Let's Be Reasonable
Posted Mar 01, 2008 08:50 pm CST
The widely accepted ethics standard for lawyer fees is deceptively simple.
Rule 1.5 of the ABA Model Rules of Professional Conduct prohibits fees that are “unreasonable.” In other words, lawyers may only charge fees—or recover expenses—that are “reasonable.” Disciplinary bodies, courts and other tribunals generally apply that standard when they evaluate fees and expenses.
But the simplicity pretty much ends there, primarily because there is no bright-line test for what is reasonable.
Model Rule 1.5 requires that the lawyer communicate with the client regarding the scope of the representation, and the basis or rate of fees and expenses. The only exception to that requirement is when the lawyer regularly represents the client and they have an ongoing understanding about fee arrangements. The rule prefers that lawyers communicate with clients in writing regarding fees and expenses, but it mandates a written agreement only in contingent fee cases. (The ABA Model Rules are the basis for most state professional conduct rules, which directly govern lawyers.)
A meeting of the minds between lawyer and client does not necessarily mean, however, that a fee agreement is reasonable in the eyes of disciplinary tribunals or courts. A case in point is In re Sinnott, 845 A.2d 373 (2004), where the Vermont Supreme Court affirmed a disciplinary panel’s finding that a fee was unreasonable even though it was based on a valid contract knowingly signed by the client. The court said it is unethical for lawyers to charge unreasonable fees “even if they are able to find clients who will pay whatever a lawyer’s contract demands.”
Lawyers seeking guidance on what constitutes a reasonable fee should start by reviewing eight factors listed in Model Rule 1.5(a):
- The time and labor required for the matter, the novelty and difficulty of the questions involved, and the skill necessary to handle the matter properly.
- The likelihood, if apparent to the client, that taking on this matter will preclude other employment by the lawyer.
- The fee customarily charged in the locality for similar legal services.
- The amount involved and the results obtained.
- Time limitations imposed by the client or by the circumstances of the case.
- The nature and length of the professional relationship with the client.
- The lawyer’s experience, reputation and ability.
- Whether the fee is fixed or contingent.
EACH CASE IS DIFFERENT
The factors enumerated in Model Rule 1.5 are not exclusive, however, nor are they all pertinent to every case. Moreover, other considerations may come into play depending on the particular circumstances of a case.
Courts have held that it is unreasonable for lawyers to charge clients for time spent learning the basic substantive law relating to a case.
In Heavener v. Meyers, 158 F. Supp. 2d 1278 (2001), a U.S. District Court judge in Oklahoma reduced a fee claim by an attorney for more than 500 hours of work in a civil rights case, which the judge deemed unreasonable for a “simple, straightforward Fourth Amendment excessive force claim.” The attorney billed 19 hours for research on well-established 11th Amendment defense issues and included 49 invoice entries for discussions with co-counsel in a case that would not normally require collaboration, the judge noted. The lawyer’s inexperience “resulted in counsel using this litigation as an educational forum in the area of civil rights law,” the court’s ruling stated.
Courts also have held that it is unreasonable for lawyers to charge their own rates for services provided by nonlawyers or for their own law-related tasks that do not constitute the practice of law, such as sending faxes or delivering documents to opposing counsel.
Lawyers should similarly avoid charging clients for services that fall outside the confines of traditional law practice. In Cincinnati Bar Association v. Alsfelder, 816 N.E.2d 218 (2004), the Ohio Supreme Court affirmed the finding of a disciplinary board that it was unreasonable under Ohio’s version of Rule 1.5 for an attorney to charge a client for “friendly advice” unrelated to the client’s legal needs. Often meeting over lunch or dinner, the client consulted the attorney about personal relationships, finances and restaurants, among other things. Despite the attorney’s assertions to the client that he had only “attorney’s time” to give, the result was “allowing the client to consult him as a friend while charging for his time as a lawyer,” the court concluded.
