Legal Fees - June 27 & 29 Flashcards
What are retainers? (Lerman)
Both the agreements that initiate most lawyer client relationships and the initial fees that clients pay are usually called “retainers.” (718)
What MPC governs the reasonableness of legal fees? (Lerman)
Rule 1.5 (719)
Must the disclosure of a lawyer’s fee be in writing? (Lerman)
No, unless the lawyer intends to charge a contingent fee. The rule recommends but does not require that the disclosure be in writing. (728)
Does the lawyer have to disclose fee and expense information before starting work on the matter? (Lerman)
No. The rule says the disclosure must occur “before or within a reasonable time after commencing the representation.” If a client needs services urgently, such as a jailed client who needs legal assistance in order to be released, it might be appropriate to postpone discussion of fee information until after the work has begun. Absent such circumstances, principles of contract law require articulation of terms before an enforceable fee agreement comes into existence. (728)
Must the lawyer estimate the amount of time she will spend or the total fee? (Lerman)
No. (728)
A woman was arrested for driving while intoxicated. The woman’s mother, worried for her daughter’s future, met with a lawyer who had a great deal of experience defending against criminal driving-while-intoxicated charges. The lawyer informed the woman’s mother that the lawyer’s retainer would be $3,000. The woman’s mother paid the $3,000 retainer, and the lawyer commenced the representation. The woman did not attend the meeting or discuss the representation with either her mother or the lawyer before her mother engaged the lawyer.
Did the lawyer improperly commence the representation of the woman? (Q)
Yes. The lawyer improperly commenced the representation of the woman. Because third parties paying for a representation may have different interests from the client (e.g., minimizing the amount spent on the representation), a lawyer must not accept compensation for representing a client from someone other than the client, unless:
the client gives informed consent;
there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and
information related to the representation is protected as required by the lawyer’s duty of confidentiality.
Here, the lawyer accepted the $3,000 retainer from the mother and commenced the representation of the woman without first obtaining the woman’s informed consent to the arrangement. Thus, the lawyer improperly commenced the representation.
Must a lawyer’s fees and expenses be reasonable under the circumstances? (Q)
Yes. A lawyer’s fees and expenses must be reasonable under the circumstances. In other words, a lawyer may not charge or collect an unreasonable fee, nor may a lawyer charge or collect an unreasonable amount for expenses.
What factors do the MRPC specify as relevant in assessing whether a lawyer’s fee is reasonable? (Q)
The MRPC specify that the following factors are relevant in assessing whether a lawyer’s fee is reasonable:
the time, labor, and skill required to render the services, including the novelty and difficulty of the questions involved;
the apparent likelihood that accepting the representation will preclude the lawyer from taking other employment;
the fee customarily charged for similar services in the same geographic area;
the amount of money at stake and the results achieved;
the time constraints imposed either by the client or by the circumstances;
the nature and length of the lawyer’s professional relationship with the client;
the lawyer’s experience, reputation, and ability; and
whether the fee to be charged is fixed or contingent.
The MRPC’s comments caution that this is not an exhaustive list, and not all of these factors will be relevant in every situation.
At what point in the representation must a lawyer communicate to a client the basis or rate of the lawyer’s fee and the other expenses for which the client will be responsible? (Q)
With limited exceptions, a lawyer must communicate to a client, preferably in writing, the basis or rate of the lawyer’s fee and other expenses for which the client will be responsible:
before commencing the representation or
within a reasonable time after the representation begins.
In a new client-lawyer relationship, the lawyer should promptly establish an understanding as to fees and expenses to avoid misunderstanding. The lawyer must also communicate to the client any changes in the basis or rate of the fee or expenses.
In what circumstance is a lawyer not required to communicate fee and expense information to a client before or within a reasonable time after commencing a representation? (Q)
Although a lawyer generally must communicate to a client the applicable fees and expenses before or within a reasonable time of commencing a representation, this is not required if the lawyer will be charging a regularly represented client on the same basis or rate as in the past. Lawyers and clients in this situation typically develop an understanding about financial matters, including fees and expenses, that renders regular communication unnecessary.
Must a contingent-fee agreement be memorialized in a writing signed by the client? (Q)
Yes. A contingent-fee agreement (i.e., an agreement that the lawyer’s fee is dependent on the outcome of the representation) must be memorialized in a writing signed by the client. The agreement must state the method by which the fee is to be determined, including:
the percentage of the recovery that will go to the lawyer in the event of settlement, trial or appeal;
litigation and other expenses that will be deducted from the recovery; and
whether those expenses will be deducted before or after the lawyer’s contingent fee is calculated.
Additionally, a contingent-fee agreement must clearly notify the client of any expenses for which the client will be liable regardless of the outcome of the representation.
At the end of a matter that involves a contingent fee, must the lawyer give the client a written statement summarizing the outcome and the fee? (Q)
Yes. At the end of a matter that involves a contingent fee, the lawyer must give the client a written statement summarizing the outcome and the fee. If the representation results in a recovery for the client, the statement must show (1) the remittance to the client and (2) how the remittance was calculated.
In what two circumstances is a lawyer prohibited from charging a contingent fee? (Q)
A lawyer is prohibited from charging a contingent fee:
in a domestic-relations matter, if the payment or amount of the fee is contingent on obtaining a divorce or on the amount of alimony, support, or property settlement and
for representing a defendant in a criminal case.
These prohibitions are based on policy considerations. In a domestic-relations matter, public policy supports reconciliation, and a lawyer who gets paid only upon obtaining a successful divorce would have a pecuniary interest in discouraging a reunion. In a criminal matter, a contingent-fee arrangement may create an incentive for a lawyer to act contrary to the client’s best interests, e.g., by encouraging the client not to take a plea deal if the lawyer hoped to receive a higher fee by taking a chance on a jury trial.
What is a fee division? (Q)
A fee division, also called fee splitting, occurs when two or more lawyers who are not in the same firm share a single fee for legal services. A fee division is permissible if:
the fee division is proportionate to each lawyer’s work on the case, or each lawyer takes joint responsibility for the entire matter;
the client has agreed in writing to the fee division and the amount of each lawyer’s share; and
the total fee is reasonable.
