ETHICS,
ATTORNEY’S FEES AND BAR ASSOCIATION FEE ARBITRATION
PROGRAMS
A LOOK AT THE RELEVANT ETHICAL RULES AND BAR ASSOCIATION ATTORNEY FEE ARBITRATION PROGRAMS IN CALIFORNIA, FLORIDA & NEW YORK
This CLE activity examines the interplay of legal ethics and attorney’s fees, especially as regards “illegal”, “unconscionable” or excessive fees, then takes you on a tour of fee arbitration programs in California, Florida and New York
GENERAL RULES
OF ETHICS AND ATTORNEY’S
FEES:
As a general rule, most jurisdictions have similar ethical rules regarding attorney’s fees. Initially, most states, including California, Florida and New York prevent an attorney attempting to “(C)harge, or collect an illegal or unconscionable fee.” (See California Rules of Professional Responsibility Rule 4-200)
Florida’s Rule 4-15 (a) is similar, and provides
“An attorney shall not enter into an
agreement for, charge, or collect an illegal, prohibited, or clearly excessive
fee or cost…”
The New York rules provide:
“A. A lawyer shall not enter into an agreement for, charge or collect an illegal or excessive fee” (DR 2-106 [§1200.11] Fee for Legal Services)”
Of course, the next issue devolves to how an illegal, excessive or “unconscionable fee” is determined.
In New York, the Disciplinary Rules determine the reasonableness of a fee by considering
“B. A fee
is excessive when, after a review of the facts, a lawyer of ordinary
prudence
would be left with
a definite and firm conviction that the fee is in
excess of a reasonable
fee. Factors to be considered as guides in determining
the reasonableness
of a fee may 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 or made known 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 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.
8. Whether the fee
is fixed or contingent.
In California, the rules determine an unconscionable fee thusly:
“ (B) Unconscionability of a fee shall
be determined on the basis of all the facts and circumstances existing at
the time the agreement is entered into except where the parties contemplate
that the fee will be affected by later events. Among the factors to be
considered, where appropriate, in determining the conscionability of a fee
are the following:
(1) The amount of
the fee in proportion to the value of the services
performed.
(2) The relative
sophistication of the member and the client.
(3) The novelty and
difficulty of the questions involved and the skill requisite to perform the
legal service properly.
(4) The likelihood,
if apparent to the client, that the acceptance of the particular employment
will preclude other employment by the member.
(5) The amount involved
and the results obtained.
(6) The time limitations
imposed by the client or by the circumstances.
(7) The nature and
length of the professional relationship with the client.
(8) The experience,
reputation, and ability of the member or members performing the
services.
(9) Whether the fee
is fixed or contingent.
(10) The time and
labor required. (11) The informed consent of the client”
In Florida, Rule 4-1.5 determines a “reasonable fee” using similar standards:
“(b) Factors to Be Considered in Determining Reasonable Fee and Costs. (1) Factors to be considered as guides in determining a reasonable fee include: (A) the time and labor required, the novelty, complexity, and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (B) the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer; (C) the fee, or rate of fee, customarily charged in the locality for legal services of a comparable or similar nature; (D) the significance of, or amount involved in, the subject matter of the representation, the responsibility involved in the representation, and the results obtained; (E) the time limitations imposed by the client or by the circumstances and, as between attorney and client, any additional or special time demands or requests of the attorney by the client; (F) the nature and length of the professional relationship with the client; (G) the experience, reputation, diligence, and ability of the lawyer or lawyers performing the service and the skill, expertise, or efficiency of effort reflected in the actual providing of such services; and (H) whether the fee is fixed or contingent, and, if fixed as to amount or rate, then whether the client's ability to pay rested to any significant degree on the outcome of the representation.”
ABA RULES ON ATTORNEY’S FEES:
Similar Standards are discussed in the ABA’S Model Rules of Professional Conduct, as follows:
ABA
Model Rules of Professional
Conduct
CLIENT-LAWYER RELATIONSHIP
(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) The scope of the representation and the basis or rate 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, except when the lawyer will charge a
regularly represented client on the same basis or rate. Any changes in the
basis or rate of the fee or expenses shall also be communicated to the
client.
(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 clearly notify the client of 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.
(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 a fee between lawyers who are not in the same firm
may be made only
if:
(1) the division is in proportion to the services performed by each
lawyer or each lawyer assumes joint responsibility for the representation;
(2) the client agrees to the arrangement, including the share each
lawyer will receive, and the agreement is confirmed in writing;
and
(3) the total fee is
reasonable.
ABA COMMENT:
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 must 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 or Rate of
Fee
[2] When the lawyer has regularly represented a client, they ordinarily
will have evolved an understanding concerning the basis or rate of the fee
and the expenses for which the client will be responsible. In a new client-lawyer
relationship, however, an understanding as to 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.
