For instance, where the agreement resulted in the nonprofessional rendering services but not being compensated, the courts are willing in certain instances to permit quasi-contract claims such as quantum meruit and unjust enrichment.16 Also, an alternative tort claim for fraud may be viable where the particular facts warrant it.17 Normally such quasi-contract and tort claims would not be viable if the contract governing the obligations of the professional were valid, but the invalidity of the fee-splitting agreement resurrects such claims.18
Nevertheless, these alternative claims may not place the nonprofessional in the same position as if the fee-splitting agreement had been fully performed. For instance, courts may, in equity, use these types of alternative claims to compensate the nonprofessional for the reasonableas opposed to the agreed uponvalue of work performed, or to return the initial capital invested by the nonprofessional in an improper fee-splitting venture, but it may decide not to go so far as to recognize the nonprofessional's contractual right to a percentage of the profits of the professional venture or company into which he or she invested his or her time and money.19
As such, it is important to advise the nonprofessional at the outset of the lawsuit that, if he does prevail, he may not be made whole in relation to the agreement he struck and there may be limitations on the relief awarded. This will assist the nonprofessional in performing the necessary cost-benefit analysis to determine whether proceeding with the claim is worthwhile economically.
Given the uncertainty of the outcomewhether the court will enforce the arrangement and to what extentthere is a strong incentive to settle these types of lawsuits at the outset, and even pre-suit if possible. Indeed, often the professional has an additional motivation to settle: Since these agreements are unlawful and violate professional rules of conduct, it is not uncommon for the courts to refer such matters to the appropriate disciplinary authorities.20
Under the governing statutes and rules prohibiting fee-splitting, such referrals could cost the professionals a lot more than the consideration received from the illegal agreement they entered into, including suspension and revocation of their license.21 And, in the few instances where the agreement does constitute a crime, such as a lawyer splitting a fee with a non-lawyer for referral of business (see N.Y. Judiciary Law §491), a referral to the district attorney's office is also an important consequence for both parties to consider.22
There are ways to assist a client to enforce a bargain of what is otherwise an unenforceable fee-splitting agreement. Like many lawsuits, the outcome is uncertain; however, initially assessing the provable equities of a fee-splitting dispute is particularly essential in assessing the viability of a potential client's claim as the outcome often hinges on whether or not the nonprofessional is less culpable than the professional.
Careful and strategic thought must be given to pleading and prosecuting the matter properly. Winning the war of the equities will likely mean the difference between the court crafting some avenue of redress (short of enforcing the agreement itself) or leaving the parties where their acts have placed them.
Michael J. Antongiovanni is a senior associate at Meyer, Suozzi, English & Klein and a member of its litigation and dispute resolution practice group.
1. Gorman v. Grodensky, 130 Misc.2d 837, 840, 498 N.Y.S.2d 249, 252 (Sup. Ct., N.Y. Co., 1985).
2. NY Eth. Op. 679 (N.Y.St.Bar.Assn.Comm.Prof.Eth.), 1996 WL 421797.