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LEGAL ETHICS:FEES AND FEE AGREEMENTS
John Steele (Steele Ethics LLC)www.johnsteelelaw.com
John SteeleSteele Ethics LLC
California CLE Provider 14306
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
650-320-7662 (USA)© John Steele 2012
