oral or written consent to the fee 
sharing, or suggests that Weeks was even aware of her right of consent.  Hence, 
we now address Chambers’s contention that he is entitled to a division of fees 
obtained in the Weeks case despite noncompliance with the rule’s written consent 
requirement. 
                                             
 
8  
Bunn, supra, 172 Cal.App.3d 450, is hereby disapproved to the extent it is 
inconsistent with the views expressed herein. 
 
18
Rule 2-200 unambiguously directs that a member of the State Bar “shall not 
divide a fee for legal services” unless the rule’s written disclosure and consent 
requirements and its restrictions on the total fee are met.  Yet Chambers, in effect, 
seeks the aid of this court in dividing the fees of a client without satisfaction of the 
rule’s written consent requirement.  We decline such aid. 
As rule 1-100(A) explains, the Rules of Professional Responsibility “are 
intended to regulate professional conduct of members of the State Bar through 
discipline.  They have been adopted by the Board of Governors of the State Bar of 
California and approved by the Supreme Court of California pursuant to Business 
and Professions Code sections 6076 and 6077 to protect the public and to promote 
respect and confidence in the legal profession.  These rules together with any 
standards adopted by the Board of Governors pursuant to these rules shall be 
binding upon all members of the State Bar.”  (See also Bus. & Prof. Code, § 6077; 
General Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1181 [attorneys 
“are bound at all events not to transgress a handful of professional ethical norms 
that distinguish their work from that of the nonattorney”].) 
Margolin, supra, 85 Cal.App.4th 891, a case involving a pure referral fee, 
explained the purpose of rule 2-200’s notice and consent requirements as follows:  
“Just as a client has a right to know how his or her attorney’s fees will be 
determined, he or she also has a right to know the extent of, and the basis for, the 
sharing of such fees by attorneys.  Knowledge of these matters helps assure the 
client that he or she will not be charged unwarranted fees just so that the attorney 
who actually provides the client with representation on the legal matter has 
‘sufficient compensation’ to be able to share fees with the referring attorney.  
Disclosure of these matters to the client should be in writing because the client 
should not be expected to mentally retain such information throughout the 
pendency of the case.”  (Margolin, supra, 85 Cal.App.4th at p. 903.)  Moreover, 
 
19
“[r]equiring the client’s written consent to fee sharing impresses upon the client 
the importance of his or her consent, and of the right to reject the fee sharing.”  
(Ibid.)9 
We agree with this statement of rule 2-200’s purpose.  We further conclude 
that the rule’s written disclosure and consent requirements remain equally 
important where, as here, the division of fees accompanies or is prompted by a 
division of the legal services provided to the client.  As part of their professional 
obligations, attorneys are required to “keep a client reasonably informed about 
significant developments relating to the employment or representation, including 
promptly complying with reasonable requests for information and copies of 
significant documents when necessary to keep the client so informed.”  (Rule 3-
500; see also Bus & Prof. Code, § 6068, subd. (m) [attorneys have a duty “to keep 
clients reasonably informed of significant developments in matters with regard to 
which the attorney has agreed to provide legal services”].)  A division of fees may 
reflect each participating attorney’s responsibilities in a case or fees may be 
charged for multiple attorney participation in the case without regard to the 
particular services each attorney performs.  Such information may affect the 
                                             
 
9  
Margolin further observed that “[t]he written disclosure has the additional 
benefit of ensuring that the attorneys themselves truly agree to the exact terms of 
the fee-sharing agreement, thus making it less likely that they will have a 
disagreement between themselves that will lead to litigation or potentially impact 
the client in a negative manner.  Moreover, providing a written disclosure of the 
fee-sharing agreement makes it less likely that the attorneys will wittingly or 
unwittingly change the terms of such agreement during the pendency of the case.”  
(Margolin, supra, 85 Cal.App.4th at p. 903.)  The decision also noted that 
requiring the client’s written consent additionally “benefits the attorneys 
themselves because it ensures that the client will not later claim there was no 
consent, and it benefits the referring attorney who has additional proof of the 
existence of the sharing agreement.”  (Ibid.) 
 
