California Lawyers Association
Ethics Spotlight: Of Fools, Of Counsel, and Attorney Fee Awards
By Kevin Mohr
A well-worn adage, variously attributed to Abraham Lincoln or Benjamin Franklin, holds that any person – including a lawyer – who represents himself has a fool for a client. And if those two luminaries were alive today in an age where many legislative frameworks as well as contract clauses provide for attorney fee awards to a prevailing party, they might have further observed that this same fool attorney would not get paid. That is because there is a well-settled rule that a lawyer who is appearing on his or her own behalf and is the prevailing party in a lawsuit may not be awarded attorney fees. Trope v. Katz (1995) 11 Cal.4th 274, 280 (applying Civil Code § 1717); Musaelian v. Adams (2009) 45 Cal.4th 512, 517 (applying CCP § 128.7). Similarly, “when a law firm is a prevailing party in a case and is represented by one of its partners, members, or associates, it cannot recover attorney fees even though the litigation is based on a contract with a prevailing party clause.” Carpenter & Zuckerman, LLP v. Cohen, 195 Cal.App.4th 373, 375 (2011). Logically this makes sense. An award of fees is intended to compensate a party for expenses it has incurred in prosecuting or defending a lawsuit. Where a firm is represented by one of its own, it is presumed not to have incurred those expenses.
But what if the person representing the law firm is not a partner, shareholder or employee of the firm, but instead has been denominated “of counsel” to the firm? Two cases from a decade ago provide insights into resolving that question. But first, let’s consider what is meant by a lawyer who is “of counsel” to a law firm.
The “Of Counsel” Designation
Lawyers with different responsibilities or interests might be designated as “of counsel” to a law firm. A non-exhaustive list of lawyers who might be denominated as an “of counsel” lawyer to a firm includes: (i) a part-time practitioner who has changed from full-time work with same firm, a different firm, or from government; (ii) a retired partner of the firm, available for occasional consultation; (iii) a probationary partner-to-be, e.g., a lawyer who has moved laterally from a different firm, corporate law office, or government; (iv) a senior lawyer who is not a partner but works full-time, and perhaps did not make partner but nevertheless stayed with the firm; (v) a law professor designated as “of counsel” and held out as being available for consultation with firm clients; and (vi) a senior lawyer who is not a partner but works full-time, typically has his or her own practice, but is held out as being available to consult and provide legal services to firm’s clients. See ABA Formal Ethics Opn. 90-357. It is accepted that a relationship between a law firm and an “of counsel” lawyer must be “‘close, personal, continuous, and regular.’” See People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1153. Moreover, “‘to the extent the relationship between [an attorney] or law firm and another [attorney] or law firm is sufficiently “close, personal, regular and continuous,” such that one is held out to the public as “of counsel” for the other, the … relationship must be considered a single, de facto firm for purposes of [avoiding the representation of adverse interests].’” Id. at 1154.
It would appear then, that once a lawyer is simply labeled “of counsel,” the lawyer is part of the firm and viewed just like any other lawyer partner or employee in the firm. As with so much in the law, however, arriving at such a conclusion is not a given. This is recognized in Comment  to Rules of Professional Conduct, rule 1.0.1, which provides that “[w]hether a lawyer who is denominated as ‘of counsel’ or by a similar term should be deemed a member of a law firm* for purposes of these rules will also depend on the specific facts.” And that brings us to the two cases referenced at the outset of this article that address whether representation of a firm by a lawyer “of counsel” to the firm precludes an award of attorney fees.
