Lawyers Beware! Be Careful What You Say When You Refer a Client to Another Law Firm!
In an interesting case reported by the Contracts Professor, one law firm referred a client over to another law firm, and represented to the receiving firm that the clients guaranteed payment of $75,000 in legal fees. The fees were not paid and the receiving firm sued the client and the referring firm for the legal fees.
The case isDePetris & Bachrach v. Srour, 2010 NY Slip Op 01840. Upon a pre-answer motion by the Defendant law firm, the trial court dismissed many of the stated claims. The Appellate court reinstated the causes. The court wrote:
[T]he motion court erroneously dismissed the fourth and fifth causes of action which allege claims against defendants-respondents for breach of the implied warranty of authority and for tortious misrepresentation of authority and assurances of payment, respectively. These causes of action seek to hold defendants-respondents liable for their own action in misrepresenting that they had authority from the Nassers to enter into a contract in which the defendants, Jacques and Ezequiel Nasser would pay plaintiff law firm $75,000 ($37,500 each) of the legal fees incurred by plaintiff's client Srour.
At this point the court is making no determination about the facts, they are only reinstating claims because the claims state a cause of action under the law. In Minnesota, the pre-answer motion would be a Rule 12 motion, claiming that the plaintiff failed to state a cause of action upon which relief can be granted. In Minnesota this motion would likely fail.
It is not unusual for one firm to refer a client to another firm when the other firm can better serve the client's needs. It is also common for the referring firm to tell the receiving firm about the fee payment history: for example, the client has always pay promptly, or slowly or what ever the case may be. In this case it appears that the sending firm allegedly misrepresented that the client guarantee payment of the legal fees.
People, and law firms, rely on representations by other attorneys.
