Attorney Could be Liable for Conversion for Retaining Referral Fees
A plaintiff’s attorney filed suit against a fellow attorney’s former spouse to recover an unpaid referral fee alleging breach of contract and conversion. Relying on the state Rules of Professional Conduct for attorneys (MRPC) to untangle this issue of first impression, the court was persuaded that an unpaid referral fee is not a debt; rather the settlement proceeds were property in which the client and both attorneys had an interest. Indeed, since MRPC 1.15(b) requires an attorney to separately hold funds received as settlement for a client's claim, this would satisfy any requirement that conversion of money must involve separately identified or distinct funds. Furthermore, MRPC 1.5(e) recognizes that attorneys may collect on a referral by sharing in a contingency fee agreement. Reasoning that the MRPCs mirror those relied on in prior case law holding the defendant could be liable for conversion for not turning over a share of the settlement to the plaintiff for his referral fee, the court held that an action for conversion can be brought where one attorney fails to turn over another attorney's referral fee.