Background
Joel Franklin was hired as an associate attorney at Emery Law Office in March 2020. His employment arrangement included a salary, performance-based bonuses, and a separation agreement with a fee allocation provision. That provision stated that if Franklin left the firm and clients elected to follow him, Emery would receive 75% of any contingency fee ultimately recovered in those cases, plus reimbursement of costs advanced before his departure.
Emery terminated Franklin in April 2022. Clients whose matters he had been handling were given three choices: remain with Emery, continue with Franklin, or retain new counsel entirely. Fourteen clients chose Franklin. Three of those matters produced no fee, and Emery waived its share in a fourth, leaving ten cases in dispute. Franklin notified Emery roughly one month after his termination that he would not honor the fee-split provision. Emery sued for a declaratory judgment and breach of contract.
The Jefferson Circuit Court granted summary judgment to Emery, enforcing the allocation clause as written. The Kentucky Court of Appeals reversed, holding that the provision violated public policy as expressed in SCR 3.130(5.6)—the rule prohibiting agreements that restrict a lawyer’s right to practice—because the steep fee split created a financial disincentive for Franklin to accept departing clients. The Kentucky Supreme Court granted discretionary review.
The Court’s Holding
The Kentucky Supreme Court reversed the Court of Appeals and reinstated the circuit court’s summary judgment for Emery. Writing for the majority, Justice Thompson held that the fee allocation clause did not violate SCR 3.130(5.6) on the record presented. The rule prohibits agreements that restrict a lawyer’s right to practice, but the agreement here imposed no direct restriction: all clients were fully informed of their options, Franklin was free to accept or decline any representation, and he in fact continued representing fourteen former Emery clients. Because Franklin failed to demonstrate that enforcing the clause actually restricted his practice or impaired any client’s freedom to choose counsel, the public-policy exception to contract enforcement was not triggered.
The Court also clarified the scope of Baker v. Shapero, 203 S.W.3d 697 (Ky. 2006), which had required departing attorneys to be compensated in quantum meruit rather than under the original contingency contract when discharged by a client mid-representation. The Court of Appeals had read Baker to mandate a quantum meruit proceeding whenever a lawyer leaves a firm and takes clients along. The Supreme Court rejected that reading, holding that Baker is a default rule that applies only where successive, unaffiliated counsel have no governing agreement. Where, as here, a valid separation agreement addresses fee division, contract principles control and no quantum meruit trial is required.
Justice Conley dissented, joined by Chief Justice Lambert and Justice Nickell, arguing that the majority applied the wrong test. Under Kentucky’s public policy doctrine, the question is whether a contract has an “evil tendency” against the public interest in general—not whether it caused actual harm in the particular case. The dissent would have affirmed the Court of Appeals, reasoning that an arbitrary flat percentage unmoored from the work actually performed by the firm could, in other circumstances, price an attorney out of taking a case and thereby deny clients their counsel of choice.
Key Takeaways
- A law firm’s fee allocation clause in a separation agreement does not automatically violate SCR 3.130(5.6); the rule targets agreements that actually restrict an attorney’s right to practice, not every provision that has financial consequences for the departing lawyer.
- Baker v. Shapero does not require a quantum meruit hearing every time a lawyer leaves a firm and retains clients—it is a default rule for disputes between successive, unaffiliated counsel in the absence of any governing contract.
- Kentucky’s strong freedom-of-contract principle protects arm’s-length separation agreements; courts will void such agreements on public policy grounds only where the controlling law clearly mandates it, not based on general notions of fairness.
- The 4-3 split signals ongoing uncertainty: the dissent’s “evil tendency” framework, if adopted in a future case involving an attorney who can show the fee split priced out a client, could reach the opposite result on nearly identical contractual language.
Why It Matters
This decision gives Kentucky law firms meaningful contractual leverage when associates depart with contingency-fee cases that the firm helped develop. By confirming that a negotiated fee allocation clause survives SCR 3.130(5.6) scrutiny so long as it does not functionally bar the departing lawyer from practicing, the ruling encourages firms to include such provisions in employment and separation agreements rather than relying solely on quantum meruit claims after the fact.
At the same time, the close vote and the dissent’s pointed critique leave the law unsettled at the margins. Future litigants who can produce concrete evidence that a flat-percentage fee split actually discouraged an attorney from accepting a client—or caused a client to lose preferred counsel—may have a viable public-policy challenge under the dissent’s framework. Firms drafting separation agreements should consider tying fee allocations to documented work performed or costs incurred, rather than applying a uniform percentage regardless of the stage of the case at departure.