20
client’s level of confidence in the attorneys and is indispensable to the client’s 
ability to make an informed decision regarding whether to accept the fee division 
and whether to retain or discharge a particular attorney.  As in the case of referral 
fees, requiring the client’s written consent to fee divisions among participating 
attorneys impresses on the client the importance of consent and the right to reject a 
fee division.  All in all, Chambers fails to persuade us that the protection afforded 
by the rule’s written consent requirement is any less necessary or beneficial where, 
as here, attorneys from separate law firms seek to divide both the work and the 
fees in a particular matter. 
Were we to hold that the fee obtained in Weeks may be divided as 
Chambers and Kay agreed, with no indication that the required client consent was 
either sought or given, we would, in effect, be both countenancing and 
contributing to a violation of a rule we formally approved in order “to protect the 
public and to promote respect and confidence in the legal profession.”  (Rule 1-
100(A), 1st par.; Bus. & Prof. Code, § 6076.)  Such a result would be untenable as 
well as inconsistent with the policy considerations that motivated the adoption of 
rule 2-200. 
Our decision to affirm the importance of written consent is consistent with 
Scolinos v. Kolts (1995) 37 Cal.App.4th 635 (Scolinos) and Margolin, supra, 85 
Cal.App.4th 891, which denied recovery for breaches of referral fee agreements 
where there was no compliance with the disclosure and consent requirements of 
rule 2-200 and its predecessor, former rule 2-108. 
In Scolinos, supra, 37 Cal.App.4th 635, the plaintiff attorney sued the 
defendant attorneys for breach of their oral agreement to pay a referral fee of 33 
1/3 percent of any attorney fees the defendants received from the referred client.  
Affirming a summary judgment granted in the defendants’ favor, Scolinos found 
the record uncontroverted that the referral agreement was not disclosed and lacked 
 
21
the client’s written consent, as former rule 2-108 required.  (Scolinos, supra, 37 
Cal.App.4th at pp. 637, 640.)  In holding the agreement unenforceable on public 
policy grounds, Scolinos reasoned that “[i]t would be absurd if an attorney were 
allowed to enforce an unethical fee agreement through court action, even though 
the attorney potentially is subject to professional discipline for entering into the 
agreement.”  (Id. at p. 640.) 
In Margolin, supra, 85 Cal.App.4th 891, the plaintiff attorneys brought a 
breach of contract action against the defendant attorney, alleging that he had 
breached an oral agreement to provide them with 50 percent of the attorney fees 
received from a referred client.  In upholding a directed verdict entered in the 
defendant’s favor, Margolin reaffirmed the rule that noncompliance with the 
written disclosure and written consent requirements of rule 2-200 rendered a fee-
sharing agreement unenforceable, even though the defendant there had promised 
the plaintiffs to facilitate fulfillment of the rule’s requirements and even had 
obtained the client’s oral consent to the subject agreement.  (Margolin, supra, 85 
Cal.App.4th at p. 903.)  In rejecting application of equitable estoppel principles 
against the defendant, Margolin emphasized that the plaintiffs, as attorneys, were 
presumed to have known that rule 2-200 requires actual written disclosure and 
written consent.  Because the plaintiffs assumed the risk that the defendant would 
not keep his promise to comply with rule 2-200, and because the plaintiffs could 
have protected themselves by providing the client with the required written fee-
sharing disclosure and obtaining her consent, the plaintiffs could establish neither 
unconscionable injury to themselves nor unjust enrichment of the defendant so as 
to support application of equitable estoppel.  (Margolin, supra, 85 Cal.App.4th at 
pp. 901-902.) 
Chambers attempts to distinguish Scolinos and Margolin on the basis that 
those decisions involved pure referral fee agreements, while in this case the fee 
 
