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RULE 1.5 FEES

Effective Date: 8/1/2006

(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent.

(b) When the lawyer has not regularly represented the client, the basis, rate, or amount of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation.

(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must identify any expenses for which the client will be liable whether or not the client is the prevailing party. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination, including itemization of expenses.

(d) A lawyer shall not enter into an arrangement for, charge, or collect:

(1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or

(2) a contingent fee for representing a defendant in a criminal case.

(e) A division of fee between lawyers who are not in the same firm may be made only if:

(1) the division of fee is in proportion to the services performed by each lawyer or each lawyer, by written agreement, assumes joint responsibility for the representation;

(2) after consultation, the client consents in writing to the participation of all the lawyers involved; and

(3) the total fee is reasonable.

(f) A lawyer may charge for work performed by a legal assistant.

(g) A lawyer may not split legal fees with a legal assistant nor pay a legal assistant for the referral of legal business. A lawyer may compensate a legal assistant based on the quantity and quality of the legal assistant's work and value of that work to a law practice. The legal assistant's compensation may not be contingent, by advance agreement, upon the outcome of a case or upon the profitability of the lawyer's practice.

Comment

Reasonableness of Fee and Expenses

[1] Paragraph (a) requires that lawyers charge fees that are reasonable under the circumstances. The factors specified in (1) through (8) are not exclusive. Nor will each factor be relevant in each instance. Paragraph (a) also requires that expenses for which the client will be charged be reasonable. A lawyer may seek reimbursement for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges, either by charging a reasonable amount to which the client has agreed in advance or by charging an amount that reasonably reflects the cost incurred by the lawyer.

Basis, Rate or Amount of Fee

[2] Ordinarily, when the lawyer has regularly represented a client, they will have an understanding concerning the basis or rate of the fee. In a new lawyer-client relationship, however, an understanding as to the fees and expenses must be promptly established. Generally, it is desirable to furnish the client with at least a simple memorandum or copy of the lawyer's customary fee arrangements that states the general nature of the legal services to be provided, the basis, rate or total amount of the fee and whether and to what extent the client will be responsible for any costs, expenses or disbursements in the course of the representation. A written statement concerning the terms of the engagement reduces the possibility of misunderstanding. The written statement may be a copy of the lawyer's customary fee schedule or a simple memorandum setting forth the basis, rate or amount of the fee.

[3] Contingent fees, like any other fees, are subject to the reasonableness standard of paragraph (a) of this Rule. In determining whether a particular contingent fee is reasonable, or whether it is reasonable to charge any form of contingent fee, a lawyer must consider the factors that are relevant under the circumstances. Applicable law may impose limitations on contingent fees, such as a ceiling on the percentage allowable, or may require a lawyer to offer clients an alternative basis for the fee. Applicable law also may apply to situations other than a contingent fee, for example, government regulations regarding fees in certain tax matters.

Terms of Payment

[4] A lawyer may require advance payment of a fee, but is obliged to return any unearned portion. See Rule 1.16(e). A lawyer may accept property in payment for services, such as an ownership interest in an enterprise, providing this does not create a conflict of interest. However, a fee paid in property instead of money may be subject to the requirements of Rule 1.8(a) because such fees often have the essential qualities of a business transaction with the client.

[5] An agreement may not be made whose terms might induce the lawyer improperly to curtail services for the client or perform them in a way contrary to the client's interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client. Otherwise, the client might have to bargain for further assistance in the midst of a proceeding or transaction. However, it is proper to define the extent of services in light of the client's ability to pay. A lawyer should not exploit a fee arrangement based primarily on hourly charges by using wasteful procedures.

Contingent Fees

[6] Paragraph (d) prohibits a lawyer from charging a contingent fee in a domestic relations matter when payment is contingent upon the securing of a divorce or upon the amount of alimony or support or property settlement to be obtained. This provision does not preclude a contract for a contingent fee for legal representation in connection with the recovery of post-judgment balances due under support, alimony or other financial orders because such contracts do not implicate the same policy concerns. Contingent fee agreements must be in a writing signed by the client and must otherwise comply with paragraph (c) of this Rule.

Division of Fee

[7] A division of fee is a single billing to a client covering the fee of two or more lawyers who are not in the same firm. A division of fee facilitates association of more than one lawyer in a matter in which neither alone could serve the client as well, and most often is used when the fee is contingent and the division is between a referring lawyer and a trial specialist. Paragraph (e) permits the lawyers to divide a fee on either the basis of the proportion of services they render or by agreement between the participating lawyers if all assume responsibility for the representation as a whole and the client is consulted and does not object. It does not require disclosure to the client of the share that each lawyer is to receive. A lawyer should refer a matter only to a lawyer whom the referring lawyer reasonably believes is competent to handle the matter. See Rule 1.1.

[8] Paragraph (e) does not prohibit or regulate division of fees to be received in the future for work done when lawyers were previously associated in a law firm.

Disputes Over Fees

[9] If there is a fee dispute, a lawyer should consider submitting to an established arbitration procedure. Law may prescribe a procedure for determining a lawyer's fee, for example, in representation of an executor or administrator, a class or a person entitled to a reasonable fee as part of the measure of damages. The lawyer entitled to such a fee and a lawyer representing another party concerned with the fee should comply with the prescribed procedure.

Fees for the Services of Legal Assistants

[10] In cases involving fixed fees or contingent fees, the total fees are agreed upon in advance and there should be no separate charge for legal assistant services. In matters charged on the basis of "fee for service" or "charge by the hour", a lawyer may include separate charges for work performed by legal assistants or otherwise include legal assistant hours in calculating the amount of fees to be charged. It may be appropriate to value such services at "market rates" rather than "actual costs" to the lawyer.

[11] The lawyer should disclose to the client, either at the outset of the representation or at the point during the representation when the lawyer determines a legal assistant should be used, that the lawyer proposes to use a legal assistant and obtain the client's agreement to any separate charges for legal assistant services.

[12] A lawyer may not split fees with a legal assistant, whether characterized as splitting of contingent fees, "forwarding" fees or other sharing of legal fees. The lawyer's obligation is to pay the legal assistant according to the employment agreement. There is no general prohibition against a lawyer recognizing the contribution of the legal assistant with a discretionary bonus. Likewise, a lawyer is not prohibited from compensating a legal assistant who aids materially in a practice with compensation greater than that generally paid to legal assistants in the geographic area working in less lucrative law practices.

Reference: Minutes of the Professional Conduct Subcommittee of the Attorney Standards Committee on 02/03/84, 03/16/84, 05/23/84, 06/27/84 and 07/27/84; Minutes of Joint Committee on Attorney Standards Meetings of 06/13/95, 09/15/95, 12/01/95, 06/11/96, 11/15/02, 11/19/04, 06/14/05.

Effective Date Obsolete Date
08/01/2006 View
03/01/1997 08/01/2006 View