The Kentucky Supreme Court recently ruled on a significant legal dispute involving attorney fee allocation in the case of Emery Law Office, Inc. v. Joel Franklin, docket number 2024-SC-0306. The court's decision, rendered on June 25, 2026, affects how law firms can structure separation agreements with their attorneys. This ruling is particularly important for attorneys and law firms across Kentucky as it addresses the enforceability of fee allocation provisions in employment agreements.
The case centers around the Emery Law Office, which employed Joel Franklin as an associate attorney. After Franklin's termination in April 2022, a disagreement arose over a fee allocation provision in their separation agreement. This provision stated that if clients chose to continue their representation with Franklin after his departure, Emery would receive 75% of any contingency fees earned from those cases. Franklin contested this arrangement, leading to legal proceedings that ultimately reached the Kentucky Supreme Court.
Initially, the Jefferson Circuit Court ruled in favor of Emery, enforcing the fee allocation clause. However, Franklin appealed, and the Kentucky Court of Appeals reversed that decision, stating that the provision violated public policy as outlined in the Kentucky Rules of Professional Conduct, specifically SCR 3.130(5.6). The Court of Appeals found that the provision imposed a financial disincentive on Franklin, potentially limiting his ability to practice law. Emery then sought discretionary review from the Kentucky Supreme Court.
In its ruling, the Kentucky Supreme Court reversed the Court of Appeals' decision, reinstating the circuit court's judgment. Justice Thompson, writing for the court, stated, "The separation agreement here did not explicitly restrict Franklin’s ability to practice law." The court emphasized that all clients were informed of their options regarding representation, and Franklin was not prevented from practicing law or accepting new clients.
The court also clarified that the fee allocation provision did not violate public policy. It noted that the agreement was a valid contract and that the record did not show any actual or functional restriction on Franklin's practice. The court further distinguished this case from its previous ruling in Baker v. Shapero, stating that a quantum meruit analysis—used to determine fair compensation in disputes between successive attorneys—was not required in this instance since a valid agreement governed the fee allocation.
This ruling has significant implications for attorneys and law firms in Kentucky. It affirms the validity of fee allocation provisions in separation agreements, provided they do not impose direct restrictions on an attorney's ability to practice. The court's decision reinforces the principle of freedom to contract, allowing law firms and attorneys to negotiate terms that suit their business relationships.
Moving forward, this ruling may encourage law firms to draft clearer separation agreements that include fee allocation provisions, knowing that such agreements can be enforced as long as they comply with professional conduct rules. Additionally, attorneys may feel more secure in their ability to negotiate their terms of separation without fear of violating public policy.
As for what lies ahead, it remains to be seen whether Franklin or any other party will seek to appeal this ruling or if related cases will emerge. The Kentucky Supreme Court's decision sets a precedent that could influence future disputes involving attorney separation agreements and fee allocation. Legal experts will likely analyze this ruling to understand its broader implications for attorney-client relationships and contract law in Kentucky.