Plaintiff appeals as of right from a circuit court opinion and order denying its motion for summary disposition and granting defendant's motion for summary disposition. We reverse and remand.
In 1995, defendant accepted a faculty position at a law school. Defendant subsequently notified the State Bar of Michigan to place her bar membership on "inactive" status. Sometime before November 1997, an automobile accident injured a third party. A friend of the third party contacted defendant to inquire about the third party's legal options. Defendant referred the third party to plaintiff. Thereafter, plaintiff entered into a contingent fee agreement with the third party. Plaintiff also agreed to provide defendant a referral fee by written confirmation of an oral referral fee agreement. The third party consented to the referral fee agreement. In the spring of 1999, plaintiff settled the third party's case for a sum of $1,920,000. Pursuant to the contingent fee agreement, plaintiff received approximately $623,000 in attorney fees. Consequently, defendant asserted that she was entitled to a referral fee of approximately $207,666.
In February 2000, plaintiff filed a complaint for declaratory relief, which acknowledged the existence of the referral fee agreement but alleged that plaintiff subsequently learned that defendant's membership in the State Bar of Michigan was placed on "inactive status." As such, the complaint requested a ruling regarding plaintiff's obligation to pay defendant the referral fee. Defendant filed an answer to plaintiff's complaint and also filed a counterclaim alleging that plaintiff was liable for breach of contract because defendant did not receive the referral fee.
In November 2000, plaintiff filed a motion for summary disposition, arguing that the State Bar of Michigan and the Michigan Legislature prohibit "inactive" members of the state bar from practicing law and that the receipt of a referral fee is considered the practice of law. As an ancillary argument, plaintiff contended that defendant's inability to practice law constituted a conflict of interest with the third party, and that public policy required the circuit court to void the referral fee agreement ab initio. Defendant also filed a motion for summary disposition, arguing that the Michigan Rules of Professional Conduct (MRPC) permit her to receive the referral fee because she is a "lawyer" entitled to receive fees, despite her "inactive" bar membership status.
The circuit court issued an opinion and order denying plaintiff's motion for summary disposition with regard to its request for declaratory relief and granting defendant's motion for summary disposition regarding breach of contract. Specifically, the circuit court determined that the term
On appeal, a circuit court's decision on a motion for summary disposition is reviewed de novo. Dressel v. Ameribank, 468 Mich. 557, 561, 664 N.W.2d 151 (2003); AFSCME v. Detroit, 252 Mich.App. 293, 304, 652 N.W.2d 240 (2002). This Court must review the record in the same manner as must the circuit court to determine whether the movant was entitled to judgment as a matter of law. Morales v. Auto-Owners Ins. Co., 458 Mich. 288, 294, 582 N.W.2d 776 (1998); Michigan Educational Employees Mutual Ins. Co. v. Turow, 242 Mich.App. 112, 114-115, 617 N.W.2d 725 (2000). We must consider the facts in a light most favorable to the nonmoving party. Dressel, supra.
The circuit court treated the motions for summary disposition as cross-motions pursuant to MCR 2.116(C)(10). Although defendant's motion was brought pursuant to MCR 2.116(C)(10), plaintiff's motion was brought pursuant to MCR 2.116(C)(8) and (9). For purposes of our review, this distinction is insignificant because, as noted, our review is de novo. See Dressel, supra; Beaty v. Hertzberg & Golden, PC, 456 Mich. 247, 253, 571 N.W.2d 716 (1997); Abela v. General Motors Corp., 257 Mich.App. 513, 517-518, 669 N.W.2d 271 (2003). A motion made under MCR 2.116(C)(10)
A proper determination of the issues presented in this case requires us to interpret provisions of various Michigan statutes and their interaction with the MRPC and the State Bar Rules of Michigan (SBR). Statutory interpretation is a question of law that is considered de novo on appeal. Eggleston v. Bio-Medical Applications of Detroit, Inc., 468 Mich. 29, 32, 658 N.W.2d 139 (2003). With regard to statutory interpretation our Supreme Court stated the following:
[T]he primary goal of judicial interpretation of statutes is to discern and give effect to the intent of the Legislature. This Court discerns that intent by
Statutory language should be construed reasonably, keeping in mind the purpose of the act. Draprop Corp. v. Ann Arbor, 247 Mich.App. 410, 415, 636 N.W.2d 787 (2001). If the plain and ordinary meaning of the language is clear, judicial construction is normally neither necessary nor permitted. Sun Valley Foods Co. v. Ward, 460 Mich. 230, 236, 596 N.W.2d 119 (1999); Toth v. AutoAlliance Int'l, 246 Mich.App. 732, 737, 635 N.W.2d 62 (2001). The rules of statutory construction merely serve as guides to assist the judiciary in determining intent with a greater degree of certainty. Title Office, Inc. v. VanBuren Co. Treasurer, 249 Mich.App. 322, 326, 643 N.W.2d 244 (2002).