DON’T ASK THE CLIENT TO PAY
A breakdown in the lawyer-client relationship that culminates in the lawyer withdrawing or being discharged frequently sets the stage for violations of Rule 1.5. Lawyers often run afoul of the rule’s reasonableness requirement in the process of terminating the relationship or when defending against disciplinary complaints by the client. In both situations, lawyers sometimes fall into the trap of improperly billing for activities that advance their own interests rather than fulfill their obligation to the client.
The North Carolina State Bar recently determined that it is improper for a lawyer to charge a client for preparing and presenting a motion to withdraw —regardless of who is responsible for ending the relationship. In its opinion, the committee states that the cost of withdrawing from a case may be shifted to the client only in the unusual circumstance in which the lawyer’s withdrawal advances the client’s objectives at the same time that it fulfills the lawyer’s professional obligations. 2007 Formal Ethics Opinion 8.
In an earlier opinion, the North Carolina State Bar held that it is improper for a lawyer to charge a client for time expended in preparing a response to a fee dispute petition or participating in the state’s fee resolution program. The opinion reasons that since North Carolina’s version of Rule 1.5 mandates participation in the program, participation is not a legal service that the lawyer provides to the client but a professional responsibility that advances the interests of the public and the bar. 2000 Formal Ethics Opinion 7.
In a case prompted by a client’s discharge of a lawyer, the Indiana Supreme Court upheld the lawyer’s suspension for billing violations. Among other things, the lawyer billed the client for time spent reading the letter informing him of his discharge and then billed the client for work performed after the termination of their relationship. In re Comstock, 664 N.E.2d 1165 (1996).
Some courts have thwarted efforts by lawyers to incorporate provisions into fee agreements that shift their costs of collecting unpaid fees to the clients. In Lustig v. Horn, 732 N.E.2d 613 (2000), the Illinois Appellate Court voided such a provision because it “gives rise to substantial fees for vigorous prosecution of the attorney’s own client” and “very well could be used to silence a client’s complaint about fees.”
Ethics authorities overwhelmingly agree that charging clients for time spent responding to the client’s disciplinary complaint is impermissible under Rule 1.5, and often under Rule 8.4 (Misconduct) as well, since lawyers have a professional obligation to respond to grievances against them.
In a 1996 decision, the Minnesota Supreme Court stated that such actions would have a “chilling effect on the public’s right to bring ethics charges.” In re Lawyers Responsibility Board Panel No. 94-17, 546 N.W.2d 744.
OPPOSING PARTY INCLUDED
An ethics opinion issued by the Maine State Bar Association concluded that a lawyer violates the reasonableness standard if he or she bills a client to defend an ethics complaint, even if the complaint was filed by the opposing party in the underlying case rather than the client. In Ethics Opinion 139 (1994), the bar found that a violation occurs even if the opposing party filed the complaint as a tactical and frivolous maneuver designed to pressure the attorney into withdrawing from representation, the attorney incurred considerable costs in fighting it, and the client gave informed consent to the fee agreement. The bar’s ethics commission emphasized that defending against a professional conduct complaint cannot “be construed, under any circumstances, as the rendition of legal services to a client.”
(In contrast, a Connecticut ethics panel determined in 2003 that a lawyer may bill a client for defending a grievance brought by an opposing party if the original fee agreement so provided, or the lawyer and client reached a new agreement with respect to the grievance. Informal Ethics Opinion 03-05.)
Even though ABA Model Rule 1.5 generally doesn’t require written fee agreements, lawyers are much better situated to meet the rule’s reasonableness standard when they have entered into written, fully informed fee agreements with their clients at the inception of representation.
But lawyers also must assure that fees (along with expenses) are inherently reasonable within the context of the representation. And lawyers should think twice before charging clients for fees associated with withdrawing from the representation, resolving fee disputes or responding to disciplinary complaints.
Doing that may just make the adage about jumping from the frying pan into the fire seem all too real.
Kathryn A. Thompson is research counsel for the ABA Center for Professional Responsibility.
Kathryn A. Thompson is research counsel for the ABA Center for Professional Responsibility.