[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(d). A lawyer may accept property
in payment for services, such as an ownership interest in an enterprise,
providing this does not involve acquisition of a proprietary interest in
the cause of action or subject matter of the litigation contrary to Rule
1.8 (i). 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.
Prohibited 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.
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 either on the
basis of the proportion of services they render or if each lawyer assumes
responsibility for the representation as a whole. In addition, the client
must agree to the arrangement, including the share that each lawyer is to
receive, and the agreement must be confirmed in writing. Contingent fee
agreements must be in a writing signed by the client and must otherwise comply
with paragraph (c) of this Rule. Joint responsibility for the representation
entails financial and ethical responsibility for the representation as if
the lawyers were associated in a partnership. A lawyer should only refer
a matter 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 a procedure has been established
for resolution of fee disputes, such as an arbitration or mediation procedure
established by the bar, the lawyer must comply with the procedure when it
is mandatory, and, even when it is voluntary, the lawyer should conscientiously
consider submitting to it. 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.
While many jurisdictions have adopted
the ABA Rules in one form or another, while the ABA rules are persuasive,
they are not necessarily binding, so let’s examine some state rules
on attorney’s fees:
ADDITIONAL STATE ETHICAL RULES REGARDING ATTORNEY’S
FEES:
Now let’s take a more detailed look at the various State Bar Rules governing attorney’s fees in California, Florida and New York. We’ll start with the New York rules:
NEW YORK ETHICS RULES ON ATTORNEY’S FEES:
CANON
2
A Lawyer Should
Assist the Legal Profession in Fulfilling
Its Duty to Make
Legal Counsel Available
EC 2-16 Persons
unable to pay all or a portion of a reasonable fee should be
able
to obtain necessary
legal services, and lawyers should support and participate
in
appropriate activities
designed to achieve that objective.
Financial Ability
to Employ Counsel: Persons Able to Pay Reasonable
Fees
EC 2-17 The
determination of a proper fee requires consideration of the
interests
of both client and
lawyer. A lawyer should not charge more than a reasonable
fee,
for excessive cost
of legal service would deter non-lawyers from using the
legal
system to protect their
rights and to minimize and resolve disputes. Furthermore,
an excessive charge
abuses the professional relationship between lawyer and
client.
EC 2-18 The
determination of the reasonableness of a fee requires consideration
of
all relevant circumstances,
including those stated in the Disciplinary Rules. The
fees of a lawyer will
vary according to many factors, including the time
required,
the lawyer’s
experience, ability, and reputation, the nature of the employment,
the
responsibility involved
and the results obtained. It is a commendable and
longstanding
tradition of the bar
that special consideration is given in the fixing of
any
fee for services rendered
another lawyer or a member of the lawyer’s immediate
family.
EC 2-19 As soon
as feasible after a lawyer has been employed, it is desirable
that
a clear agreement be
reached with the client as to the basis of the fee charges to
be
made. Such a course
will not only prevent later misunderstanding but will
also
work for good relations
between the lawyer and the client. It is usually
beneficial
to reduce to writing
the understanding of the parties regarding the fee,
particularly
when it is contingent.
A lawyer should be mindful that many persons who
desire to employ a
lawyer may have had little or no experience with fee
charges
of lawyers, and for
this reason lawyers should explain fully to such persons
the
reasons for the particular
fee arrangement proposed.
EC 2-20 Contingent
fee arrangements in civil cases have long been commonly
accepted
in the United States
in proceedings to enforce claims. The historical bases
of their acceptance
are that (1) they often, and in a variety of circumstances,
provide
the only practical
means by which one having a claim against another can
economically afford,
finance, and obtain the services of a competent lawyer to
prosecute a claim,
and (2) a successful prosecution of the claim produces a
fund
out of which the fee
can be paid. Although a lawyer generally should decline
to
accept employment on
a contingent fee basis by one who is able to pay a
reasonable
fixed fee, it is not
necessarily improper for a lawyer, where justified by the
particular circumstances
of a case, to enter into a contingent fee contract in a
civil
case with any client
who, after being fully informed of all relevant factors,
desires
that arrangement. Because
of the human relationships involved and the unique
character of the
proceedings, contingent fee arrangements in domestic
relations
matters are rarely
justified. In administrative agency proceedings, contingent
fee
contracts should be
governed by the same considerations as in other civil
cases.
Public policy properly
condemns contingent fee arrangements in criminal cases,
largely on the ground
that legal services in criminal cases do not produce a
fund
out of which the fee
can be paid.
EC 2-21 A lawyer
should not accept compensation or anything of value
incident
to the lawyer’s
employment or services from one other than the client without
the
knowledge and consent
of the client after full disclosure.