22
division would be among attorneys who each rendered substantial legal services to 
the client.  Chambers also emphasizes that here, Kay acknowledged the fee-
sharing agreement in a letter sent to Chambers and copied to the client.  Neither of 
these circumstances justifies a different result. 
Chambers’s performance of legal services in the Weeks case and Kay’s 
acknowledgement of the fee-sharing agreement are irrelevant in light of rule 2-
200’s language expressly barring attorneys from dividing any fees (except 
between partners, associates, or shareholders) without the client’s written consent.  
(Rule 2-200(A)(1).)  Although Chambers argues that rational reasons exist for 
allowing a division of fees despite the lack of written client consent, e.g., it would 
effectuate the intent of the contracting attorneys and would avoid incentives for 
fraud in the inducement of such contracts, we remain mindful that we adopted the 
rule to protect the public and to promote respect and confidence in the legal 
profession.  (See rule 1-100(A), 1st par.)  Because attorneys who negotiate fee 
divisions without fulfilling their obligations under rule 2-200 undermine the 
public’s respect and confidence in the legal profession by failing to put the best 
interests of their clients first, and because attorneys are fully capable of 
safeguarding their own interests simply by obtaining the requisite client consent, 
we are not persuaded that Chambers’s proffered reasons are sufficient to disregard 
rule 2-200’s command. 
Chambers next argues that Moran v. Harris, supra, 131 Cal.App.3d 913, 
Potter v. Peirce (Del. 1997) 688 A.2d 894, and Arya Group, Inc. v. Cher (2000) 
77 Cal.App.4th 610 (Arya Group) support his contention that the sharing of fees is 
appropriate under the present circumstances.  We disagree. 
Moran v. Harris, supra, 131 Cal.App.3d 913, held that public policy did 
not prohibit enforcement of a fee-sharing agreement that was entered in January of 
1972 and subsequently assigned in 1973.  The issue there was whether that 
 
23
agreement, which involved a referral fee, violated public policy in light of the 
circumstances that the Rules of Professional Conduct had banned referral fees in 
November of 1972 (former rule 22) but eliminated the ban in 1979 (former rule 2-
108).  We find Moran v. Harris unhelpful because in that case the issues of client 
notification and consent were neither litigated nor addressed. 
Potter v. Peirce, supra, 688 A.2d 894, which involved a fee-splitting 
agreement between attorneys from different states, likewise is off the mark.  There 
the Delaware Supreme Court concluded that “a Delaware lawyer may not assert 
his noncompliance with Delaware Lawyers’ Rule of Conduct 1.5(e)[10] as a 
defense to an agreement with an out-of-state lawyer, not charged with compliance 
with that rule or a similar rule in his own jurisdiction.”  (Potter v. Peirce, supra, 
688 A.2d at p. 897.)  In contrast to the situation in Potter v. Peirce, both Kay and 
Chambers are California attorneys bound by rule 2-200’s restrictions on the 
division of fees. 
Arya Group, supra, 77 Cal.App.4th 610, involved the interpretation of 
Business and Professions Code section 7164, which requires all contracts for 
construction of a single-family dwelling to be in writing and signed by both 
parties.  In that case, the appellate court permitted a suit on an oral construction 
contract to proceed after finding that the Legislature had not intended to void all 
contracts violating the statutory requirement.  The court observed that, while the 
                                             
 
10  
Delaware Lawyers’ Rules of Professional Conduct 1.5(e) provides:  “A 
division of fee between lawyers who are not in the same firm may be made only if:  
[¶] (1) the division is in proportion to the services performed by each lawyer or, by 
written agreement with the client, each lawyer assumes joint responsibility for 
representation; [¶] (2) the client is advised of and does not object to the 
participation of all the lawyers involved; and [¶] (3) the total fee is reasonable.”  
(Quoted in Potter v. Peirce, supra, 688 A.2d at p. 896.) 
 
