John Steele (Steele Ethics LLC)

LEGAL ETHICS:FEES AND FEE AGREEMENTS

John Steele (Steele Ethics LLC)www.johnsteelelaw.com

John SteeleSteele Ethics LLC

California CLE Provider 14306

www.johnsteelelaw.comjohn.steele@johnsteelelaw.com

650-320-7662 (USA)© John Steele 2012

Topics1. What law governs?2. Types of fees3. Life-cycle of fee agreements

a) Formalitiesb) Enforcement mechanismsc) Modificationd) Disputes/Arbitration

4. Sharing Fees

1What Law Governs?

ABA Model Rules Approach

MR 1.5

MR 1.8

MR 1.16

MR 1.7, 5.4, 7.2

Rules Unique to States

e.g., California

Quirky and statutory

Little in the rules

State Statutes

MICRA(medical malpractice)

Federal Statutes & Courts

2Types of

Fees

Hourly

Dominant approach

Basis for lodestar calculations

Hourly

Usually the basis for statutory awards

Perdue v. Kenny A., 130 S.Ct. 1662 (2010)

Hourly

Usually the basis when commercial contract provides attorneys fees

Contingency Fees

Heavily regulated

ABA 1.5

State statutes

Flat

Family law & criminal defense

Increasingly, corporate matters

Lots of confusion!

Stock in client

Permitted but heavily regulated!

ABA MR 1.8(a)

ABA Op. 00-418

Quantum Meruit

“Off contract” recoveries

Often similar to lodestar

Look at 8 factors of 1.5

3Lifecycle of

Fee Agreements

Lifecycle1. Initial negotiation2. Formalization3. Enforcement

mechanisms4. Re-negotiation5. Withdrawal for

nonpayment6. Satisfaction7. Disputes/Arbitration

Initial Negotiation

1. “Arms length”2. Regulations set

limitations

Formalities: Hourly & FlatMust communicate the basis

“Preferably in writing”

“Desirable” to have written explanation

Client knows and agrees?

Reasonable? (8 factors of 1.5)

Formalities: Contingency

Two writings; one signed by client

Details

Gross or net

Disbursement disclosure

Formalities: Contingency

No contingency for:

Criminal defense Domestic

relations (securing divorce, support, property)

Permitted for collecting support or property following divorce

We – Us - You

Ambiguouspronouns

“Attorney”“Firm”“Client”“Acme”

Define Client – One Client Clause

Exclude:

FoundersInventorsOfficersAgents

Define Client – One Client Clause

Exclude:

AffiliatesParentsSubsidiaries

Limiting the Scope of Work

e.g.,

Tax,Appeals,Insurance

Enforcement Mechanisms: Liens

Liens (charging; possessory)

Writing required?

Possessory lien permitted on client file? (ABA says no)

ABA Op 02-427 & Inf. Op 593

Writing signed by client; advise client in writing of desirability of independent legal counsel

Applies to taking stock in client

Enforcement Mechanisms: RetainersGeneral Retainers

Availability Earned on receipt

Special Retainers: Advance fees Replenishing Security Deposit Pre-trial

Douglas R. Richmond, Understanding Retainers and Flat Fees, 34 J. Legal Prof. 113 (2009)

Enforcement Mechanisms: Flat FeesNon-refundable? (In re Cooperman, 633 N.E.2d 1069 (N.Y. 1994))

Where to keep the flat fee while work is done?

In re Mance, 980 A.2d 1196 (D.C. 2009); DC Op. 355

Contractual “milestones”?

Enforcement Mechanisms: 3rd Party Payers

Need client’s “informed consent” (1.8(f))

Don’t let them interfere!

Don’t share client confidences!

MR 1.7, 1.8, 5.4

Modification

ABA Op 11-458

Be fair!

State your case in the modification

WSC?

AIWDSILC?

Withdrawal

MR 1.16

Give a warning!

Did you have a writing?

Judge can make you stay on the job

Return unearned fees!

Disputes/Arbitration

Does your state have MFA?

Good idea?

Lose legal defenses?

Gain privacy, speed?

4Sharing

Fees

Fee Sharing

Sharing fees with non-lawyers: Forbidden Salary ok Profit-sharing

ok

In-house lawyer (ABA Op. 95-329)

Fee Sharing

Division of fees with lawyer at other firm

Permitted, if: In proportion to

services rendered; or

If both lawyers assume joint responsibility; and

Client consent is confirmed in writing

Fee Sharing: Referral Fees

ABA: Forbidden under 7.2(b)(anything of valueMany states ok

Fee Sharing with Non-profits

MR 5.4

Topics1. What law governs?2. Types of fees3. Life-cycle of fee agreements

a) Formalitiesb) Enforcement mechanismsc) Modificationd) Disputes/Arbitration

4. Sharing Fees

John SteeleSteele Ethics LLC

California CLE Provider 14306

www.johnsteelelaw.comjohn.steele@johnsteelelaw.com

650-320-7662 (USA)© John Steele 2012