In 1986, Jаck S. Kaplan, an attorney then practicing law in Illinois, was retained by James Cohn and Lisa Bahn Cohn to represent their minor child in connection with a
lawsuit alleging injuries sustained during the child’s birth. Kaplan agreed to represent the Cohns, but informed them that he lacked experience in medical malpractice cases. He advised the Cohns to retain additional counsel whose area of expertise was in medical malpractice.
Kaplan subsequently referred the case to Geoffrey Gifford, a medical malpractice attorney associated with the law firm of Asher, Pavalon, Gittler & Greenfield, Ltd., an Illinois partnership. 1 Kaplan had previously referred several сases to Gifford in exchange for a percentage of the attorney’s fees paid to Gifford’s law firm in connection with the referred eases.
In October 1986, the Cohns, Kaplan, and Gifford met in Gifford’s office in Chicago. At that meeting, the Cohns, pursuant to Kap-lan’s recommendation, agreed to retain Gif-ford as additional counsеl. Kaplan contends that all parties understood that Kaplan would continue to serve as counsel of record and would be materially involved in the litigation, even though Gifford would have primary responsibility for the Cohns’ ease. Kaplan also claims that Gifford expressly informed the Cohns that Kaplan would receive of the attorney’s fees paid to Pavalon & Gifford. The Cohns purportedly understood and consented to the fee-sharing agreement between Kaplan and Pavalon & Gifford. Pavalon & Gifford denies the existence of the fee-sharing agreement and hence, denies that the Cohns were informed of, or consented to any such agreement.
In еarly 1987, Gifford entered into a written contingency fee agreement with the Cohns whereby they agreed that Pavalon & Gifford would receive a percentage of the amount recovered from their suit as payment for legal services. All parties agree that thére was no reference in the written contingency fee agrеement to any separate fee-sharing agreement between Kaplan and Pa-valon & Gifford. The Cohns signed the con *89 tingency fee agreement on February 13, 1987.
In August 1991, the Cohns settled their case for $1.5 million. Pursuant to the 1987 written contingency fee agreement, attorney’s fees of $362,500 were paid to Pavalon & Gifford. On September 6, 1991, Eugene Pa-valon, a partner with Pavalon & Gifford, sent Kaplan a chеck for $32,500. The letter accompanying the check stated:
Enclosed you will find our check in the amount of $32,500.00 representing an amount which is the remainder of what our actual fee was less an amount equivalent to % of the amount of the fee if calculated on a jé fee basis. In other words we retained the amount which would hаve been % of a & fee.
Kaplan demanded that Pavalon & Gifford pay him the additional fee that he believed he was owed under their oral fee-sharing agreement. Pavalon & Gifford refused.
In 1992, Kaplan, now a resident of West Virginia, filed a complaint in the district court in Chicago for breach of contract against both Gifford and the law firm of Pavalon & Gifford. Pavalon & Gifford thereafter filed a motion for summary judgment, arguing that because the fee-sharing agreement was not in writing and was never signed by the Cohns, as required by Rule 2-107 of the Illinois Code of Professional Responsibility, the agreement was unenforceable as a matter of public policy. The district court agreed, granting summary judgment in favor of Pavalon & Gifford,
Discussion
The only issue presented for our rе-' view is whether, under Illinois law, a fee-sharing agreement between attorneys that is not in writing and not signed by the client is unenforceable as a matter of public policy. Our review is
de novo. Lolling v. Patterson,
(A) A lawyer shall not divide a fee for legal services with another lawyer who is not a partner or assoсiate of his law firm, unless (1) the client consents in a writing signed by him to employment of the other lawyer, which writing shall fully disclose (a) that a division of fees will be made, (b) the basis upon which the division will be made, including the economic benefit to be received by the other lawyer as a result of the division, and (c) the responsibility to be assumed by the other lаwyer for performance of the legal services in question; ....
Initially, it is important to note our duty in diversity cases: “we must apply the state law that would be applied in this context by the Illinois Supreme Court.”
Green v. J.C. Penney Auto Ins. Co.,
Illinois courts will not enforce an agreement between private parties that violates public policy.