If reasonable minds can differ about the meaning of a statute, judicial construction is appropriate. Adrian School Dist. v. Michigan Pub. School Employees Retirement System, 458 Mich. 326, 332, 582 N.W.2d 767 (1998); Ross v. Michigan, 255 Mich.App. 51, 55, 662 N.W.2d 36 (2003). The court must consider the object of the statute, the harm it is designed to remedy, and apply a reasonable construction that best accomplishes the statute's purpose, but should also always use common sense. Marquis v. Hartford Accident & Indemnity (After Remand), 444 Mich. 638, 644, 513 N.W.2d 799 (1994); Proudfoot v. State Farm Mut. Ins. Co., 254 Mich.App. 702, 708, 658 N.W.2d 838 (2003). Statutes should be construed to avoid absurd consequences, injustice, or prejudice to the public interest. McAuley v. Gen. Motors Corp., 457 Mich. 513, 518, 578 N.W.2d 282 (1998), overruled in part on other grounds Rafferty v. Markovitz, 461 Mich. 265, 602 N.W.2d 367 (1999); Houghton Lake Area Tourism & Convention Bureau v. Wood, 255 Mich.App. 127, 142-143, 150, 662 N.W.2d 758 (2003).
The Michigan Supreme Court is empowered to "provide for the organization, government, and membership of the state bar of Michigan, and to adopt rules and regulations concerning the conduct and activities of the state bar of Michigan and its members." MCL 600.904. The rules of statutory construction also apply to rules promulgated by the Michigan Supreme Court, such as the Michigan Court Rules (MCR), the MRPC, and the SBR. See, generally, Grievance Administrator v. Underwood, 462 Mich. 188, 193, 612 N.W.2d 116 (2000); McAuley, supra at 518, 578 N.W.2d 282; ISB Sales Co v. Dave's Cakes, 258 Mich.App. 520, 672 N.W.2d 181 (2003).
Plaintiff's argue on appeal that a referral fee agreement between an attorney and an inactive attorney is not enforceable. We agree.
MRPC 1.5(e) provides, in relevant part, "A division of a fee between lawyers who are not in the same firm may be made." MRPC 5.4(a) provides, in pertinent part, "A lawyer or law firm shall not share legal fees with a nonlawyer." In addition, this Court, citing MRPC 5.4(a), has stated "`any fee received by an attorney may not be shared with a non-licensed attorney.'" Dupree v. Malpractice Research, Inc., 179 Mich.App. 254, 262, 445 N.W.2d 498 (1989), citing Polo by Shipley v. Gotchel, 225 N.J.Super. 429, 542 A.2d 947 (1987).
Similarly, defendant refers to the "normally understood" meaning of the word "lawyer" in contending that a law school graduate with ten years of counseling experience who subsequently became a law school professor is a "lawyer," despite her inactive membership in the State Bar of Michigan. Both the circuit court and defendant improperly defined the term "lawyer," as used in MRPC 1.5(e) and 5.4(a), as their definition conflicts with legislative mandate and the intended meaning of the term in these MRPC provisions.
The Legislature's Revised Judicature Act of 1961, MCL 600.101 et seq., contains an entire chapter devoted to "attorneys and counselors." Chapter 9. Specifically, in this Chapter, the Legislature mandates:
The state bar of Michigan is a public body corporate, the membership of which consists of all persons who are now and hereafter licensed to practice law in this state. The members of the state bar of Michigan are officers of the courts of this state, and have the exclusive right to designate themselves as "attorneys and counselors," or "attorneys at law," or "lawyers." No person is authorized to practice law in this state unless he complies with the requirements of the supreme court with regard thereto. [MCL 600.901 (emphasis added).]
Under the plain language of the statute, Federated Publications, Inc., supra at 107, 649 N.W.2d 383; Rossow v. Brentwood Farms Dev., Inc., 251 Mich.App. 652, 659, 651 N.W.2d 458 (2002), a person must have a license to practice law in Michigan in order to be a member of the State Bar of Michigan. The statute does not define the word "license."
