Opinion ID: 1801808
Heading Depth: 3
Heading Rank: 3

Heading: Compensation for Legal Services

Text: (7a) Because Birbrower violated section 6125 when it engaged in the unlawful practice of law in California, the Court of Appeal found its fee agreement with ESQ unenforceable in its entirety. Without crediting Birbrower for some services performed in New York, for which fees were generated under the fee agreement, the court reasoned that the agreement was void and unenforceable because it included payment for services rendered to a California client in the state by an unlicensed out-of-state lawyer. The court opined that When New York counsel decided to accept [the] representation, it should have researched California law, including the law governing the practice of law in this state. The Court of Appeal let stand, however, the trial court's decision to allow Birbrower to pursue its fifth cause of action in quantum meruit. [5] We agree with the Court of Appeal to the extent it barred Birbrower from recovering fees generated under the fee agreement for the unauthorized legal services it performed in California. We disagree with the same court to the extent it implicitly barred Birbrower from recovering fees generated under the fee agreement for the limited legal services the firm performed in New York. It is a general rule that an attorney is barred from recovering compensation for services rendered in another state where the attorney was not admitted to the bar. (Annot., Right of Attorney Admitted in One State to Recover Compensation for Services Rendered in Another State Where He Was Not Admitted to the Bar (1967) 11 A.L.R.3d 907; Hardy, supra, 99 Cal. App.2d at p. 576.) The general rule, however, has some recognized exceptions. Initially, Birbrower seeks enforcement of the entire fee agreement, relying first on the federal court exception discussed ante, at page 130. ( Cowen, supra, 230 Cal. App.2d at p. 872; In re McCue, supra, 211 Cal. at p. 66; see Annot., supra, 11 A.L.R.3d at pp. 912-913 [citing Cowen as an exception to general rule of nonrecovery].) This exception does not apply in this case; none of Birbrower's activities related to federal court practice. A second exception on which Birbrower relies to enforce its entire fee agreement relates to Services not involving courtroom appearance. (Annot., supra, 11 A.L.R.3d at p. 911 [citing Wescott v. Baker (1912) 83 N.J.L. 460 [85 A. 315]].) California has implicitly rejected this broad exception through its comprehensive definition of what it means to practice law. Thus, the exception Birbrower seeks for all services performed outside the courtroom in our state is too broad under section 6125. Some jurisdictions have adopted a third exception to the general rule of nonrecovery for in-state services, if an out-of-state attorney makes a full disclosure to his client of his lack of local license and does not conceal or misrepresent the true facts. (Annot., supra, 11 A.L.R.3d at p. 910.) For example, in Freeling v. Tucker (1930) 49 Idaho 475 [289 P. 85], the court allowed an Oklahoma attorney to recover for services rendered in an Idaho probate court. Even though an Idaho statute prohibited the unlicensed practice of law, the court excused the Oklahoma attorney's unlicensed representation because he had not falsely represented himself nor deceptively held himself out to the client as qualified to practice in the jurisdiction. ( Id. at p. 86.) In this case, Birbrower alleges that ESQ at all times knew that the firm was not licensed to practice law in California. Even assuming that is true, however, we reject the full disclosure exception for the same reasons we reject the argument that section 6125 is not meant to apply to nonattorneys. Recognizing these exceptions would contravene not only the plain language of section 6125 but the underlying policy of assuring the competence of those practicing law in California. Therefore, as the Court of Appeal held, none of the exceptions to the general rule prohibiting recovery of fees generated by the unauthorized practice of law apply to Birbrower's activities in California. Because Birbrower practiced substantial law in this state in violation of section 6125, it cannot receive compensation under the fee agreement for any of the services it performed in California. Enforcing the fee agreement in its entirety would include payment for the unauthorized practice of law in California and would allow Birbrower to enforce an illegal contract. ( See Hardy, supra, 99 Cal. App.2d at p. 576.) Birbrower asserts that even if we agree with the Court of Appeal and find that none of the above exceptions allowing fees for unauthorized California services apply to the firm, it should be permitted to recover fees for those limited services it performed exclusively in New York under the agreement. In short, Birbrower seeks to recover under its contract for those services it performed for ESQ in New York that did not involve the practice of law in California, including fee contract negotiations and some corporate case research. Birbrower thus alternatively seeks reversal of the Court of Appeal's judgment to the extent it implicitly precluded the firm from seeking fees generated in New York under the fee agreement. We agree with Birbrower that it may be able to recover fees under the fee agreement for the limited legal services it performed for ESQ in New York to the extent they did not constitute practicing law in California, even though those services were performed for a California client. Because section 6125 applies to the practice of law in California, it does not, in general, regulate law practice in other states. (See ante, at pp. 128-131.) Thus, although the general rule against compensation to out-of-state attorneys precludes Birbrower's recovery under the fee agreement for its actions in California, the severability doctrine may allow it to receive its New York fees generated under the fee agreement, if we conclude the illegal