EC 2-22 Without
the consent of the client, a lawyer should not associate in a
particular
matter another lawyer
outside the lawyer’s firm. A fee may properly be
divided between lawyers
properly associated if the division is in proportion to
the
services performed
by each lawyer or, by a writing given to the client, each
lawyer
assumes joint
responsibility for the representation and if the total fee is
reasonable.
EC 2-23Alawyer
should be zealous in efforts to avoid controversies over fees
with
clients and should
attempt to resolve amicably any differences on the subject.
A
lawyer should not sue
a client for a fee unless necessary to prevent fraud or
gross
imposition by the
client.
Financial Ability
to Employ Counsel: Persons Unable to Pay Reasonable
Fees
EC 2-24Aperson
whose financial ability is not sufficient to permit payment of
any
fee cannot obtain legal
services, other than in cases where a contingent fee is
appropriate, unless
the services are otherwise provided. Even a person of
means
may be unable to pay
a reasonable fee, which is large because of the
complexity,
novelty, or difficulty
of the problem or similar factors.
EC 2-25 A lawyer
has an obligation to render public interest and pro bono
legal
service. A lawyer may
fulfill this responsibility by providing professional
services
at no fee or at a reduced
fee to individuals of limited financial means or to
public
service or charitable
groups or organizations, or by participation in programs
and organizations
specifically designed to increase the availability of legal
services.
In addition, lawyers
or law firms are encouraged to supplement this
responsibility
through the financial
and other support of organizations that provide legal
services to persons
of limited means.
NY DISCIPLINARY RULES:
DR 2-106
[§1200.11] Fee for Legal Services.
A. A lawyer
shall not enter into an agreement for, charge or collect an illegal
or
excessive
fee.
B. A fee is
excessive when, after a review of the facts, a lawyer of ordinary
prudence
would be left with
a definite and firm conviction that the fee is in
excess of a reasonable
fee. Factors to be considered as guides in determining
the reasonableness
of a fee may 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 or made known 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 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.
8. Whether the fee
is fixed or contingent.
C. A lawyer
shall not enter into an arrangement for, charge or
collect:
1. A contingent fee
for representing a defendant in a criminal case.
2. Any fee in a domestic
relations matter:
a. The payment or amount
of which is contingent upon the securing of a
divorce or in any way
determined by reference to the amount of
maintenance, support,
equitable distribution, or property settlement;
b. Unless a written
retainer agreement is signed by the lawyer and client
setting forth in plain
language the nature of the relationship and the
details of the fee
arrangement. A lawyer shall not include in the written
retainer agreement
a nonrefundable fee clause; or
c. Based on a security
interest, confession of judgment or other lien, without
prior notice to the
client in a signed retainer agreement and
approval from a tribunal
after notice to the adversary. A lawyer
shall
not foreclose on a
mortgage placed on the marital residence while the
spouse who consents
to the mortgage remains the titleholder and the
residence remains the
spouse’s primary residence.
3. A fee proscribed
by law or rule of court.
D. Promptly
after a lawyer has been employed in a contingent fee matter,
the
lawyer shall provide
the client with a writing stating 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, if not prohibited by statute or court rule,
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.
E. Where
representation is in a civil matter, a lawyer shall resolve fee
disputes
by arbitration at the
election of the client pursuant to a fee arbitration
program
established by the
Chief Administrator of the Courts and approved by
the justices of the
Appellate Divisions.
F. In domestic
relations matters, a lawyer shall provide a prospective client
with
a statement of
client’s rights and responsibilities at the initial conference
and
prior to the signing
of a written retainer agreement.
DR 2-107
[§1200.12] Division of Fees Among Lawyers.
A. A lawyer
shall not divide a fee for legal services with another lawyer who
is
not a partner in or
associate of the lawyer’s law firm, unless:
1. The client consents
to employment of the other lawyer after a full disclosure
that a division of
fees will be made.
2. The division is
in proportion to the services performed by each lawyer
or,
by a writing given
the client, each lawyer assumes joint responsibility for
the
representation.
3. The total fee of
the lawyers does not exceed reasonable compensation for
all legal services
they rendered the client.
B. This Disciplinary
Rule does not prohibit payment to a former partner or
associate
pursuant to a separation
or retirement agreement.
New York has adopted both attorney-client fee arbitration provisions, and requirements for a letter of engagement in certain situations, as discussed more fully infra.
