Obsolete Date: 8/1/2006
(a) A lawyer's fee shall be reasonable. 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 shall be communicated to the client 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 writing 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. 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.
(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 does not object 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.
Basis, Rate or Amount of Fee
When the lawyer has regularly represented a client, they ordinarily will have evolved an understanding concerning the basis or rate of the fee. In a new client-lawyer relationship, however, an understanding as to the fee should be promptly established. It is not necessary to recite all the factors that underlie the basis of the fee, but only those that are directly involved in its computation. It is sufficient, for example, to state that the basic rate is an hourly charge or a fixed amount or an estimated amount, or to identify the factors that may be taken into account in finally fixing the fee. When developments occur during the representation that render an earlier estimate substantially inaccurate, a revised estimate should be provided to the client. A written statement concerning the fee 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.
Terms of Payment
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. However, a fee paid in property instead of money may be subject to special scrutiny because it involves questions concerning both the value of the services and the lawyer's special knowledge of the value of the property.
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. When there is doubt whether a contingent fee is consistent with the client's best interest, the lawyer should offer the client alternative bases for the fee and explain their implications. Applicable law may impose limitations on contingent fees, such as a ceiling on the percentage.
Division of Fee
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.
Disputes Over Fees
If there is a fee dispute, a lawyer should consider submitting to the arbitration Procedure established by the bar.
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
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. In Missouri v. Jenkins, 491 US 274 (1989), the Court held in setting a reasonable lawyer's fee under 28 U.S.C. 1988 that it was appropriate to include a charge for legal assistant services, and that it was appropriate to value such services at "market rates" rather than "actual costs" to the lawyer.
In such instances, 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.
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. Furthermore, a legal assistant may not be compensated on a contingent basis for a particular case or paid for "signing up" clients for a legal practice. The linchpin of the prohibition is the lawyer's obligation to pay the legal assistant regardless of the outcome of the case. There is no general prohibition against a lawyer who enjoys a particularly profitable period recognizing the contribution of the legal assistant to that profitability with a discretionary bonus. Likewise, a lawyer engaged in a particularly profitable speciality of legal practice is not prohibited from compensating the legal assistant who aids materially in that practice more handsomely than the compensation generally awarded 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.