24
statute requires construction contracts to be “ ‘evidenced in writing signed by both 
parties,’ ” it does not limit a party’s ability to sue.  (Arya Group, supra, 77 
Cal.App.4th at p. 616.)  In reaching its conclusion, the court contrasted that statute 
with Business and Professions Code section 7031, subdivision (a), which specifies 
that, except as otherwise provided, no unlicensed contractor “may bring or 
maintain any action, or recover in law or equity in any action, in any court of this 
state for the collection of compensation for the performance of any act or contract” 
where a license is required.  (Arya Group, supra, 77 Cal.App.4th at p. 616.)  The 
court deemed significant the absence of any similarly prohibitive language in 
Business and Professions Code section 7164, for, as exemplified by Business and 
Professions Code section 7031, subdivision (a), “[t]he Legislature has shown it is 
perfectly capable of drafting a statute which limits a party’s ability to sue, where 
that is its intent.”  (Arya Group, supra, 77 Cal.App.4th at p. 616.) 
Unlike the statute construed in Arya Group, rule 2-200, which is binding on 
all State Bar members, contains language explicitly stating that, unless one of 
three exemptions applies, a member of the State Bar “shall not divide a fee” unless 
the client consents to the division in writing.  If anything, Arya Group’s statutory 
analysis supports, rather than undermines, our conclusion that attorneys such as 
Chambers are precluded from maintaining an action for a division of fees where 
the client’s written consent was neither sought nor obtained. 
Finally, Chambers argues that rule 2-200 should not be deemed to create a 
new affirmative defense to his otherwise meritorious civil cause of action for 
breach of contract.  To support this contention, Chambers points to the fourth 
paragraph of rule 1-100(A), which specifies that the Rules of Professional Conduct 
“are not intended to create new civil causes of action.  Nothing in these rules shall 
be deemed to create, augment, diminish, or eliminate any substantive legal duty of 
lawyers or the non-disciplinary consequences of violating such a duty.” 
 
25
The fourth paragraph of rule 1-100 does not support Chambers’s position.  
First of all, the paragraph does not apply here because no one is attempting to 
assert a civil cause of action against Chambers for failure to obtain the requisite 
written client consent.  Nor does anyone contend that the consent requirement 
creates a substantive legal duty, a breach of which might give rise to recovery.  
Most important, because this court approved rule 2-200 under legislative 
authorization (see Bus. & Prof. Code, § 6076), and because the rule binds all 
members of the State Bar (Rule 1-100(A), 1st par.), it would be absurd for this or 
any other court to aid Chambers in accomplishing a fee division that would violate 
the rule’s explicit requirement of written client consent and would subject 
Chambers to professional discipline.  (See Scolinos, supra, 37 Cal.App.4th at p. 
640.) 
D.  Quantum Meruit Recovery 
After holding that rule 2-200 precluded recovery for breach of the fee-
sharing agreement, the Court of Appeal determined that Chambers nonetheless 
was entitled to recover in quantum meruit for the reasonable value of the legal 
services he had provided before his discharge from the Weeks case.11  Here, 
Chambers contends that the Court of Appeal erred in concluding that a quantum 
meruit award could not be predicated upon an apportionment of the contingent fee. 
                                             
 
11  
The Court of Appeal also reversed the trial court’s ruling that the two-year 
statute of limitations (Code Civ. Proc., § 339) bars the quantum meruit claim.  To 
the extent Kay argues in his brief that the Court of Appeal decided that issue 
incorrectly, or contends that Chambers has no right to recover the reasonable costs 
of services rendered, even under a quantum meruit theory, because of the absence 
of written client consent to the agreed fee division, he has forfeited the issues by 
failing to petition for their review. 
 