Generally, this Court must apply the "plain and ordinary meaning" to the word "license" because the statute does not provide a definition. Stone v. Michigan, 467 Mich. 288, 291, 651 N.W.2d 64 (2002). In this endeavor, this Court may refer to a dictionary to determine the common and ordinary meaning of the word. Koontz v. Ameritech Services, Inc., 466 Mich. 304, 312, 645 N.W.2d 34 (2002); Sanchez v. Eagle Alloy Inc., 254 Mich.App. 651, 668, 658 N.W.2d 510 (2003). However, if necessary, this Court must apply a "peculiar and appropriate meaning" if it is a term of art. Consumers Power Co. v. Public Service Comm., 460 Mich. 148, 163, 596 N.W.2d 126 (1999); MCL 8.3a.
First, with regard to word "license," as used in MCL 600.901, one dictionary defines "license," in relevant part, as follows:
Second, Michigan courts have previously defined a "license" as "a grant of permission to do something," Bray v. Dep't of State, 69 Mich.App. 172, 177, 244 N.W.2d 619 (1976), as "the permission by competent
With regard to a "license to practice law in Michigan," MCR 9.103(A) provides:
With regard to the meaning of "membership," as used in MCL 600.901, the SBR promulgated by the Michigan Supreme Court provide for four classes of members, namely, active members, inactive members, law student members, and affiliate members. For the purpose of the present case we are only concerned with active and inactive members. But we note the fact that MCL 600.901 envisions a more limited view of the word membership, when stating it is all persons licensed to practice law in Michigan, because some of the individuals in the classes provided for in the SBR would clearly not be licensed to practice law in this state. SBR 2 provides the following with regard to licensing and bar membership:
SBR 3 provides, in part:
Defendant was on the "inactive" list of the state bar. It is axiomatic that "a
As previously noted, the Legislature clearly mandates that "members of the state bar of Michigan ... have the exclusive right to designate themselves as `attorneys and counselors,' or `attorneys at law,' or `lawyers.'" MCL 600.901 (emphasis added). The fact that this only includes active members of the state bar is further supported by MCL 600.916(1), which provides:
It naturally follows, then, that the law prohibited defendant from suggesting that she was an attorney, lawyer, etc.
MCL 600.916(1), which provides that a person shall not represent or designate himself or herself as a lawyer when they are not "authorized to practice law in this state," appears to clearly coincide with the SBR 3 provision stating that when an inactive member practices law it is considered "unauthorized practice." Defendant was not a member of the state bar who was entitled to represent or designate herself as a lawyer because her "inactive" status deprived her of a "license" or privilege to practice law in Michigan and she was not authorized to practice law. Thus, defendant was clearly prohibited from designating herself as an attorney, lawyer, etc.
We recognize the Supreme Court's power to provide for the organization of the state bar, MCL 600.904, but the issue in this case conflicts with a legislative mandate, which is in no way contradicts the power provided to the Supreme Court, nor does it contradict the MRPC or the SBR. Throughout the MRPC a "lawyer" is referred to as someone representing clients, which supports the contention that a "lawyer" in Michigan is an active member of the State Bar of Michigan, because an inactive member clearly cannot represent clients. See, generally, MRPC 1.1 through 8.5. Further, the clear intent of our Supreme Court in promulgating MRPC 1.5 and 5.4 was to avoid potential conflicts of interests such as those that would require a lawyer to share legal fees with an individual who is not a lawyer. See Comment to MRPC 5.4 ("These limitations are to protect the lawyer's professional independence of judgment."); Underwood, supra
The circuit court's method of defining the word "lawyer" must fail as it is contrary to the clear intentions of the Legislature and the intended use of the word in MRPC 1.5(e) and 5.4(a). Likewise, defendant's definition of the word "lawyer" is not correct, as it is contrary to the clear intent of the Legislature and the intended use of the word in MRPC 1.5(e) and 5.4(a).
Defendant contends that the common and ordinary meaning of the word "lawyer" includes experienced, yet not licensed, law professors. Yet, one dictionary defines "lawyer" as "a person whose profession is to represent clients in a court of law or to advise or act for them in other legal matters." Random House Webster's College Dictionary (1997). It is clear that defendant could not represent, advise, or act for anyone, let alone "clients." In addition, defendant's reference to the commentary to MRPC 1.0 to demonstrate that she was a "lawyer" does not support her argument. The commentary to MRPC 1.0 further provides support that the term "lawyer" as used in the MRPC requires active state bar membership, as it states:
Defendant then contends that she was a "lawyer" because, as a law professor, she had a "special responsibility for the quality of justice."
