Fees and Property

Question 1

Restrictions on legal fee amount (ABA rule)

Answer 1

A lawyer must not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.

Question 2

What factors are considered in determining whether a fee is reasonable?

Answer 2

1. time and labor
2. skill required
3. customary fee
4. reputation of the attorney
5. whether the fee is fixed or contingent
6. opportunity for the lawyer
7. time constraints
8. amount involved and result obtained

Question 3

Restrictions on legal fee amount (California rule)

Answer 3

California prohibits illegal or unconscionable fees

Question 4

Is double billing permitted by the ABA?

California exception applies

Answer 4

Ordinarily, “double billing” is considered unreasonable and dishonest.

In CA: doube billing is allowed if: (i) the fee charged to each is “not unconscionable”; (ii) the lawyer clearly disclosed the billing practice at the outset of the relationship; and (iii) the lawyer obtained both client’s consent

Question 5

General rule for fee agreements

Answer 5

A lawyer must, before or within a reasonable time after commencing a representation, communicate the basis or rate of the fee and the expenses for which the client will be responsible.

Although writing is preferable, it is generally not required (except for contingent fee agreements).

The lawyer has an ongoing duty to communcate any changes regarding the fee amount.

Question 6

What is the exception to the communication requirement surrounding legal fees?

Answer 6

If the lawyer regularly represents the client and will be charging the same basis rate as in other matters, the lawyer need not communicate the fee arrangement each time.

Question 7

Rules regarding fee agreements in California

Answer 7

If it is reasonably foreseeable that the total expenses to the client will exceed $1,000 the fee agreement must be in writing to be enforceable.

However, even if the fee exceeds $1,000, a written agreement is not required in any of the following situations:
1. the client is a corporation
2. the client states in writing that they do not want a written fee agreement
3. the legal services are the same kind of services that the client has previously received and paid for
4. the lawyer acted in an emergency to protect the client’s rights
5. a writing is impractical for other reasons

Question 8

What is the difference between advanced payments and true retainers?

Answer 8

A lawyer must refund the unearned portion of an advance if the client fires the lawyer or the lawyer does not perform the services

A lawyer is not required to refund a true retainer fee, as it is not compensation for legal services.

Question 9

Can a lawyer accept property in return for services?

Answer 9

A lawyer may accept property in return for services. However, such arrangements are subject to scrutiny as a conflict of interest because they may constitute business transactions

Question 10

Contingent fees

California exception applies

Answer 10

A contingent fee is a fee that is dependent on the successful resolution of the client’s case.

A contingent fee must be reasonable and may not be used when a lawyer knows it is unreasonable to do so

In CA: there are limts on the amount of contingent fee agreements in medical malpractice cases.

Question 11

Writing and disclosure requirements for contingent fees

California exception applies

Answer 11

All contingent fee agreements must be in writing and signed by the client, and must disclose:
1. how the fee was calculated
2. what expenses will be deducted from the recovery
3. whether expenses will be deducted before or after the contingent fee is calculated
4. what expenses the client must pay regardless of the outcome

In CA: there are two additional requirements. (i) that the lawyer’s percentage is not set by law and can be negotiated between the lawyer and client; and (ii) how the client will be charged for work and covered by the contingency

Question 12

Discharge of lawyer on contingency

Answer 12

A client is free to discharge a lawyer hired on a contingency basis at any stage of the proceedings.

Usually, the discharged lawyer will be entitled to the reasonable value of their services performed up to the time of discharge; however, the lawyer is not entitled to get paid unless and until the client recovers.

Question 13

When are contingent fees prohibited?

Answer 13

A lawyer must not enter into a contingent fee agreement in either of the following circumstances:
1. defending a client in a criminal case
2. representing a client in a domestic relations case

Question 14

What must a lawyer do with money received in connection with representation?

Answer 14

All money must be placed in a client trust account, separate from the lawyer’s own personal and business accounts.

The lawyer cannot place their own money into said account.

The interest after bank services charges goes to the client.

Question 15

What should a lawyer do if the client’s funds are too small in amount or held too briefly to earn interest for the client?

Answer 15

The lawyer must place the client’s funds into a “pooled client trust account” (a.k.a. IOLTA ccount)

Question 16

Placement of advanced payments

California exception applies

Answer 16

An advance payment from a client must be put into the client trust account, to be withdrawn by the lawyer only as fees are earned or expenses incurred.

In CA: the rule also provides that a flat fee mau be deposited into the firm’s operating account, provided that the lawyer disclose to the client in writing that the client: (i) has a right to require that the flat fee be deposited in a client trust account until it is earned; and (ii) is entitled to a refund of any unearned amount of the representation is terminated or the services are not rendered.

Question 17

Requirements for safekeeping and delivery of property

Answer 17

1. identify and label securities and properties of the client or third person and put them in a safe deposit box
2. promptly notify the client or third person when the lawyer receives funds funds or property in which the client or third party had an interest
3. promptly deliver fiunds or property to which the clienr or third party is entitled
4. keep records for at least 5 years after final distribution of the property

Question 18

Splitting legal fees with other lawyers in the firm

Answer 18

Partners and associates can pool and split legal fees however they like

Question 19

Splitting legal fees with outside lawyers (ABA rule)

Answer 19

A lawyer may share legal fees with a lawyer at a different firm if:
1. the total fee is reasonable
2. either: (i) the split is in proportion to the services performed by each lawyer, or (ii) the split is in some other proportion if each lawyer assumes joint responsibility
3. the client agrees to the split in a writing that discloses the share each lawyer will receive

Question 20

Splitting legal fees with outside lawyers (California rule)

Answer 20

The CA rule allows “true” referral fees; it does not require that the split be proportionate to services or that the lawyers assume joint responsibility.

The following is still required:
1. the agreement must be in writing
2. the total fee charged by all lawyers must not be increased solely by reasons of the agreement to divide fees
3. client must consent to the division

Question 21

Splitting legal fees with nonlawyers (ABA rule)

Answer 21

A lawyer must not share legal fees with nonlawyers except when:
1. paying death benefit to a dead lawyer’s estate
2. purchase a law practice of a dead, disabled, or disappeared lawyer
3. including nonlawyers employees in a compensation or retirement plan
4. sharing court awarded legal fees with a nonprofit organization that employed the attorney

Question 22

Splitting legal fees with nonlawyers (California rule)

Answer 22

California recognizes two additional permitted grounds:
1. sharing non-court awarded legal fees with nonprofit organizations
2. payments to lawyer referral services