Compensation for Legal Services Flashcards
Amount of Lawyer’s Fees
Under the ABA, a lawyer’s fee must be reasonable.
In CA, the fee cannot be unconscionable or illegal. “Unconscionability” has been described by the California Supreme Court as a fee that is so exorbitant and wholly disproportionate to the to the services performed as to shock the conscience.
Amount of Lawyer’s Fees–Factors to Determine Whether the Fee is Ethical
Factors to determine whether the fee is ethical include:
- 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).
Fee Agreements–ABA
Under the ABA, general fee agreements are NOT required to be in writing (except for contingency fee arrangements). However, the ABA requires that the fee be communicated to the client (a writing is encouraged, but not required).
Fee Agreements–CA (General situational requirements)
In CA, ALL fee agreements must be in writing UNLESS:
(a) the fee to be charged is $1,000 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.
Free Agreements–CA (Specific Contract requirements)
In CA, fee agreements MUST include:
(1) how compensation is calculated;
(2) the nature of legal services to be provided; AND
(3) the responsibilities of the lawyer and client.
Contingency Fee Agreement–In General
A contingency fee agreement is an agreement between the lawyer and client, stating that the lawyer’s fees will be paid out of any recovery the client receives.
Contingency Fee Agreement–Requirements
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 lawyer’s percentage is taken out before or after expenses.
In CA, the writing must also 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.
Contingency Fee Agreements–Situations when they’re prohibited
The ABA and CA prohibit contingency agreements for:
(i) domestic relations matters when payment is contingent upon securing a divorce or upon the amount of alimony/support/property settlement obtained – but contingency fees for recovery of post-judgment balances is allowed; and
(ii) representing a criminal defendant.
Contingency Fee Agreements–Failure to Comply with REquirements
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.
Contingency Fee Agreements–Situations where Lawyer will be entitled to 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.
**The lawyer has the burden of proof to establish the
reasonable fee.
Advance Payments & True Retainers
- A lawyer MAY require advance payment of a fee from a client (commonly mislabeled as a “retainer”), BUT is obliged to return any unearned portion.
- In CA, 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. A true retainer is a fee paid to the lawyer to ensure the lawyer’s availability, but not as compensation for legal services.
Fee Divisions Among Lawyers–Generally
A lawyer MAY generally share fees with other lawyers inside of the firm.
Fee Divisions Among Lawyers–ABA
Under the ABA, fees CANNOT be shared with lawyers outside of the firm UNLESS:
(1) the total fee is reasonable;
(2) the client agrees (including the share of each lawyer) and the agreement is confirmed in writing; AND
(3) the division is proportional to the work done by each lawyer, unless each is jointly responsible.
Fee Divisions Among Lawyers–CA
In CA, fees CANNOT be shared with lawyers outside of the firm UNLESS:
(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
Sharing Legal Fees 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 lawyer’s 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 that are shared with a non-profit organization that employed, retained, or recommended the lawyer; OR
(e) a lawyer referral service operated in accordance with California’s minimum standards [CA only].