Interestingly, defendant ignores that the commentary demonstrates that a lawyer is three things: a representative of clients, an officer of the legal system, and a public citizen having special responsibility for the quality of justice. Clearly, defendant could not have legally represented clients. Moreover, defendant's assertion that law professors have special responsibilities for the quality of justice and, therefore, are "lawyers" demonstrates the argument's absurdity. Under defendant's analysis, police officers, legislators, and even courtroom news reporters are "lawyers" because of their special responsibilities relating to the quality of justice. In sum, defendant's reasoning supporting her assertion that she was a "lawyer," within the meaning of the MRPC, must fail, because it is contrary to the mandate of the Legislature and the intended use of the word "lawyer" in MRPC 1.5(e) and 5.4(a). Defendant may not designate or represent herself as a "lawyer," nor may courts designate her as a "lawyer," when she is not currently licensed to practice law, albeit because she is on "inactive" status. Any other reading of the statute, MCL 600.916(1), and the applicable rules promulgated by our Supreme Court, in particular MRPC 1.5(e) and 5.4(a), would produce absurd consequences. See McAuley, supra at 518, 578 N.W.2d 282.
Although, as a general rule, courts must provide competent parties the "utmost liberty" to engage in contractual relations, Terrien v. Zwit, 467 Mich. 56, 71, 648 N.W.2d 602 (2002), a contract is valid only if it involves "a proper subject matter." Thomas v. Leja, 187 Mich.App. 418, 422, 468 N.W.2d 58 (1991), citing Detroit Trust Co. v. Struggles, 289 Mich. 595, 286 N.W. 844 (1939). A proposed contract is concerned with a proper subject matter only if the contract performance requirements are not contrary to public policy. Cudnik v. William Beaumont Hosp., 207 Mich.App. 378, 383-384, 525 N.W.2d 891 (1994). Courts must proceed with caution in determining what exactly constitutes Michigan's "public policy," and not merely impose its belief of what public policy should be. In other words, Michigan's "public policy" must be clearly apparent in "our state and federal constitutions, our statutes, and the common law," Terrien, supra at 67, 648 N.W.2d 602, as well as our "administrative rules and regulations, and public rules of professional conduct," id. at 67 n. 11, 648 N.W.2d 602.
A December 3, 1997, letter from plaintiff to defendant sets forth the terms of the contract at issue between the parties. In relevant part, the letter states:
Paul F. Doherty, a member of plaintiff law firm, signed the letter.
The issue then becomes what actions constitute the "practice [of] law" or "engage[ment] in the law business," and, further, whether the contract required defendant to perform such actions. The Legislature does not define these phrases. However, our Supreme Court recently determined that "a person engages in the practice of law when he counsels or assists another in matters that require the use of legal discretion and profound legal knowledge." Dressel, supra at 569, 664 N.W.2d 151.
The contract at issue does not require a performance from defendant that constitutes the "practice of law." Defendant's sole obligation under the terms of the contract is to receive one-third of the attorney fees that plaintiff earned. We do not believe that the solitary act of receiving money, regardless of its connection to the underlying lawsuit, is "the practice of law." Indeed, such an act is quite dissimilar to drafting documents, rendering legal advice, appearing before a judge, or otherwise effecting someone's legal rights. In addition, referring an individual to an attorney and receiving a referral fee does not require defendant to assist "in matters that require the use of legal discretion and profound legal knowledge." Dressel, supra at 569, 664 N.W.2d 151. Stated in the most simple terms, the protection of the public does not require this Court to place the act of receiving money solely in the hands of licensed attorneys. Accordingly, the contract at issue does not require defendant to engage in the "practice of law."
Next, we consider whether the contract requires defendant to "engage in the law business." Although the exact meaning of this phrase has not been jurisprudentially determined, it still has meaning. It is an axiomatic principle of statutory construction that courts must give effect to each phrase of a statutory provision. Electronic Data Sys. Corp. v. Flint Twp., 253 Mich.App. 538, 545, 656 N.W.2d 215 (2002), quoting Pohutski v. Allen Park, 465 Mich. 675, 683-684, 641 N.W.2d 219 (2002). In addition, the Legislature's separation in MCL 600.916(1) of the phrase "practice of law" from the phrase "engage in the law business" with the word "or" expresses the Legislature's conceptual separation of the two. Cf. People v. Nickerson, 227 Mich.App. 434, 439, 575 N.W.2d 804 (1998) (requiring courts to give the word "or" its usual meaning, unless "its sense is ... rendered dubious"); Root v. Ins. Co. of North America, 214 Mich.App. 106, 109, 542 N.W.2d 318 (1995).
