Lawyers, ethics, and fees: Getting paid under Model Rule 1.5

Georgetown Journal of Legal Ethics, The, Summer 2003 by Parekh, Ankur, Pelkofer, Jay R

INTRODUCTION

As a general rule never take your whole fee in advance, nor any more than a small retainer. When fully paid beforehand, you are more than a common mortal if you can feel the same interest in the case, as if something was still in prospect for you, as well as for your client.1

Although the practice of charging a client the entire fee before representation begins is no longer common, Lincoln likely would not be proud of some of the fee practices being employed today and would no doubt formulate new maxims to prevent today's lawyers from improperly overcharging their clients. Rule 1.5 of the Model Rules of Professional Conduct (Model Rules) is the American Bar Association's (ABA's) determination of the limitations that should be imposed on the types and amount of fees that lawyers charge.2 This rule was recently amended to reflect changes suggested by the Ethics 2000 Commission ("Commission") of the ABA.3 The Commission understood the sensitive nature of a rule that regulates lawyers' fees. The Reporter for the Commission noted that the rule on attorneys' fees "is likely to be controversial no matter what we do. Its terms measure lawyers' conduct in almost every case, clients find unexpectedly high fees a distasteful surprise, and public criticism about excessive fees damages the reputation of all lawyers."4 Regardless, the new Rule 1.5 does contain some significant changes.

This Note examines Model Rule 1.5 and the accompanying Comment so that lawyers will better understand the basic provisions of and recent changes to the Rule. Part I of this Note provides background information about the proceedings of the Ethics 2000 Commission. Part II of this Note describes each of the provisions of Model Rule 1.5, focusing on the recent changes. Within Part II, Section A describes the prohibition against lawyers' charging unreasonable fees and the factors that are considered to determine whether a fee is reasonable. Section B examines the explicit treatment of expenses in the text of the new Model Rule. Section C examines the lawyer's responsibility to communicate to her client the scope of representation and the basis or rate of the fee and expenses for which the client will be charged. Section D examines the requirements governing contingent-fee agreements between lawyer and client. Section E examines the prohibition against a lawyer from charging a contingent fee in domestic relations matters and when representing a defendant in a criminal case. Finally, section F examines the requirements for dividing fees between lawyers who are not in the same firm. Part III of this note discusses outstanding criticisms of Model Rule 1.5 that are not incorporated in the recent amendments to the Rule.

I. ETHICS 2000

In 1997, the Board of Governors for the ABA appointed the 13-member Commission to overhaul the Model Rules.5 The lack of uniformity and growing disparity among the state ethics rules was the primary motivation for the project;6 however, other motivations included: recognition of the lack of clarity in some of the Model Rules, the changing organization of modern law practice, and the need to enhance the public's trust and confidence in the legal profession.7 The Commission did not operate in secret; rather, it used an open process to solicit and receive viewpoints throughout the legal community.8 It submitted its final report to the House of Delegates of the ABA, whose members debated the contents of the report at their annual meeting in Chicago in August of 2001 and again at their mid-year conference in Philadelphia in February of 2002. The House of Delegates did not act as a rubber stamp. Rather, it made amendments to the Commission's final report before the new set of Model Rules was adopted by the House at the Philadelphia meeting.9

II. ANALYSIS OF THE NEW RULE 1.5

A. PROHIBITION AGAINST CHARGING UNREASONABLE FEES

Model Rule 1.5(a) has been amended to explicitly prohibit a lawyer from charging a fee that is larger than reasonable.10 The language of the previous version of the Rule required that "[a] lawyer's fee shall be reasonable."11 The language of the new version of the Rule - "A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses" - more forcefully prohibits unreasonable fees.12 The previous language made it "harder than necessary" to discipline lawyers for charging excessive fees.13 The previous version of Model Rule 1.5(a) applied only to fees that were unreasonably high; it did not restrict lawyers from charging fees that were less than normal or from charging no fee at all.14 Presumably, new Model Rule 1.5(a) will also apply only to unreasonably high fees.

The new version of Model Rule 1.5(a) lists the same eight factors to be considered in determining reasonableness of a fee as the previous version of Model Rule 1.5(a).15 The Commission did not adopt several proposed amendments to the factors.16 The eight factors are not exclusive, and not all factors will be relevant in each instance.17 In fact, for many lawyers the primary, and often sole, factor for determining the fee is the hourly billing rate.18 The factors listed in Model Rule 1.5(a) exactly replicate the factors set forth in the Model Rules' predecessor, the Model Code of Professional Responsibility ("Model Code"),19 but the focus is different. Under the Model Code, the variables were to be used in assessing whether a fee was "clearly excessive,"20 which was defined as "in excess of a reasonable fee."21 Some cases held that only grossly unreasonable fees were a basis for disciplinary action under this standard.22 It appears that the stronger language contained in the Model Rules is the result of an effort to eliminate the "grossly unreasonable" standard and replace it with a stricter standard that prohibits lawyers from charging a fee larger than is reasonable under the circumstances.