Court Opinion

ID: 8203884
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:50:01.143418+00
Date Added: 2024-06-11T16:41:04.949222
License: Public Domain

ANN WALSH BRADLEY, J.
¶ 62. (dissenting). Today the majority interprets SCR 20:5.4(a) to allow fee splitting on particular cases with nonlawyer employees. Because I believe that this interpretation is contrary to both the purpose of the rule and to the interpretation of similar or identical fee-splitting rules enacted in other states, I respectfully dissent.
¶ 63. The court is asked to review three counts of alleged misconduct. In regard to the first two counts set forth in the complaint, the majority accepts the recommendation of the referee and concludes that Attorney Weigel should be disciplined. I agree.
¶ 64. However, the majority further concludes that the third count, involving the bonus structure used *152to compensate certain nonlawyer employees, should be dismissed. It determines that the compensation scheme used in this case does not violate the fee-splitting rule, SCR 20:5.4(a). It is here that I part ways with the majority.
¶ 65. Supreme court rule 20:5.4(a), which is based on an ABA model rule, prohibits lawyers or law firms from sharing legal fees with nonlawyers. An exception allows, however, that they "may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement." SCR 20:5.4(a)(3).1
¶ 66. The underlying purpose of the rule is to guard the professional independence of the lawyer. As the majority correctly notes, "ethical issues arise when the nonlawyer's compensation is tied too directly to . . . work performed by the nonlawyer such that the professional independence of the lawyer is compromised." Majority op., ¶ 48. A person entitled to a portion of a lawyer's fees may attempt to influence the lawyer's activities so as to maximize those fees. Restatement (Third) of The Law Governing Lawyers § 10 cmt. b (2000).
¶ 67. A review of ethics opinions from other states with a similar or identical fee-splitting rule indicates that the rule permits certain bonuses to nonlawyer employees. For instance, the State Bar of Georgia determined that lawyers may pay a monthly bonus to nonlawyer employees based on the overall success of the firm. See State Bar of Georgia Formal Advisory Op. 05-4 (2007). Another ethics committee determined that *153a law firm could compensate a nonlawyer based on a percentage of the firm's net profits of a specific law practice area. See Michigan Ethics Op. RI-143 (1992).
¶ 68. However, "compensating nonlawyer employees based on a percentage of the legal fees generated in the particular matters on which the nonlawyer worked has been held impermissible." Restatement (Third) of The Law Governing Lawyers § 10 cmt. e. See, e.g. Utah State Ethics Advisory Op. Comm., Op. 02-07 (2002) (lawyers or law firms may not compensate nonlawyers with bonuses that are "tied to specific fees from a particular case"); Philadelphia Bar Ass'n Prof. Guidance Comm., Op. 2001-7 (2001) (bonus is permissible "provided that the bonus is not tied to or contingent on the payment of a fee from a particular case or specific class of cases"); North Carolina State Bar, Op. RPC 147 (1993) (nonlawyer bonus impermissible because it was "calculated based upon a percentage of the income the firm derives from legal matters on which the paralegal has worked").
¶ 69. The majority reflects that in addition to her base pay, the paralegal at issue received "thirty cents per thousand dollars (three-tenths of one percent2) of the gross recoveries from personal injury cases she worked on." Majority op., ¶ 44.
¶ 70. The OLR contends that this bonus arrangement constitutes unlawful fee splitting under SCR 20:5.4. It explains:
Whether or not the Firm was at any time profitable, [the paralegal] was entitled to receive three-tenths of one percent of the clients' gross recoveries in the *154personal injury cases she worked on. Weigel's assertion that the bonus is not based upon "specific fees from specific cases" is mere semantics ....
¶ 71. In its argument, the OLR emphasizes that the payment to the nonlawyer, although computed on the basis of a client's gross recovery, comes out of the contingent fee earned by the firm. It describes the fee as follows:"... viewing the distribution of the client's gross recovery as a pie chart, if the Firm is entitled to a one-third percentage of the gross recovery, the nonlawyer gets an approximate one percent slice of the fee, off the top, before expenses, prior to any computation of 'profit,' that is, total revenues less total expenses on a Firm-wide basis."
¶ 72. I find the argument of the OLR persuasive. It is consistent with the conclusions of the other jurisdictions referenced above which have interpreted similar or identical rules based on the ABA model code. Therefore, I determine that a formula, as used here, that compensates nonlawyer employees based on a percentage of the legal fees generated in the particular matters on which the nonlawyer worked, violates both the purpose and the plain prohibition set forth in SCR 20:5.4. Accordingly, although I join the majority in finding violations as to counts 1 and 2, I respectfully dissent as to the dismissal of the third count.
¶ 73. I am authorized to state that CHIEF JUSTICE SHIRLEY S. ABRAHAMSON joins this dissent.

 The language of SCR 20:5.4(a)(3) was not affected by the changes to Chapter 20 which became effective on July 1, 2007. See S. Ct. Order 04-07, 2007 WI 4, 293 Wis. 2d xv, 726 N.W.2d Ct.R-45 (eff. July 1, 2007).

 It is unclear from the record whether the percentage used by the majority opinion is correct. However, for consistency we use the percentage as set forth by the majority.