(7) Professional Responsibility: Fees Flashcards
ABA vs CA
Fee Amount
ABA Rule: A lawyers fees must be reasonable.
CA Rule: A lawyers fee cannot be unconscionable or illegal. Unconscionability is a fee that is so exorbitant and wholly disproportionate to the services performed as to shock the conscience.
Factors to determine when a fee is ethical
Fee Amount
The time, skill, experience, degree of specialty, and difficulty required for the task; preclusion of other employment; amount and whether the fee is fixed/contingent; relationship with the client; services performed and results obtained; and whether the lawyer engaged in wrongdoing (fraud, overreaching, failure to disclose).
General Fee Agreement (ABA)
General fee agreements are not required to be in writing (except for contingency fee arrangements). However the fee must be communicated to the client and a writing is encouraged by not required.
Rule & Exceptions:
General Fee Agreement (CA)
All fee agreements must be (1) in writing unless (a) the fee to be charged is $1K or less; (b) the work is routine work for a regular client; (c) the client is a corporation; (d) the client states in writing, after full disclosure that a written fee agreement is not required; (e) an emergency to avoid foreseeable prejudice to the client’s rights/interests; OR (f) circumstances making a written agreement impractical.
A Fee Agreement Must Include: (2) how compensation is calculated; (3) the nature of legal services to be provided; AND (4) the responsibilities of the lawyer and client.
Definition:
Contingency Fee Agreements
A contingency fee agreement is an agreement between the lawyer and client, stating that the lawyers fees will be paid out of any recovery the client receives.
Requirements w/CA differences:
Contingency Fee Agreements
A contingency fee agreement must (1) be in a writing signed by the client; AND (2) include (i) the percentage of recovery the lawyer will take, (ii) the expenses that will be deducted from recovery and (iii) whether the lawyers percentage is taken out before or after expenses, Plus In CA, the writing must include, (3) how work or expenses not covered by the contingency fee will be charged; AND (4) that the fee is not set by law and is negotiable.
When are they prohibited?
Contingency Fee Agreements
The ABA and CA prohibit contingency agreements for (a) domestic relations matters when payment is contingent upon securing a divorce or upon the amount of alimony/support/settlement obtained; AND (b) representing a criminal defendant.
Reasonable Fee
Contingency Fee Agreements
Failure to comply with these rules renders the agreement voidable at the option of the client but the lawyer will still be entitled to collect a reasonable fee. A lawyer is also entitled to a reasonable fee when (a) there is a division of contingent fees between successive lawyers (i.e., a contingency fee lawyer has withdrawn with good cause OR is discharged by a client prior to deriving a recovery and there is a later recovery); OR (b) a disqualified lawyer may be entitled to recovery for services performed prior to their removal under the unjust enrichment doctrine.
Who has the burden of proof to determine the fee is reasonable?
Contingency Fee Agreement
The lawyer has the burden of proof to establish the reasonable fee.
Definition:
Advance Payments & True Retainers
Definition: A true retainer is a fee paid to the lawyer to ensure the lawyers availability but not as compensation for legal services.
ABA vs CA
Advance Payments & True Retainers
ABA Rule: A lawyer may require advance payment of a fee from a client but is obliged to return any unearned portion.
CA Rule: A lawyer may charge a non-refundable “true-retainer” but only if the client agrees in writing after disclosure that the fee is non-refundable.
Fee Sharing Amoungst Lawyers - Inside the Law Firm
A lawyer may share fees with other lawyers inside of the firm
Fee Sharing Amoungst Lawyers - Outside the Law Firm (ABA)
A lawyer cannot share fees with lawyers outside of the firm unless (1) the total fee is reasonable; (2) the client agrees (including the share for each lawyer) in writing; AND (3) the division is proportional to the work done by each lawyer.
Fee Sharing Amoungst Lawyers - Outside the Law Firm (CA)
“Pure Referral Fees” are allowed meaning that fees can be shared with a lawyer outside the firm without requiring that referring lawyers continued involvement in the matter. However, the following is required in order to share fees with a lawyer outside of the firm (1) the lawyers enter into a written division agreement; (2) the client consents in writing after full written disclosure; AND (3) the total fee is not increased by virtue of the fee division agreement.
Rule & Exceptions w/ CA Differences:
Fee Sharing with Non-Lawyers
A lawyer or law firm cannot share legal fees with a non-lawyer (including referral fees). Except for: (a)death benefits paid to the deceased lawyer’s estate or heirs; (b) payments to a lawyers estate/representative for the purchase of the lawyer’s practice; (c) compensation or retirement plan payments to non-lawyer employees – even if the plan is based on profit sharing; (d) court-awarded legal fees shared with a non-profit organization that employed, retained, or recommended the lawyer; OR (e) non-court awarded legal fees shared with a non-profit organization wherein (i) the fees arise from settlement or other resolution of a matter; (ii) in which the non-profit organization employed, retained or recommended the lawyer; (iii) the non-profit qualifies as a 501(c)(3) organization under the Internal Revenue Code; (iv) the lawyer entered into a written agreement to divide the fee with the non-profit; (v) the client consent is obtained in writing; AND In CA (vi) the total fee charged is not increased solely by the agreement to divide the legal fees ; OR (f) In CA a lawyer referral service operated in accordance with CA’s minimum standards.
