Opinions of the General Counsel, 0713 ALBJ, 74 The Alabama Lawyer 266 (2013)
| Author | J. Anthony McLain |
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\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Rule 5.4 Prohibits Fee-Splitting With Non-Lawyer, but Lawyer May Pay Non-Lawyer for Services Rendered to the Lawyer
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0QUESTION:
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0"The purpose of this letter is to request the Alabama State Bar to advise that Law Firm 1 may, consistent with the Alabama Rules of Professional Conduct (the 'Rules'), compensate a non-lawyer for very valuable services rendered to Law Firm 1 in connection with its representation of certain plaintiffs in litigation that has been conducted in Delaware involving XYZ Company. We believe that such payment would not violate any of the Rules. The facts giving rise to this request are as follows:
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0"In March 1985, Lawyer A, a partner in Law Firm 1, filed an objection pro se to a proposed settlement of a stockholder class action pending in the Chancery Court of the State of Delaware involving certain stockholders of XYZ Company as plaintiffs, and XYZ Company ('XYZ'), ABC Corporation (ABC) and related XYZ companies, as defendants. This class action ('Bear Action') arose out of a tender offer made by ABC in February 1984 for the stock of XYZ. Upon approval of a settlement of the Bear Action by the Delaware Chancery Court, Lawyer A appealed the settlement pro se to the Delaware Supreme Court in May 1985. Lawyer A briefed and argued the case on appeal. In December 1985, the Delaware Supreme Court approved the settlement.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0"On June 7, 1985, a wholly-owned subsidiary of ABC was merged into XYZ in a merger in which the public stockholders of XYZ were cashed out at $58 per share. Lawyer A, as a stockholder of XYZ, perfected his right to an appraisal arising out of this merger, and, in July 1985, filed a petition pro se in the Delaware Chancery Court seeking appraisal of the common stock of XYZ. In October 1985, Lawyer A amended his petition in the appraisal action to add allegations of unfair dealing with respect to a cash dividend declared by XYZ in May 1985 and unfair dealing in the merger of ABC and XYZ.
\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0"As a result of Lawyer A's appeal of the settlement of the Bear Action, John Doe of Washington, D.C. ('Doe'] approached Lawyer A in May 1985. At that time, Doe, who is not a lawyer, was executive director of the XYZ Shareholder's Committee ('Committee'), a non-profit Delaware corporation organized in 1984 by certain XYZ stockholders (at the instigation of Doe). During 1984, Doe, as executive director of the committee, urged XYZ stockholders to reject the tender offer made by ABC in February 1984 and to seek an appraisal. Doe spent all of his business time as executive director of the committee during 1984 trying to persuade XYZ stockholders to reject the ABC tender offer. His principal argument was that the XYZ stockholder had a viable alternative to the tender offer, i.e., to seek an appraisal of their XYZ stock if ABC succeeded in cashing out the public stockholders of XYZ.
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