The phrase "engage in the law business" seemingly encompasses actions that are related to commercial activity proximate to legal services. Our Supreme Court in Dressel, supra, though not defining the phrase "engage in the law business," did state that "because defendant was not practicing law when it completed the mortgage, it was not engaged in the `law business.' It is immaterial that it charged a fee for its services. Charging a fee for nonlegal services does not transmogrify those services into the practice of law." Id. at 568, 664 N.W.2d 151. In addition, the holding in Dressel, supra at 569, 664 N.W.2d 151,
The issue presented in the present case is different than the issue decided in Dressel, supra. In Dressel, supra, it was determined that completing standard mortgage documents was not the practice of law and, therefore, a person charging fees for completing standard mortgage documents could not be engaged in the law business. However, in the present case, although defendant was not practicing law when she made a referral and would not be practicing law in accepting a referral fee, she did refer the case to plaintiff for work that is considered the practice of law, i.e., tort claim representation. As such, the present case is distinguishable from Dressel, supra, in that plaintiff may have been engaged in the "law business" even though she was not practicing law. We decline to address the issue at this point, as it is unnecessary to the resolution of the case because public policy voids the contract for other reasons, but note the distinction from Dressel, supra.
We find that public policy voids the contract ab initio. The Legislature has chosen to delegate the determination of "public policy" underlying the activities of the State Bar of Michigan to the judiciary. MCL 600.904. This Court has recently held that contracts containing performance requirements that would violate the MRPC are not enforceable because such contracts contradict Michigan's public policy. Evans & Luptak, PLC, supra at 189-197, 650 N.W.2d 364. Specifically, this Court provided:
Enforcement of the contract would require plaintiff to violate the MRPC's prohibition against sharing legal fees with those not permitted to practice law, i.e., inactive members of the state bar. As stated before, MRPC 5.4(a) mandates that "[a] lawyer or law firm shall not share legal fees with a nonlawyer." Plaintiff is a law firm. Contrary to defendant's assertions, defendant is categorized a "nonlawyer," within the meaning intended in MRPC 5.4(a), and as mandated by the Legislature. The contract requires plaintiff to transfer one-third of its earned legal fees to defendant. This would require the sharing of legal fees with a "nonlawyer." Furthermore, defendant does not fall within the exceptions provided in MRPC 5.4 or the exception noted in the Comment to MRPC 5.4 because defendant is not similar to "an organization such as a union-sponsored prepaid legal services plan." Thus, if enforced, the performance requirements of the contract would violate MRPC 5.4(a).
In addition, enforcement of the contract would require plaintiff to violate the MRPC's broad prohibition against paying for referrals. MRPC 7.2(c) states that "[a] lawyer shall not give anything of value to a person for recommending the lawyer's services." The members of plaintiff are lawyers. One-third of plaintiff's earned attorney fees are considered something of value. Defendant is a person. Defendant's consideration was her referral, i.e., recommendation, of the third party to plaintiff. Therefore, the contract's requirement that plaintiff provide defendant with a "referral fee" is contrary to Rule 7.2(c). As such, the performance of the contract would violate Michigan's public policy and, thus, is unenforceable. See Evans & Luptak, PLC, supra at 196, 650 N.W.2d 364.
For the above stated reasons, the referral fee contract between plaintiff and defendant requires performance that contradicts provisions of the MRPC. Thus, as a matter of public policy, the contract is void ab initio. See Evans & Luptak, PLC, supra at 196, 650 N.W.2d 364.
As a final matter, defendant's discussion of, and comparison to, various state bar ethical opinions is not persuasive with regard to the issues presented in the present case. Principally, ethical opinions clearly are not binding on this Court and provide little, if any, precedential value, especially when statutory and judicial rules are completely dispositive with regard to the issues that the parties present. Watts v. Polaczyk, 242 Mich.App. 600, 607, 619 N.W.2d 714 (2000). Plaintiff's citation of State Bar of Michigan Ethics Opinion RI-199 (March 23, 1994) for support is not persuasive.
In sum, the contract at issue is not enforceable. The circuit court improperly determined that defendant was a "lawyer," contrary to the clear mandate of the Legislature and the intended meaning of the term as used in MRPC 1.5(e) and 5.4(a). The contract contains performance requirements that, if completed, would violate statutory provisions and the MRPC. Thus, the contract does not contain a proper subject matter, and is not enforceable because it violates Michigan's public policy. See Evans & Luptak, PLC, supra at 196, 650 N.W.2d 364; Thomas, supra at 422, 468 N.W.2d 58, citing Detroit Trust Co., supra. Consequently, the circuit court erred by enforcing the contract and denying plaintiff's request to declare the contract void ab initio as a matter of public policy.
We reverse the circuit court's opinion and order granting defendant's motion for summary disposition and remand with instructions to enter summary disposition in favor of plaintiff.