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Mich. court rules on law firms' dispute over referral fee for car crash case

By Gabriel Neves | Jan 24, 2019

LANSING, Mich. (Legal Newsline) – A Michigan appeals court has affirmed part of and reversed part of  a lower court's orders denying summary disposition in a dispute between two law firms over a referral fee.

Michigan Court of Appeals Judge Michael Riordan issued a 17-page ruling on Jan. 15 reversing in part, vacating in part, and affirming in part the Oakland Circuit Court decision in the lawsuit filed by the Law Offices of Jeffrey Sherbow LLC against Fieger & Fieger PC.

"We affirm the trial court’s orders denying summary disposition and (judgment notwithstanding the verdict), vacate the jury’s verdict with respect to the first two questions regarding Mervie (Rice), (Philip) Hill and (Dorothy) Dixon, and remand for further proceedings consistent with this opinion," Riordan wrote.

The Law Offices of Jeffrey Sherbow sued the law firm alleging its attorneys violated the Model Rules of Professional Conduct, a code of rules for lawyers, on the fee contract for legal representation.

As stated in the ruling, "In the years preceding 2012, Jeffrey Sherbow, an attorney and the sole proprietor of plaintiff, had a working relationship with Charles Rice, who ran a business in Detroit."

"During the early morning hours of July 13, 2012, Charles was in a fatal automobile accident in Ohio," the ruling states. "The other passengers in the vehicle at the time of the accident—Mervie Rice, Dorothy Dixon, and Philip Hill—were seriously injured. Dixon was taken to an Ohio hospital and placed in a medically induced coma."

Rice's son, Dion, contacted Sherbow seeking legal advice, while having contact at the same time with an attorney of Fieger & Fieger. Sherbow set up with the Fieger attorney that the counsel would get paid one-third of any fee that Dion earned in an injury lawsuit.

Sherbow referred Dion to the Fieger attorney, Jeffrey Danzig, who was retained.

Since the case was tried in Ohio, a local law firm was contacted.

"When the Ohio firm demanded 20 percent of the contingent fee earned in the case, Sherbow agreed to have his referral fee lowered to 20 percent as well. Danzig memorialized that new agreement in a letter dated Jan. 2, 2014, which specifically noted that Sherbow was to receive 20 percent of the contingent fee for his referral of the cases," the suit states.

The defendant obtained an award of $10.2 million and the defendant was paid a $3.4 million contingent fee. Sherbow filed the instant litigation over breach of contract claims after the defendant allegedly refused to pay 20 percent of that fee, or $681,666.67, to Sherbow.

"Defendant moved for summary disposition three separate times, arguing, among other things, that the referral fee contract violated MRPC 1.5(e) and thus was unenforceable, and that Danzig did not have the authority to bind defendant to a contract with plaintiff.  

"With respect to a violation of MRPC 1.5(e), defendant provided evidence from Dion, Mervie, Dixon, and Hill that they were not aware of the referral fee agreement and even if they had been, they would have objected. Plaintiff countered with evidence from Sherbow and Danzig that the clients were informed and did not object. Further, plaintiff argued that Danzig had the apparent authority to bind defendant where Danzig was a named partner, appeared on the firm’s letterhead, and was the head of defendant’s intake department. The trial court agreed with plaintiff and denied the motions for summary disposition," the ruling said.

A jury trial found Sherbow had an attorney-client relationship with Dion, and awarded him $93,333.33 as a fee for Rice's estate that was earned. He filed for judgment notwithstanding the verdict (JNOV) regarding the fees from Dixon's case, but the motion was denied by the lower court.

In his ruling, Riordan affirmed the denial of the JNOV motion, stating that "because judgment in plaintiff’s favor was not required as a matter of law based on the jury’s findings of fact, the trial court properly denied plaintiff’s motion for JNOV."

The judge also vacated the decision regarding the other three victims of the car accident, remanding to the lower court for further proceedings.

Michigan Court of Appeals case number 338997

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