Duty of Financial Responsibility Flashcards
Attorney’s Fee
CA??
ABA Rules state that an attorney’s fee must be reasonable. Many factors are considered in determining the reasonableness of a fee, including:
* the time and labor required;
* the novelty and difficulty of the questions involved;
* the skill required to perform the legal service; and
* the experience, ability, and reputation of the attorney.
California Rules similarly prohibit “unconscionable” fees.
Fee Agreement (or lack of one)
ABA Rules don’t require a non-contingent fee agreement to be in writing, although it is recommended. Therefore, an oral fee agreement is proper. A fee agreement must contain:
* scope of representation
* basis for calculating the fee, and
* any expenses the client is responsible for
California requires a written fee agreement if fee will exceed $1,000, EXCEPT in the following situations:
* (i) client is a corporation;
* (ii) the client states in writing that she does not want a written fee agreement;
* (iii) routine services: legal services are the same kind of services that the client has previously received and paid for; and
* (iv) emergency: the lawyer acted in an emergency to protect the client’s rights, or
* (v) a writing is impractical for other reasons.
- Does the fee exceed $1K?
- Was there written agreement explaining the basis or rate of the fee?
- Is the client a corporation?
Client asking lawyer about criminal/fraudulent conduct
A lawyer may not counsel a client to engage in criminal or fraudulent conduct or assist the client with such conduct, but a lawyer may discuss the legal consequences of the conduct and counsel and assist a client to make a good faith effort to determine the validity, scope, meaning, or application of a law.
- Arguing for modification of existing decisional law is PROPER (not ethical violation)
- Ex. For CA marijuana laws, can counsel client on federal laws that ban marijuana.
Lawyer gets property for services
Lawy gets proprietary interest in litigation
CA?
Ex. Ownership interest in business
Under the ABA, a lawyer may accept property in return for services, UNLESS it is a prohibited proprietary interest in the cause of action or subject matter of litigation.
* EXCEPTION to this rule is where a lawyer contracts with a client for a reasonable contingent fee in a civil case or for a lien authorized by law.
* California does not have an equivalent rule.
Business Transaction (Property for Services)
ABA AND CA THE SAME
Assess property for services, business transaction rules, and reasonableness of fee
ABA and California Rules, the lawyer’s acceptance of property in return for services is also subject to scrutiny as a conflict of interest because it may be a business transaction between the lawyer and the client.
Lawyer must not enter into a business transaction with a client or knowingly acquire an ownership or other pecuniary interest adverse to a client UNLESS:
(i) the terms are fair to the client;
(ii) the terms are fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client;
(iii) the client is informed in writing of the desirability of seeking, and is given a reasonable chance to seek, the advice of independent outside legal counsel on the transaction; and
(iv) the client gives informed consent in a signed writing
(First Discuss Over Coffee)
- Check to see if client was sophisticated or not (part of whether client reasonably understood implications of agreement)
Contingent Fee
Agreement?
Under a contingent fee agreement, a client only pays if a certain conduct or result is reached. A lawyer may contract with the client for a reasonable contingent fee in a civil case but NOT in a:
* criminal case, where lawyer is representing the defendant, or
* domestic relations cases, where the contingency is securing a divorce, the amount of the property settlement, or the amount of alimony or child support
Contingent fee agreement must be:
* in writing and signed by the client,
* reasonable,
* disclose how the fee will be calculated
* indicate litigation and other expenses to be deducted from the recovery
* whether such expenses are to be deducted before or after the contingent fee is calculated
* what expense client must pay regardless of the outcome
CA: requires how work not covered by contingency fee will be paid + statement that lawyer’s fees are negotiable
Sharing Fees with Nonlawyer
Ex. Unlicensed/disbarred attorney
A lawyer may not share fees with a non lawyer (subject to limited exceptions).
- If the lawyer paid an unlicensed/disbarred attorney directly from the legal fees, it was an ethical violation.
Financial Assistance to Clients
ABA Rules prohibit a lawyer from providing financial assistance to a client in connection with pending or contemplated litigation, except that:
* (i) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter;
* (ii) a lawyer representing an indigent client may pay the client’s court costs and expenses outright; and
* (iii) under certain circumstances, a lawyer representing a client pro bono basis may provide modest gifts to the client for **basic living expenses **
California Rule is more detailed:
* (i) it applies in all contexts, not just litigation;
* (ii) it prohibits a lawyer from “buying” a potential client with a promise to pay the potential client’s personal or business debts; and
* (iii) it provides that after the lawyer is hired, regardless of the client’s financial status, the lawyer may lend the client money for any purpose if the client gives him a written promise to repay the loan
- Was it an an advancement of client’s litigation expenses? Then it’s OK under ABA and CA rules.
- If living expenses, NOT ok unless lawyer representing client on pro bono basis under ABA. Under CA, ok only if client gave written promise to repay the loan.
Payment for Recommendation
Ex. Expensive dinner for every successful referral
A lawyer generally must NOT give anything of value to a person for recommending the lawyer’s services.
EXCEPTION:
* lawyer may give a gift or gratuity as a token of appreciation to a person who recommended the lawyer or the lawyer’s firm, provided the gift or gratuity was not offered or given in consideration of an understanding that such gift of gratuity would be forthcoming or that referrals would be made or encouraged in the future.
Payment from Third Parties
Under the ABA Rules, a lawyer must NOT accept compensation for representing a client from someone other than the client unless:
* (i) the client gives informed consent;
* (ii) there is no interference with the lawyer’s independence of professional judgment or with the lawyer-client relationship; and
* (iii) information relating to the representation of a client remains confidential.
California further requires that the client give informed written consent.
Example: Here…the third party offered to pay attorney fees for ___…
- Lawyer might not have independent judgment because…
- Would be hard to ensure confidential information of the client is not revealed to the third party because…
- Especially hard if the lawyer is representing multiple parties and the third party is a client
- Therefore, the lawyer violated ABA Rules and California Rules by agreeing to accept compensation from the third party.
Duty not to commingle finances with client trust account
All money that a lawyer receives in connection with a representation (whether from the client or a third party) must promptly be placed in a client trust account, separate from the lawyer’s own personal and business accounts.
* lawyer must never place their own money or their firm’s money into the client trust account, except for the sole purpose of paying bank service charges.
* has duty to safeguard client trust account
CA: Same except it also applies to funds received/held for benefit of client OR benefit of third party to whom lawyer owes legal duty
* Trust account must be maintained in CA