The Sands Case
In Sands & Associates v. Juknavorian (2012) 209 Cal.App.4th 1269, a pair of lawyers became affiliated with the Sands law firm as “of counsel” and “represent[ed] the [Sands] firm in its collection and appeal matters and the firm’s clients when they required civil litigation expertise.” Id. at 1273. A dispute arose between the Sands firm and its client, Juknavorian, over attorney fees, with the firm represented by the two “of counsel” lawyers. The dispute was submitted to arbitration as provided in the retainer agreement, which also included a provision that “reasonable attorney’s fees[ ] shall be borne by the losing party.” Id. The Sands firm prevailed and the “of counsel” lawyers moved for attorney fees as provided in the retainer agreement. Although the two lawyers’ declarations itemized the work they had done, they did not provide billing statements or time records, nor was there any evidence of an agreement between the Sands firm and the lawyers as to how they were to be compensated. On the other hand, both the firm and “of counsel” were listed at the same address and shared phone and facsimile numbers, and lawyers and staff in the Sands firm often assisted the “of counsel” lawyers in their matters. Further, the two lawyers were listed as “of counsel” on the Sands firm’s letterhead in in legal directories. The court of appeal concluded that given all of the foregoing facts, the relationship between the “of counsel” lawyers and the Sands firm was “close, personal, continuous, and regular.” Id. at 1296. Given that relationship and relying on SpeeDee Oil, supra, the court held that the firm and “of counsel” lawyers constituted a “single, de facto firm” and, as a result, could not be found to have incurred the expense of attorney fees in prosecuting its fee action against its former client. Thus, attorney fees could not be recovered under the retainer agreement.
The Dzwonkowski Case
In reaching its conclusion, the Sands court distinguished the second-referenced case decided the previous year, Dzwonkowski v. Spinella (2011) 200 Cal. App.4th 930. In that case, plaintiff lawyer had prevailed in a Mandatory Fee Arbitration, had the award confirmed, and then sought fees for the services of his lawyer, Boltz, who was denominated as “of counsel” to plaintiff’s firm. Although Boltz had worked with plaintiff on occasion, he had an independent office in a different city and did “not maintain any regular presence in [plaintiff’s] office.” Further, Boltz provided “litigation services for some of [plaintiff’s] clients on a contract basis.” For this particular matter, Boltz and plaintiff had a fee agreement under which Boltz would be entitled to 10% of any recovery. Moreover, Boltz provided billing statements to the court. Given the foregoing facts, the Dzwonkowskicourt reasoned that plaintiff was obligated to pay attorney fees to Boltz for representation in the fee dispute, there was a legitimate attorney-client relationship between plaintiff and Boltz, and that plaintiff and Boltz had distinct interests. The trial court awarded the requested fees, and the Court of Appeal affirmed the result.
The Facts Control
What are we to make of these cases? The Dzwonkowski court identified three factors to consider in determining whether attorney fees are incurred by the law firm, thus permitting an award of contractual or statutory attorney fees: (i) an obligation of the firm to pay attorney fees to the lawyer representing it; (ii) the existence of an attorney-client relationship between the firm and the lawyer; and (iii) distinct interests between the attorney and the client. 200 Cal. App.4th at 935. Although the court concluded that all factors were present, the court discounted the “of counsel” designation (which appeared to be known only to plaintiff and Boltz), instead noting that “the nature of the relationship, and whether fees were incurred, are the keys” to determining whether a fee is recoverable. Id. at 936 (Emphasis added). In short, a recognized in Comment  to rule 1.0.1, it will “depend on the specific facts.” In Dzwonkowski, the “of counsel” designation did not control; instead, the attenuated relationship between Boltz and plaintiff, as established by evidence of a fee agreement and billing statements, did and attorney fees were recoverable. In Sands, on the other hand, the evidence established that the close working relationship between the firm and the of counsel lawyers, together with the lack of any indicia of a lawyer-client relationship or the obligation to pay a fee, warranted a conclusion that they were a single, de facto firm, precluding the recovery of the contractual attorney fees.
What lessons should we take from these cases? As noted, the label of “of counsel” is less important than the specific facts which will largely determine whether a prevailing party law firm can recover an award of attorney fees. A court will focus on evidence establishing the nature of the relationship between the firm and the “of counsel” lawyer and determine whether the firm might have actually incurred attorney fees. If the relationship is attenuated and there is evidence that fees were incurred then contractual or statutory attorney fees are recoverable.
Kevin Mohr is a professor at Western State College of Law, Irvine, California, and a founding member of CLA’s Ethics Committee. The views expressed are his own.