SCF Consulting, LLC v. Barrack, Rodos and Bacine: A contract action against a law firm alleging an unethical fee-sharing agreement should be allowed to proceed
A divided Supreme Court of Pennsylvania agreed that a lawsuit against a law firm based on a breach of a contract should be allowed to move forward, even though the alleged contract would have been in violation of the fee-sharing rules of professional conduct. The Court was divided on the reason, and remanded for further proceedings “without present guidance from this Court.”
SCF Consulting filed a civil complaint against Barrack, Rodos & Bacine, a law firm on Market Street in Philadelphia (where Benjamin Franklin performed many of his electricity experiments). SCF alleges that Barrack Rodos failed to make contracted for payments to a consulting firm based on a percentage contingent recovery. Barrack Rodos denied the existence of such a contract and filed preliminary objections arguing that, even if such a contract existed, it would be void under the Rules of Professional Conduct.
The trial court dismissed the complaint via preliminary objections.
Opinion by CJ Saylor: We don’t agree on this case, but it should be allowed to go forward
The Chief Justice, joined by Justice Dougherty, lays out the compelling arguments on both sides, and rules 4-3 for the whole Court that the breach of contract action must be allowed to go forward. The question presents a Scylla and Charybdis: a per se rule in favor of dismissal may put lay and legal parties on notice that fee-sharing contracts are unenforceable and thus discourage their formation, but it would also reward unscrupulous attorneys, who are already in a powerful bargaining position with non-lawyers, and result in a windfall to the unethical attorney.
The Rules of Professional Conduct purport not to affect any substantive law, but rather only govern the conduct of attorneys. Should the disciplinary board be a client’s only remedy when an attorney agrees to an illusory contract, or should the client be able to resort to the courts for a remedy?
Saylor and Dougherty “would hold only that the contract cause of action is not per se barred by the purported infraction on [the law firm’s] part and, accordingly, the county court’s bright-line approach to the unenforceability of the alleged consulting agreement should not be sustained.” However, the majority is only willing to agree “that the present contract action should not have been dismissed.” Accordingly, “the dismissal will be overturned” and remanded for further proceedings “without present guidance from this Court” as to the ultimate underlying issue.
Conclusion: A case to watch
The Court’s internal divisions on this matter give both parties a second bite at the apple, and the arguments developed before the Court of Common Pleas and in subsequent appeal will be interesting to watch. You can be almost certain that this will be back before the Court again soon.