portions of the agreement pertaining to the practice of law in California may be severed from those parts regarding services Birbrower performed in New York. (See Annot., supra, 11 A.L.R.3d at pp. 908-909, and cases cited [bar on recovery by out-of-state attorney extends only to compensation for local services]; see also Ranta, supra, 391 N.W.2d at p. 166 [remanding case to determine which fees related to practice locally and which related to attorney's work in state where he was licensed].) The law of contract severability is stated in Civil Code section 1599, which defines partially void contracts: Where a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest. In Calvert v. Stoner (1948) 33 Cal.2d 97 [199 P.2d 297] ( Calvert ), we considered whether a contingent fee contract containing a provision restricting a party's right to compromise a suit without her attorney's consent was void entirely or severable in part. ( Id. at p. 103.) We observed that It is unnecessary ... to determine whether the particular provision is invalid as against public policy. It is sufficient to observe, assuming such invalidity, that in this state ... the compensation features of the contract are not thereby deemed affected if in other respects the contract is lawful. ( Id. at p. 104.) Calvert concluded that the invalid provision preventing the client from compromising the suit could be severed from the valid provision for attorney fees. ( Ibid. ) The fee agreement between Birbrower and ESQ became illegal when Birbrower performed legal services in violation of section 6125. (8) It is true that courts will not ordinarily aid in enforcing an agreement that is either illegal or against public policy. ( Asdourian v. Araj (1985) 38 Cal.3d 276, 291 [211 Cal. Rptr. 703, 696 P.2d 95]; Homami v. Iranzadi (1989) 211 Cal. App.3d 1104, 1109-1110 [260 Cal. Rptr. 6].) Illegal contracts, however, will be enforced under certain circumstances, such as when only a part of the consideration given for the contract involves illegality. In other words, notwithstanding an illegal consideration, courts may sever the illegal portion of the contract from the rest of the agreement. ( Keene v. Harling (1964) 61 Cal.2d 318, 320 [38 Cal. Rptr. 513, 392 P.2d 273] ( Keene ).) `When the transaction is of such a nature that the good part of the consideration can be separated from that which is bad, the Courts will make the distinction, for the ... law ... [divides] according to common reason; and having made that void that is against law, lets the rest stand....' ( Id. at pp. 320-321, quoting Jackson v. Shawl (1865) 29 Cal. 267, 272.) If the court is unable to distinguish between the lawful and unlawful parts of the agreement, the illegality taints the entire contract, and the entire transaction is illegal and unenforceable. ( Keene, supra, 61 Cal.2d at p. 321.) In Keene, the defendant agreed to pay the plaintiffs $50,000 in exchange for their business involving coin-operated machines. The defendant defaulted on his payments, and the plaintiffs sued. The defendant argued that the sales agreement was void because part of the sale involved machines that were illegal under a California penal statute. The court affirmed the lower court's determination that the price of the illegal machines could be deducted from the amount due on the original contract. Since the consideration on the buyer's side was money, the court properly construed the contract by equating the established market price of the illegal machines to a portion of the money consideration. ( Keene, supra, 61 Cal.2d at p. 323.) Thus, even though the entire contract was for a fixed sum, the court was able to value the illegal portion of the contract and separate it from the rest of the amount due under the agreement. (7b) In this case, the parties entered into a contingency fee agreement followed by a fixed fee agreement. [6] ESQ was to pay money to Birbrower in exchange for Birbrower's legal services. The object of their agreement may not have been entirely illegal, assuming ESQ was to pay Birbrower compensation based in part on work Birbrower performed in New York that did not amount to the practice of law in California. The illegality arises, instead, out of the amount to be paid to Birbrower, which, if paid fully, would include payment for services rendered in California in violation of section 6125. Therefore, we conclude the Court of Appeal erred in determining that the fee agreement between the parties was entirely unenforceable because Birbrower violated section 6125's prohibition against the unauthorized practice of law in California. Birbrower's statutory violation may require exclusion of the portion of the fee attributable to the substantial illegal services, but that violation does not necessarily entirely preclude its recovery under the fee agreement for the limited services it performed outside California. ( Calvert, supra, 33 Cal.2d at pp. 104-105.) Thus, the portion of the fee agreement between Birbrower and ESQ that includes payment for services rendered in New York may be enforceable to the extent that the illegal compensation can be severed from the rest of the agreement. On remand, therefore, the trial court must first resolve the dispute surrounding the parties' fee agreement and determine whether their agreement conforms to California law. If the parties and the court resolve the fee dispute and determine that one fee agreement is operable and does not violate any state drafting rules, the court may sever the illegal portion of the consideration (the value of the California services) from the rest of the fee agreement. Whether the trial court finds the contingent fee agreement or the fixed fee agreement to be valid, it will determine whether some amount is due under the valid agreement. The trial court must then determine, on evidence the parties present, how much of this sum is attributable to services Birbrower rendered in New York. The parties may then pursue their remaining claims.