26
In particular, Chambers complains of the following passage in the Court of 
Appeal’s opinion:  “We agree with [plaintiff] that his quantum meruit cause of 
action is cognizable, but the award cannot be based upon a division of the 
contingency fee.  An attorney engaged pursuant to a contingent fee agreement and 
discharged prior to occurrence of the contingency may recover in quantum meruit 
recovery for the reasonable value of services rendered up to the time of discharge, 
rather than the full amount of the agreed contingent fee.”  In Chambers’s view, 
this analysis is partially correct, but only if all of the contingent fee services 
expected of that attorney have not been rendered at the time of the discharge.  
According to Chambers, a trial court remains free to award the entire fee provided 
for in a fee-sharing agreement as a proper quantum meruit determination where, as 
here, the amount specified in the agreement is based on the understanding that that 
attorney’s services were completed. 
In essence, Chambers contends that, notwithstanding the absence of the 
required written client consent, he should be allowed to accomplish indirectly a 
division of fees under the guise of a quantum meruit claim.  We reject the 
contention.  None of the authorities Chambers identifies addressed quantum 
meruit recovery in the context of an improper fee division.  (Franklin v. Appel 
(1992) 8 Cal.App.4th 875 [holding that where attorney fee agreement was not 
voidable, trial court’s error in not awarding damages pursuant to the agreement 
was nonprejudicial where the court awarded the entire fee to which the attorney 
was entitled as quantum meruit recovery]; see also Heppler v. J.M. Peters Co. 
(1999) 73 Cal.App.4th 1265; Spires v. American Bus Lines (1984) 158 Cal.App.3d 
211.)  We perceive no legal or policy justification for finding that the fee the 
parties negotiated without the client’s consent furnishes a proper basis for a 
quantum meruit award in this case. 
 
27
CONCLUSION AND DISPOSITION 
We recognize, as did the Court of Appeal below, that this fee dispute is 
between attorneys only and that the client is not a party.  Nonetheless, rule 2-200 
aims to protect clients by requiring, inter alia, the attorney’s written disclosure and 
the client’s written consent to nonexempt fee divisions.  (Margolin, supra, 85 
Cal.App.4th at p. 903.)  Although Chambers complains that Kay should not be 
permitted to take advantage of his own disregard of the Rules of Professional 
Conduct, we are not persuaded that this circumstance justifies or otherwise 
excuses Chambers’s equally disturbing neglect of rule 2-200 and the policy 
considerations that motivated its adoption.  Chambers could have protected his 
interests, and at the same time fulfilled the beneficial purposes of the rule and 
acted in Weeks’s best interests, by requesting proof of her written consent to the 
fee division before committing himself to her case. 
The judgment of the Court of Appeal is affirmed. 
 
 
 
 
 
 
BAXTER, J. 
WE CONCUR: 
 
GEORGE, C.J. 
KENNARD, J. 
WERDEGAR, J. 
CHIN, J. 
BROWN, J. 
MORENO, J. 
 
1
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Chambers v. Kay 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 88 Cal.App.4th 903 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S098007 
Date Filed: November 4, 2002 
__________________________________________________________________________________ 
 
Court: Superior 
County: San Francisco 
Judge: Ronald Evans Quidachay 
 
__________________________________________________________________________________ 
 
Attorneys for Appellant: 
 
Werchick & Werchick, Arne Werchick; Bornstein & Bornstein, Jonathan H. Bornstein; Law Offices of Joel 
D. Adler and Joel Adler for Plaintiff and Appellant. 
 
 
 
 
 
__________________________________________________________________________________ 
 
Attorneys for  Respondent: 
 
Sedgwick, Detert, Moran & Arnold, Steven D. Wasserman, Thomas F. Kopshever, Kirk C. Jenkins; Law 
Offices of Philip Edward Kay, Philip Edward Kay and Lawrence Anthony Organ for Defendant and 
Respondent. 
 
 
 
 
Marie M. Moffat, Lawrence C. Yee and Jay Goldman for State Bar of California as Amicus Curiae. 
 
 
 
 
2
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Arne Werchick 
Werchick & Werchick 
12386 Stockholm Way 
Truckee, CA  96161-6941 
(530) 587-1944 
 
Kirk C. Jenkins 
Sedgwick, Detert, Moran & Arnold 
One Embarcadero Center, 16th Floor 
San Francisco, CA  94111 
(415) 781-7900