Fees, Fiduciary Duties, & 3rd Parties - Fees Flashcards
1.5 - Fees
(a) DON’T COLLECT UNREASONABLE FEES & EXPENSES
Factors:
1) Time and labor, novelty and difficulty of questions, skill required,
2) Likelihood that taking the case will stop the lawyer from taking other work (as long as client can tell),
3) fee normally charged in the area for similar services,
4) amount involved and results
5) time limit imposed by client or circumstances
6) nature and length of relationship with client
7) experience, reputation, ability of lawyer or lawyers performing services
8) whether fee is fixed or contingent
(b) Scope of the rep and and rate of fee and expenses for which client will be responsible shall be communicated to client, in writing, before or within reasonable time after starting rep (except if charging regular client on the same rate). Must communicate any changes to fee & expense rates.
(c) Contingency fees are ok with few exceptions. Contingent fee must be in writing, signed by client, and stating method by which fee is determined. Agreement must notify client of any expenses for which client will be liable regardless of winning/losing. After finishing contingency rep, provide client with written statement with outcome and if there is recovery, showing remittance to client and method for determining it.
(d)
DON’T CHARGE CONTINGENCY FEES FOR DIVORCE OR DOMESTIC RELATIONS
DON’T CHARGE CONTINGENCY FEES FOR CRIMINAL DEFENDANTS
(e) You can divide a fee between lawyers not in the same firm but only if:
1) the fee is divided proportionally for each lawyer or each lawyer assumes joint responsibility for the rep;
2) client agrees to this arrangement, including share each lawyer will receive, and agreement is confirmed, AND
3) total fee is reasonable.
1.15 Safekeeping Funds
NO COMMINGLING
(a) Lawyer SHALL hold client’s or 3rd person’s property SEPARATELY from lawyer’s. Funds must be kept in a separate account in the state where lawyer’s office is located or somewhere with consent. Complete records of that property/funds must be preserved by lawyer for 5 years after ending rep.
(b) Lawyer may deposit lawyer’s own funds in client trust account ONLY in the amount needed to pay bank service charges.
(c) Lawyer shall deposit legal fees and expenses paid in advance into client trust account. ONLY WITHDRAW FEES/EXPENSES AS EARNED/INCURRED.
(d) After receiving funds/property from client/3rd person, lawyer SHALL notify client/3rd person. Lawyer SHALL promptly deliver to client/3rd person leftover funds and SHALL render full accounting about it.
(e) When lawyer is in possession of property in which 2+ persons claim interests, property shall be kept separate by the lawyer until the dispute is resolved. Lawyer shall promptly distribute all portions of property where interests aren’t disputed.
Exceptions about Client Funds
If the funds are nominal, and for a short time, they can be pooled together.
When a client gives you money in a trust account, they normally don’t get interest. They probably lost money to inflation. In states like Iowa, nominal amounts in client trust accounts get pooled together by banks and go into pooled interest accounts (the IOLTA) an interest-bearing pooled shared account. All the interest on the retainers in all the banks get channeled into legal aid to pay for legal fees for those who can’t pay for a lawyer.
Those clients who put in a ton of money over a long period of time get to keep their interest.
Can you double dip hours? Like taking a flight to one client’s city while working on another client’s issue during the flight?
No. No double-dipping hours.
Flat Fee Considerations
If you take a case on a flat fee, such as doing a whole case for $1,000, you’ll want to predict how much time it’s going to take.
If it takes too long, you lose, if you finish instantly, you win.
MPRE Classic Fees Question - Notice Timing
Say your rate is $100 per hour and you worked 10 hours in a month, for $1000 fee. You agreed in the scope of your writing that you’ll withdraw money from the trust account at the start of the month.
Can you take the money out on November 1st or do you have to send out the notice? How late can you send notice?
The answer depends on state law.
Option 1 - Notice first then withdrawal after - Safest option, this is fine in all states.
Option 2 - Same-day notice + withdrawal - This is the rule in most states. It’s the latest you can give notice (on the same day).
YOU CANNOT WITHDRAW BEFORE GIVING NOTICE in any state.
Retainer v. Special Retainer
General Retainer = A fee paid to ensure the lawyer will be available for a client.
Special Retainer = Advance payment of fees that the client anticipates owing lawyer in the future.
Most people who say “retainer” are actually referring to special retainer.
Most states prohibit nonrefundable special retainers because if you haven’t earned all of the money, you shouldn’t be able to take all of it from the client when you haven’t earned it all yet.
General and special retainer with a married couple? Joint representation problem. If they divorce, you must drop both due to the duty of loyalty.
Commingling Issues
Don’t mix your money and the client’s money.
Obvious commingling = putting your own money in the same account as the client’s money, or putting their money in your account before you’ve earned it.
Less obvious commingling = putting a lien on your client’s car then driving it around too soon.
Third-Party Commingling Issues
Third parties may pay the client’s bills, so you should put that third-party money in that client’s trust account. Third party still cannot make decisions or access client confidences.
MPRE Classic Fees Question - Client Trust Accounts
What if you took 1k out of the client’s trust account but the client disputes $500? How much do you have to put back in? The whole amount? Nothing?
Put back in exactly 500, because that’s the disputed amount. Disputed funds stay in the trust account and should be kept there.
Thomas v. Bannum Place of Saginaw
Dog fable - dog has a piece of meat in its mouth, walks along the river, and sees its own reflection (a dog with meat in its mouth). The dog wants that meat too, so it bites at its own reflection and drops the real meat it was carrying into the river in the process, thereby losing both.
The attorney here overcharged their client and sought an excessive amount of money. The judge said they get nothing.
