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Johnson v. Brewer & Pritchard, P.C.

Supreme Court of Texas · 2002 · Corporations
73 S.W.3d 193 (Tex. 2002)
Updated
CorporationsFiduciary dutyAgencyLaw firm associatesReferral feesassociate attorneylaw firmreferral fee

Facts

While employed as an associate at Brewer & Pritchard, Chang told firm partners that he could obtain representation of helicopter-crash victims for the firm and described the matter as a significant business opportunity. Chang then arranged meetings for Henry King, whose father was injured in the crash, with several personal injury lawyers, including Johnson, and King signed a contingent fee agreement with Johnson, who then referred the matter to Jamail & Kolius for half of the net fee. Chang later told Brewer & Pritchard that the firm had lost out and disclaimed knowledge of how the Jamail firm obtained the case. Brewer & Pritchard alleged Chang breached a fiduciary duty by diverting the opportunity and indirectly sharing in Johnson's referral fee, but the summary judgment record contained no evidence that Chang actually received or had agreed to receive any such compensation.

Issue

When does an associate of a law firm breach a fiduciary duty to the firm by referring a client or potential client to another lawyer or law firm? More specifically, does an associate owe an absolute fiduciary duty to route matters to the employer firm, or only a duty not to profit or gain from such a referral without the employer's consent?

Rule

Under common-law agency principles, a law firm associate owes a fiduciary duty to the employer not to accept or agree to accept any fee, profit, compensation, gain, or other benefit from referring or participating in the referral of a client or potential client to a lawyer or firm other than the associate's employer without the employer's consent. But an associate may participate in such a referral without breaching fiduciary duty so long as the associate receives no benefit, compensation, or other gain from the referral. A contractual workplace policy restricting referrals does not itself create a fiduciary duty imposed by law.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.
Leah Moreno is an associate at Cedar Point Legal Group in Dallas. A family acquaintance asks Leah for help finding counsel for a medical-malpractice claim, and Leah recommends a trial boutique in Houston after concluding her own firm lacks that experience. Leah receives no money, promise, discount, or other advantage from the Houston firm.

Did Leah breach a fiduciary duty to Cedar Point Legal Group by making the referral?

Explanation. The majority held that a law firm associate does not breach fiduciary duty merely by referring or participating in a referral to outside counsel if the associate receives no benefit, compensation, gain, or other advantage from the referral. The court rejected an absolute duty requiring associates always to direct matters to the employer firm.