O’Hara v. Ahlgren, Blumenfeld and Kempster,
127 Ill.2d. 333,
“The indicia of public policy regarding lawyers, acting in a dual capacity as lawyers and in some other business or professional capacity, is three-fold. The public policy of Illinois on this subject can be found in its statutory law, in the Illinois Code of Professional Responsibility adopted by the Supreme Court of Illinois on July 1,1980, and in various Ethical Opinions issued by the Illinois State Bar Association. These are all appropriate sources for defining Illinois public policy.” Id. (citations omitted).
Kaplan argues that “in the context of a contract action, the failure of the parties to fully comply with Rule 2-107 is a failure of form, not of substance.” Therefore, Kaplan contends, violation of Rule 2-107 does not automatically render a contract unenforceable as a matter of public policy. Kaplan’s position finds support in our decision in
Cross v. American Country Ins. Co.,
In that ease, Cross, an attorney, entered intо a contingency fee agreement with his client, Patterson, whereby Cross was to receive jé of-any amount recovered from Patterson’s personal injury suit against a taxicab company. Id. at 626. The agreement did not state when expenses would be deducted and was not signed by Cross. Id. Subsequently, American Country Insurance Company, thе cab company’s insurer, settled the suit directly with Patterson without consulting Cross. Id. at 627. Cross did not receive payment from either the insurance company or from Patterson. Id. Cross then brought suit claiming that American Country had engaged in tortious interference with his contingency fee agreement with Patterson. Id. American Country defended by claiming thаt the underlying contingency fee agreement was unenforceable as a matter of public policy as expressed by Rule'2-106 of the Illinois Code of Professional Responsibility. Id. at 627-628. Thus, American Country argued, Cross had failed to meet his burden of proving one of the elements of tortious interference with a contract. Id. Rule 2 — 106(c)(2) provided ■ in pertinent part:.
Any contingent-fee agreement shall be in writing. The original and each copy shall be signed by the lawyer and by each client_ Any contingent-fee agreement shall set forth ... whether expenses are to be deducted before or after -the contingent fee is calculated....
We found that the contingency fee agreement was enforceable, even though it was not signed by Cross and did not indicate when expenses would be deducted, thereby failing to meet the requirements of Rule 2-106(c)(2). A necessary predicate of our decision was a finding that, under Illinois law, the Code of Professional Responsibility is not binding on the courts.
Id.
at 628. In making that finding, we noted that one intermediate Illinois appellate court had previously held that the Code of Professional Responsibility has the function of law.
See Marvin N. Benn & Assocs. Ltd.,
We then applied a “substantial compliance” test, finding that the parties’ failure to specify when expenses would be deducted and Cross’s failure to sign the agreement, as required by Rule 2-106(c)(2), represented only “minor technical deficiencies.”
Cross,
In 1990, following our decision in
Cross,
the Illinois Supreme Court changed or clarified its positiоn regarding the binding effect of the Code of Professional Responsibility. In
In re Vrdolyak,
the court made it clear that the Code is now binding on the courts as a matter of law.
Recognizing that this change in Illinois law underminеd the premise on which Cross was decided, the district court in-this case held that Rule 2-107 is binding on the courts and thus “dictates the conditions under which fee-sharing agreements will be tolerated under law.” The district court found that the oral fee-sharing agreement violated Illinois pubhc pohey, as expressed by Rule 2-107. We agree with the district court that Cross сan no longer be considered a valid reflection of Illinois law.
Additionally, a decision of an Illinois appellate court, rendered after the district court reached its decision in this case, specifically requires fee-sharing agreements between attorneys to be in writing and signed by the ehent to be enforceable.
Holstein v. Grossman,
While Rule 2-107 of the Illinois Code removed the outright prohibition against fee sharing based solely on a ehent referral, the supreme court’s sanctioning of such conduct was not without significant sáfe-guards designed to protect the ehent.... [W]e beheve that the enhanced consent provision and signed writing requirement represent an integral part of the Illinois Supreme Court’s pubhc pohey trade off which the court struck in giving its official sanction to intra-attorney fee-sharing agreements where the primary service performed by the referring attorney is the referral of a ehent. Before the rule, the actual effect of fee-sharing agreements on the chents themselves was our paramount concern. This concern, firmly rooted in pubhc pohey, required intra-attorney fee-sharing agreements based upon a mere ehent referral to be held violative of pubhc pohey. After the rule, pubhc policy still requires that all such agreements be evaluated with this same concern in mind.... We beheve that the signed writing requirement’s significant pubhc pohey roots require a holding in this case that plaintiff is entitled to no referral fee. The Ghent’s right to counsel of his choosing must be preserved, and the signed writing requirement guarantees this result.
