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Professional Responsibility
University of Baltimore School of Law
Rochvarg, Arnold

Rochvarg_professional responsibility_fall_2010
 
Fees – Rule 1.5
A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or expenses.
Factors in determining reasonableness:
(1)   time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly (the longer you spend on the case the more you can charge) (novelty/difficulty means if youre handling return of security deposit case prob cant charge the same as if youre handling international anti-trust litigation … novelty means how new the law will be… simple type of matter have to factor that in)
(2)   the likelihood that employment will preclude other employment of the lawyer
(3)   the fee customarily charged for similar service in that locality
(4)   the amount involved and the results obtained (Eg- “high risk” case) (more money involved in case, the higher the fee will be charged)
(5)   time limitations imposed by the client or by the circumstances (time pressures) (guy calls you on dec30 and says this real estate deal has to be closed TMRW – you will charge more!! It doesn’t mean you can take advantage of the client, you always have fiduciary duty to your client to be fair, but it is reasonable that there will be pressure put on you by your client in a case like this)  
(6)   the nature and length of the professional relationship with the client
(7)   the experience, reputation, and ability of the lawyer (lawyer who has been in practice for 25yrs can charge more than 1st yr out of law school bc of experience, etc.)
(8)   whether the fee is fixed or contingent.
The fee and expenses must be communicated preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client the same rate…Any changes shall also be communicated to the client.
A contingent fee must be in writing and signed by the client
(1)   must state the methods by which the fee is to be determined. (including the percentage or percentages that shall accrue to the lawyer in the event of settlement)
(2)   must state terms of how expenses will be deducted and collected and whether such expenses will be deducted before or after the contingent fee is calculated
(3)   Agreement must notify client of any expenses for which client will be responsible whether or not client is the prevailing party
(4)   Upon conclusion of the representation, the lawyer must provide a written statement of the outcome of the matter, and, if there is a recovery, showing the remittance to the client and the method of its determination.
No Contingency fees in a domestic relations matter
(1)   As in, divorce or custody of a child or upon the amount of alimony or support or property settlement,
-Reasons: (1) the money is supposed to go to benefit the spouses; (2) Purpose of reconciliation is defeated if getting paid is contingent on obtaining a divorce
No contingency fee in a criminal case.
Reasons:
(1)   Don’t want to encourage lawyers to bend laws/break the rules
(2)   There is inherent conflict- atty will not do “good” work if his client is unlikely to prevail
(3)   Issue with plea bargaining: How would it work? Is PB same as winning? Even though client is guilty of a crime? (99% of criminal cases get resolved through PB)
(so typically contingency fees are used for plaintiff personal injury cases and for collections)
 
A fee CAN be divided among lawyers of different firms if:
(1)   the division is in proportion to the services performed by each lawyer OR each lawyer assumes joint responsibility for the representation
[NOTE: Arg for fee splitting- encourages attys to refer cases in which they are unqualified to a more qualified/competent atty
NOTE: rules do NOT state what the % should be btwn the attys- if each atty assumes joint resp, the agreement could be that one atty gets 90% and do no work, and another gets 10% and do all the work, while both could still say they assumed joint responsibility] (2)   the client agrees to the joint representation and the agreement is confirmed in writing; (but, MD rules do not require that client be informed of the % fee division agreement btwn the two attys); and
(3)   the total fee is reasonable.
 
(4)   NO ethical rules cover the division of fees amongst attys in SAME firm
(5)   There is NO fiduciary duty btwn 2 attys who are sharing fees- duty to client should always be the atty’s main focus
 
Receiving shares of a company in consideration for legal fees is ok
A fee in excess of an agreed upon fee, even if it is still a good deal, is an unreasonable fee.  A reasonable fee is what you TELL YOUR CLIENT it will be!
AGC v. Hess(1999)è Hess agreed on 15% discount with client so that client would pay on time – client rarely paid on time and Hess inflated his hrs 15% to make up for it, without telling his clients è Hess acted unethically and was suspended 3yrs
A fee that is unreasonable may become reasonable if the client understands that by hiring you, you will loose other employment and thus must charge the client more
If a client imposes time is of the essence (time pressure) you can charge more
The longer you've had a client, the more likely the fee is reasonable
Not likely to take advantage of a client over and over
 
Civil rights case hypo on fees
Statute says atty fees to be paid by loosing party
Atty does 3 years of prep and the day before trial the other side says, I'll settle for all client's requests but not the atty fee
atty takes settlement as it is in the best interest of his client and sues for fee on his own
supreme ct says the settlement agreement was valid and atty got no fee for 3 years of work.
 
