Ethics Experts Question Bank of America's New Tactic for Reducing Its Legal Fees
Ethics experts are raising questions about a new plan by Bank of America to win reductions in its legal fees from outside law firms.
The bank is seeking a credit on its annual legal fees based on the amount of customer business it sends to its preferred provider law firms, Corporate Counsel reports. According to the report, Bank of America has threatened to drop law firms that refuse to agree.
Bank of America sent a form to the law firms asking them to agree to the credit and to confirm “that these fee arrangements are ethical.” The bank has also revised its loan commitment letters to state that it may be receiving a benefit for fees received by law firms as a result of the borrower relationship.
University of California at Hastings law professor Geoffrey Hazard told Corporate Counsel that the arrangement appears to be a referral in return for money, a violation of ethics rules.
But McGuireWoods partner Thomas Spahn said his law firm agreed to the deal and he sees no problem, as long as the Bank of America credit is not tied to a particular fee. “Most law firms will give benefits to a company that sends them a lot of work,” such as free seminars or cocktail parties, he told Corporate Counsel. Spahn is the law firm’s in-house counsel on ethics issues.
The bank defended the practice in a statement issued to Corporate Counsel. “We do not require clients to retain particular law firms and we are committed to transparency in disclosing fee arrangements as well as potential benefits to our company,” the statement said. “We are confident that our agreements with external legal service providers are appropriate.”