John Steele (Steele Ethics LLC)
www.johnsteelelaw.com
LEGAL ETHICS:
FEES AND FEE AGREEMENTS
John Steele
Steele Ethics LLC
California CLE Provider 14306
www.johnsteelelaw.com
[email protected]
650-320-7662 (USA)
© John Steele 2012
Topics
1.
2.
3.
a)
b)
c)
d)
4.
What law governs?
Types of fees
Life-cycle of fee agreements
Formalities
Enforcement mechanisms
Modification
Disputes/Arbitration
Sharing Fees
1
What 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
2
Types 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
3
Lifecycle of Fee
Agreements
Lifecycle
1.
2.
3.
4.
5.
6.
7.
Initial negotiation
Formalization
Enforcement mechanisms
Re-negotiation
Withdrawal for nonpayment
Satisfaction
Disputes/Arbitration
Initial Negotiation
1. “Arms length”
2. Regulations set limitations
Formalities: Hourly & Flat
Must 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
Ambiguous
pronouns
“Attorney”
“Firm”
“Client”
“Acme”
Define Client – One Client Clause
Exclude:
Founders
Inventors
Officers
Agents
Define Client – One Client Clause
Exclude:
Affiliates
Parents
Subsidiaries
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: Retainers
General 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 Fees
Non-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?
4
Sharing 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 value
Many states ok
Fee Sharing with Non-profits
MR 5.4
Topics
1.
2.
3.
a)
b)
c)
d)
4.
What law governs?
Types of fees
Life-cycle of fee agreements
Formalities
Enforcement mechanisms
Modification
Disputes/Arbitration
Sharing Fees
John Steele
Steele Ethics LLC
California CLE Provider 14306
www.johnsteelelaw.com
[email protected]
650-320-7662 (USA)
© John Steele 2012