Id.
at 602,
Kaplan concedes that the “broad language of
Holstein v. Grossman
supports Pavalon & Gifford.”
3
However, Kaplan contends that “the decision is poorly reasoned and fails to fully address critical authorities.” Specifically, Kaplan argues that the
Holstein
court failed to consider commentary to the American Bar Association Model Rules of Professional Conduct. The Illinois Code was based on the ABA Model Code of Professional Responsibility,
In re Himmel,
Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The Rules are designed tо provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not de *92 signed to be a basis for civil liability. Furthermore, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a Rulе is a just basis for a lawyer’s self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule. Accordingly, nothing in the Rules should be deemed to augment any substantíve legal duties of lawyers or the extra-disciplinary consequences of violating such a duty.
American Bar Association Rules of Professional Conduct, (1983).
This commentary, however, does not appear in the official committee commentary to the Illinois Code of Professional Responsibility, See generally, Illinois Code of Professional Responsibility and Committee Commentary, 39 IlLDec. XXV-LXV, nor does it appear in the preamble to the current Illinois Rules of Professional Conduct. 139 Ill.Dec. XLIII-XLV (1990). Moreover, even the official Illinois commentary to Code is “advisory only.” 39 Ill.Dec. at XXVI. Accordingly, little or no weight should be accorded the ABA commentary in this area. The Illinois courts apparently have not considered it authoritаtive.
Kaplan does correctly point out that the same appellate court that decided
Holstein
previously expressed concern over the use of the disciplinary rules by attorneys to escape contractual obligations.
Phillips v. Joyce,
Plaintiff asserts that “disciplinary rule 2-107 should not be too readily construed as a license for attorneys tо break a promise, go back on their word, or decline to fulfill an obligation in the name of legal ethics.” ... We reject plaintiffs argument_ Our paramount concern must be the effect these fee-sharing agreements have on the clients, not the attorneys involved. “It does not matter whose ox is gored.” We will not enforce a fee-sharing agreement which violates public policy.
Kaplan also makes several policy arguments against allowing attorneys to use the ethical rules to escape contractual obligations. However, Illinois has already made a policy choice favoring precise compliancе with Rule 2-107 over the adverse effects associated with attorneys using the rule as a means to avoid their agreements with one another. While our opinion in Cross may be the preferable approach, as we see it; in a diversity case we are obligated to apply the law as it has been (or would likely be) enunciated by the Illinois Supreme Court.
Conclusion
In Illinois, a fee-sharing agreement between attorneys for referrals, which is neither in writing nor signed by the client, is unenforceable as a matter of public policy. Therefore, the oral fee-sharing agreement between Kaplan and Pavalon & Gifford is unenforceable because, as all partiеs agree, it was not in writing and not signed by the Cohns. Accordingly, the decision of the district court is Affirmed.
Notes
. Gifford and several other partners and associates subsequently left the law firm of Asher, Pavalon, Gittler & Greenfield, Ltd., and formed their own firm, Pavalon & Gifford. In connection with this split, Gifford took the Cohn case with him to Pavalon & Gifford. Pavalon & Gif-ford thereby became the successor in interest to the rights and duties of Ashеr, Pavalon, Gittler & Greenfield as to the Cohns.
. The Illinois Supreme Court repealed the Illinois Code of Professional Responsibility effective August 1, 1990 and replaced it with the Illinois Rules of Professional Conduct. Rule 1.5(f) of the Rules of Professional Conduct contains the same substantive requirements as Rule 2-107.
. In his Reply Brief, Kaplan urges us to certify the issue presented in this case to the Illinois Supreme Court because "there is now a conflict between this Court and at least one Illinois Court of Appeals...." This we decline to do.