Can a North Carolina lawyer reveal a client's settlement amount to the client's former lawyer who is claiming a share of the fee?

Plain-English summary

A client hired Lawyer A for a workers' compensation matter, discharged her, and hired Lawyer B, who settled the case; the Industrial Commission approved the settlement and the fee. The discharged Lawyer A, who had reserved her fee, asked Lawyer B for the Commission's order and the settlement amount to value her share, but the client instructed Lawyer B to keep the settlement confidential, so Lawyer B refused. The opinion concludes that keeping a client's information confidential is paramount: unless the client consents, or a Rule 1.6(b) exception applies, Lawyer B may not reveal the settlement details to Lawyer A.

The opinion then identifies the applicable exception. A client may discharge a lawyer at any time, and a contingency-fee lawyer discharged before the matter concludes has a quantum meruit claim against the proceeds, which the discharged lawyer may assert against the client or the successor lawyer (citing Covington v. Rhodes and Guess v. Parrott). Rather than wait for suit, the better practice is to try to resolve the dispute first. To that end, the opinion states that at the start of the representation Lawyer B should counsel the client about the predecessor's quantum meruit claim and explain that Rule 1.6(b)(6) permits disclosing confidential information, without the client's consent, to respond to allegations in any proceeding concerning the representation, and that, per Comment [11], the exception does not require waiting for an action to commence. Lawyer B may therefore disclose the settlement details to resolve Lawyer A's fee claim, but only the information relevant to valuing Lawyer A's legal services.

In practice

Under the North Carolina rules as they stood at the time of the opinion, conduct in which a successor lawyer hands settlement details to a discharged predecessor over the client's objection is not permitted absent the Rule 1.6(b)(6) exception; the opinion holds that, against the client's instruction, the default is nondisclosure under Rule 1.6. Per the opinion, the analysis turns on the self-defense exception: because the discharged lawyer's quantum meruit claim is an allegation concerning the representation, Rule 1.6(b)(6) authorizes disclosure of the information relevant to valuing the predecessor's services, even before any suit is filed.

The opinion frames a practical sequence: counsel the client at the outset about the predecessor's fee claim and the Rule 1.6(b)(6) exception, then disclose only what is relevant to the valuation when resolving the claim.

Common questions

Q: Can a North Carolina lawyer give the client's former lawyer the settlement amount to calculate a fee split?

A: Not by default. The opinion says settlement details are confidential under Rule 1.6, so absent the client's consent or a Rule 1.6(b) exception, the successor lawyer may not disclose them to the discharged predecessor.

Q: What exception lets the lawyer disclose the settlement to resolve the fee claim?

A: Rule 1.6(b)(6). The opinion explains that the exception permits disclosing confidential information to respond to allegations in a proceeding concerning the representation, and that, per Comment [11], the lawyer need not wait for an action to be filed.

Q: How much can the lawyer disclose?

A: Only what is relevant. The opinion says only the information relevant to the valuation of the former lawyer's legal services may be disclosed.

Q: What does the opinion suggest the successor lawyer do at the outset?

A: It says the better practice is to try to resolve the dispute before litigation, and that at the beginning of the representation the lawyer should counsel the client about the predecessor's quantum meruit claim and explain the Rule 1.6(b)(6) exception.

Background and rules framework

The opinion applies North Carolina Rule 1.6 (confidentiality of information, the analogue of Model Rule 1.6). It treats settlement terms as confidential information protected by Rule 1.6(a) and resolves the disclosure question through Rule 1.6(b)(6), the self-defense exception permitting disclosure to respond to allegations in a proceeding concerning the lawyer's representation, read with Comment [11].

The substantive backdrop is North Carolina law on a discharged contingency-fee lawyer's quantum meruit recovery, drawn from Covington v. Rhodes and Guess v. Parrott, which allow the claim to be brought against the client or the successor lawyer.

Citations and references

Rules of Professional Conduct:

• MR 1.6 / NC Rule 1.6 (confidentiality; Rule 1.6(a); Rule 1.6(b)(6) self-defense exception; Comment [11])

Cases:

• Covington v. Rhodes, 38 N.C. App. 61, 247 S.E.2d 305 (1978), disc. rev. denied, 296 N.C. 410, 251 S.E.2d 468 (1979), quantum meruit recovery by a discharged contingency-fee lawyer.
• Guess v. Parrott, 160 N.C. App. 325, 585 S.E.2d 464 (2003), discharged lawyer may assert the claim against the client or the successor lawyer.

See also

• NC State Bar 2016 FEO 4: Disclosing Confidences to Execute a Fee Judgment
• ABA Formal Op. 487: Fee Division With a Client's Prior Counsel
• ABA Formal Op. 476: Confidentiality When Withdrawing for Nonpayment of Fees

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2013-formal-ethics-opinion-12/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Facts:

Client hired Lawyer A to represent Client in a workers’ compensation matter. A year later, Client discharged Lawyer A and subsequently hired Lawyer B. Lawyer A filed a motion to withdraw as counsel while reserving her right to a legal fee. Lawyer B settled Client’s workers’ compensation case and the Industrial Commission entered an order approving the settlement and the legal fee to be paid from the proceeds of the settlement. Lawyer A asked Lawyer B for a copy of the Industrial Commission’s order. Client instructed Lawyer B to keep the settlement information confidential. Lawyer B therefore refused to provide Lawyer A with a copy of the Industrial Commission’s order, and also refused to disclose the settlement amount. However, Lawyer B asked Lawyer A to submit an accounting of Lawyer A’s hours in the case and Lawyer A’s hourly rate. Lawyer A refused to provide an accounting of her time without more information about the settlement. Lawyer A insists that she needs to know the settlement amount to determine the amount of the fee that is to be divided between the two lawyers. Lawyer A further asserts that before she can determine the amount of her fee, she must know which injury claims are subject to the settlement.

Inquiry:

May Lawyer B share the settlement details with Lawyer A?

Opinion:

Keeping a client’s information confidential is paramount among the duties a lawyer owes to the client. Unless Client consents to the disclosure of information about the settlement, or one of the exceptions set out in Rule 1.6(b) applies, Lawyer B may not reveal the details of the settlement to Lawyer A.

A client has the right to discharge his lawyer at any time. Where a lawyer with a contingency fee contract is terminated before the matter is concluded, the discharged lawyer has a claim for quantum meruit recovery from the proceeds of the matter. Covington v. Rhodes, 38 NC App. 61, 247 S.E.2d 305 (1978), disc. rev. denied, 296 NC 410, 251 S.E.2d 468 (1979). Furthermore, the discharged lawyer may file his claim for quantum meruit against the client or against the subsequent lawyer. Guess v. Parrott, 160 NC App. 325, 585 S.E.2d 464 (2003).

Rather than wait for Lawyer A to file suit, however, the better practice is to attempt to resolve a dispute before litigation. To this end, at the beginning of the representation, Lawyer B should counsel Client about the law pertaining to Lawyer A’s claim for a legal fee based on quantum meruit. Lawyer B also should explain to Client that Rule 1.6(b)(6) permits a lawyer to disclose confidential client information, without the client’s consent, “to respond to allegations in any proceeding concerning the lawyer's representation of the client,” and that the exception to the rule, as noted in the comment, “does not require the lawyer to await the commencement of an action or proceeding…” Rule 1.6, cmt [11]. Therefore, Lawyer B may disclose the details of the settlement to resolve Lawyer A’s claim for a share of the fee. Only that information relevant to the valuation of Lawyer A’s legal services may be disclosed.