Types of Fees
Flat Fees (“preferably in writing”)
Not based on anything other than the product itself
As in $1200 for a will, $2000 for a DUI
Divorces, appellate case(here is the case do the appeal)
Until the 1970's there were minimum fee schedules set by Bar Association
Bar Assoc would vote and say Ex)we shouldn’t charge less than $450 for divorce
Ruled to be in violation of antitrust laws
Proportional Fees (“preferably in writing”)
Not based on hours worked
Percentage of value of the deal
As in taking 15% of the value of the house to do the closing
Usually done in real estate or corporate work
Ex) Spend the same amt of hours closing a $1mil house as a $1.5mil house but you will make more $$ on the $1.5mil house è fee is higher bc $$ involved is higher
Hourly Fees (“preferably in writing”)
Based on time actually worked
Ethical issues of hourly fees
Failure to keep a running log of your time/keep accurate time sheets
You cannot estimate hours – must contemporaneously fill out time sheets as you do everything
Rounding up to certain intervals
Only worked 15minutes, round up to an hour?
Doing nonessential work
Excess research, can you bill for it? It's nonessential but you want to cover all the bases.
Are you being efficient with your time when someone is pay by the hour
Recommending the case go to trial so that the hours go up
Contingency, you do want to settle
Hourly you wouldn't want to settle
Padding hours to reach your billable hours expected of you by your firm
“Value Added” Contingency Fees:
NOT popular form of fee; used by Pltf attys in civil cases
Usually applied in cases where 1st settlement offer is not accepted
Atty gets a % of the recovery AFTER the atty has “added value” to the case
Atty bills hourly fee up to the time of the 1st settlement offer by Defendant
If Defendant’s offer is rejected, atty gets a % of any amount that is over and above the original offer’s amount
“Reverse” Contingency Fees:
Used by defense attys in civil cases
Atty gets a % of the amount that defendant does NOT owe the Pltf
BUT, Pltf’s demand (ad damnum clause) must be reasonable
Ex) Pltf sues for $10,000, Deft wins- Deft atty gets 1/3 of $10,000 b/c that is how much atty saved the client; or if Deft settled for $5,000, atty gets 1/3 of $5,000 b/c he saved Pltf $5,000
Problem w/ this: plaintiffs usually sue for an INFLATED # expecting that they will g

s the atty “part of the case”- more atty gets for client, more atty gets for himself- “conflict type situation”- atty is like the client
(2)   Atty will want to settle quickly if the case requires more work but little more in return (i.e. settle before more work needs to be done)
(3)   Because the client is out nothing if he loses, this will lead to filing of frivolous cases
[counter arg: contingency fees lead to fewer cases being filed bc attys aren’t going to accept “meritless” cases that aren’t worth anything] (4)   Issue of “Fairness”- attys gets same % from client’s recovery regardless of how much or how little work atty does; also, the more injured the client is, the more pain and suffering there is = higher recovery amt = higher fees collected by atty (leads to excessive atty fees)
 
Sharing of Fees – Rule 5.4
theory is that we don't want non-lawyer investors influencing the lawyers judgment/professional conduct
Law Firms and Lawyers shall not(can't) share fees with a non-lawyer, except that…
Non-lawyer can't be a partner in a law firm (bc partners share fees) if any of the activities of the partnership consist of the practice of law
Lawyer cannot give a referral fee to a non-lawyer
Atty may share ct awarded legal fees w/ non-profit org that retained, employed, or recommended employment of the atty in the matter
Atty shall not permit a person who recommends, employs, or pays the atty to render legal services for another to direct or regulate the atty’s professional judgment in rendering legal services (Ex – parent/child)
Atty shall not practice w/ or in the form of a professional corp or association authorized to practice law for profit, if:
A nonlawyer owns any interest therein, except that a fiduciary representative of the estate of an atty may hold the stock or interest of the atty for a reasonable time during administration
A nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation; or
A nonlawyer has the right to direct or control the professional judgment of an atty
 
Responsibilities Regarding Law-Related Services – Rule 5.7
If you're a lawyer and are providing other services as well (such as accounting), you are bound by the lawyer's professional responsibilities and not the other professions…As in a tax lawyer and CPA
If someone under the control of the lawyer does the law related services, the lawyer is subject to the MLRPC if he doesn't tell the client the services are not legal services and that the lawyer/client rules don't apply.
MultiDisciplinary Practice:
Opening up of ancillary(additional, secondary, subsidiary) businesses by law firms in businesses NOT involved in the practice of law
DC is only jurisdiction that allows nonlawyers to share in fees w/ lawfirm
 
MD Rule on Pro Bono – Rule 6.1
Lawyer has a professional responsibility to render pro bono legal service
Lawyer in full time practice should aspire to do 50 hours pro bono work (not required)
Unless the lawyer is prohibited (as a judge or gov’t employee) from rendering legal services, a substantial portion of the applicable hours should be without fee or expectation of a fee, or at a substantially reduced fee to: