April 29, 2020 Adventures in the Law

The Accidental Practice of Law

By Norm Tabler

If you don’t believe that it’s possible to practice law without meaning to, just ask attorney Frank McClellan, professor of law emeritus at Temple University’s Beasley School of Law.

Cindy Johnson approached McClellan about bringing a medical malpractice action in New Jersey on behalf of her husband Tony’s estate. McClellan seemed like a good choice, having been founding co-director of Temple’s Center for Health Law. But McClellan was not admitted to practice in New Jersey, so he referred Cindy to another lawyer, Aaron Freiwald.

Freiwald successfully sought admission pro hac vice in New Jersey, litigated on behalf of Cindy, and settled the case for $500,000, or $469,000 net of expenses. He retained $156,000 of the net as his one-third contingency fee, and he paid McClellan $52,000 of his $156,000. He and McClellan called the $52,000 payment a referral fee.

So, Cindy, McClellan, and Freiwald are all happy, right? Well, not exactly. Cindy learned that Freiwald had failed to name certain medical providers as defendants in her med mal suit, so she filed another malpractice suit, this time for legal malpractice. She named both McClellan and Freiwald as defendants.

The relief Cindy sought included recovery of the $52,000 Freiwald paid to McClellan. When the court ruled that repayment of the $52,000 couldn’t be part of her legal malpractice case, Cindy filed a separate case against McClellan alleging that (1) his receipt of the $52,000 violated the New Jersey rules of professional conduct and (2) his involvement in her med mal case constituted the unauthorized practice of law in New Jersey.

Cindy’s suit put McClellan in a bind: His receipt of the referral fee was a violation of the New Jersey rules of professional conduct unless he had acted as Cindy’s lawyer in the med mal case. But if he had acted as Cindy’s lawyer without pro hac vice admission in New Jersey, then he had engaged in the unauthorized practice of law.

In his defense McClellan tried to sail a middle course between the Scylla of having received an illegal referral fee and the Charybdis of having engaged in the unauthorized practice of law. He argued that his role in Cindy’s med mal case had been merely advisory and that paying him was no different from paying for an expert or for litigation support.

In his effort to sail between the two perils, McClellan failed to avoid either of them. The court granted Cindy summary judgment, ruling that (1) limited though McClellan’s role in the med mal case may have been, it nevertheless constituted the unauthorized practice of law in New Jersey, and (2) because McClellan was not authorized to practice in New Jersey, his receipt of the referral fee violated that state’s rules of professional conduct.

Could matters get any worse for McClellan? They could and they did. In New Jersey a fee-splitting agreement between lawyers is not valid unless the client has consented to it in writing. Had Cindy signed form consenting to the Freiwald-McClellan fee split? Nope.

If at this point, you’re thinking that McClellan is out $52,000, you seriously underestimate his predicament. In New Jersey the unauthorized practice of law creates mandatory liability on the unauthorized practitioner of three times the costs and fees borne by the client. Accordingly, the court ordered McClellan to pay Cindy treble damages amounting to $156,000; reimburse her for the attorneys’ fees and expenses she incurred in her case against him, with post-judgment interest; and pay all court costs.

All because he referred the case to another lawyer in return for a share of the fee.

The case is Johnson v. McClellan, Super. Ct. of N.J.

Author

Norm Tabler is a retired lawyer in Indianapolis. He serves on the editorial advisory boards of the ABA Senior Lawyers Division’s Voice of Experience and the ABA Health Law Section’s The Health Lawyer and is host of the American Health Lawyers Association’s podcast, The Lighter Side of Health LawEmail Norm.