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August 09, 2004

Illinois upholds six-digit "referral fee"

When Mary Corcoran's husband, Michael, was struck and killed by a railroad train in Chicago, she negotiated a $1.4 million settlement offer with Metra and Union Pacific. But Corcoran decided to see if a lawyer could do better. She went to see Joseph Dowd of Des Plaines, Illinois; Dowd, who lists his practice areas as bankruptcy, divorce, and real estate, recommended that she see a personal injury lawyer. Corcoran suggested the well-known firm of Corboy & Demetrio because of a family connection, and Dowd scheduled a meeting.

Corcoran signed a contingent fee contract: 25% of any sum recovered from settlement or judgment to the Corboy firm, and a 40%-of-attorneys-fees referral fee for Dowd. Corboy & Demetrio litigated the case for two years before deciding that they couldn't do any better than the offer still on the table from Union Pacific. Corcoran settled for the original $1.4 million offer, and the Corboy firm waived the fee.

But Joe Dowd didn't, insisting on a $140,000 payment: the 40% of the 25% of the $1.4 million. A trial court and Illinois appellate court agreed, holding that Corcoran should have negotiated a better fee arrangement for herself: it was her own fault, in other words, that she relied upon her attorneys to protect her interests and ended up with a contract that permitted her lawyers to recover without actually accomplishing anything to improve her situation. Illinois rules (134 Ill. 2d R. 1.5(g)) permit a referral fee disproportionate to the services actually performed. As Professor Lubet points out, the organized bar opposes reforms that would disallow contingent fees where the attorney has not achieved tangible benefit for the client.

Dowd has since sued Corcoran for interest on the original fee. (Steven Lubet, "Dispiriting the Law", American Lawyer, Aug. 1; Corcoran v. Northeast Ill. Reg. Commuter R. Corp.).

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Attorneys' Fees and Ethics



Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.