In matters where the fee is anticipated to exceed $3,000 that the attorney provide the client with a written letter of engagement, as set forth following. Order Adopted by the Appellate Divisions December 20, 2001 Amended April 3, 2002 The Appellate Divisions of the Supreme Court, pursuant to the authority invested in them, do hereby add, effective March 4, 2002, Part 1215 to Title 22 of the Official Compilations of Codes, Rules and Regulations of the State of New York, entitled "Written Letter of Engagement," as follows: Part 1215 Written Letter of Engagement §1215.1 Requirements (a) Effective March 4, 2002, an attorney who undertakes to represent a client and enters into an arrangement for, charges or collects any fee from a client shall provide to the client a written letter of engagement before commencing the representation, or within a reasonable time thereafter (i) if otherwise impracticable or (ii) if the scope of services to be provided cannot be determined at the time of the commencement of representation. For purposes of this rule, where an entity (such as an insurance carrier) engages an attorney to represent a third party, the term "client" shall mean the entity that engages the attorney. Where there is a significant change in the scope of services or the fee to be charged, an updated letter of engagement shall be provided to the client. (b) The letter of engagement shall address the following matters: (1) Explanation of the scope of the legal services to be provided; (2) Explanation of attorney's fees to be charged, expenses and billing practices; and (3) Where applicable, shall provide that the client may have a right to arbitrate fee disputes under Part 137 of the Rules of the Chief Administrator. (c) Instead of providing the client with a written letter of engagement, an attorney may comply with the provisions of subdivision (a) by entering into a signed written retainer agreement with the client, before or within a reasonable time after commencing the representation, provided that the agreement addresses the matters set forth in subdivision (b). §1215.2 Exceptions This section shall not apply to (1) representation of a client where the fee to be charged is expected to be less than $3000, (2) representation where the attorney's services are of the same general kind as previously rendered to and paid for by the client, or (3) representation in domestic relations matters subject to Part 1400 of the Joint Rules of the Appellate Division (22 NYCRR) or (4) representation where the attorney is admitted to practice in another jurisdiction and maintains no office in the State of New York, or where no material portion of the services are to be rendered in New York. All three of these states have ethical rules providing for the arbitration of disputes regarding attorney’s fees. Interestingly, California provides for mandatory attorney fee arbitration, New York provides a “hybrid” system where in some situations arbitration of fee disputes is mandatory, and in others, voluntary. And in Florida attorney fee arbitration is purely voluntary.
NEW YORK ATTORNEY FEE ARBITRATION PROGRAM: As mentioned briefly above, New York has a “hybrid” arbitration program; some attorney client disputes are subject to mandatory arbitration, and some disputes are either not subject to arbitration, or to voluntary arbitration. New York’s PART 137. FEE DISPUTE RESOLUTION PROGRAM applies to matters involving legal services rendered after January 1, 2002, involving an attorney admitted in, and for legal services provided in New York.
There are a number of exceptions to the NY Fee Arbitration Program, as set forth in the rules:
“This Part shall not apply to
any of the following:
(1)
representation in criminal
matters;
(2)
amounts in dispute
involving a sum of less than $1000 or more
than $50,000, except that an arbitral body may hear disputes involving
other amounts if the parties have consented;
(3)
claims involving
substantial legal questions, including professional malpractice or
misconduct;
(4)
claims against an attorney
for damages or affirmative relief other than adjustment of the
fee;
(5)
disputes where the
fee to be paid by the client has been
determined pursuant to statute or rule
and allowed as of right by a court; or where the fee has been determined
pursuant to a court order;
(6)
disputes where no
attorney's services have been rendered for more than two
years;
(7)
disputes where the
attorney is admitted to practice in another jurisdiction and maintains no
office in the State of New York, or where no material portion of the services
was rendered in New York;
(8)
disputes where the
request for arbitration is made by a person
who is not the client of the attorney or the legal representative
of the client.”
As to those cases which come within the ambit
of the rule, fee arbitration is mandatory for the attorney, when requested
by the client. In addition, the arbitration award is final and binding unless
de novo proceedings are sought under rule 137.8
The rules provide that in certain circumstances,
both the attorney and client may agree in advance to submit fee disputes
for arbitration, and in addition that arbitral venues other than those
established in Rule 137 may be used, and may waive the de novo
proceedings.
The rules provide that
“to the extent practicable” the arbitration programs shall be
operated by either the New York State or a local bar
association.
Unless the parties have already agreed
to fee arbitration as discussed above, the fee arbitration proceedings are
commenced pursuant to “Arbitration
Procedure
(a) (1) Except as set forth in paragraph (2),
where the attorney and client cannot agree
as to the attorney's fee, the attorney shall forward a written notice to
the client, entitled "Notice of
Client's Right to Arbitrate," by certified mail or by personal service.
CALIFORNIA ATTORNEY FEE ARBITRATION PROGRAM: The California fee arbitration is mandatory for attorneys, and voluntary for the client. In California, attorney fees are governed by the California Rules of Professional Conduct:
Rule 4-200. Fees for Legal Services
(A) A member shall not enter into an agreement
for, charge, or collect an illegal or unconscionable fee.
(B) Unconscionability of a fee shall be determined
on the basis of all the facts and circumstances existing at the time the
agreement is entered into except where the parties contemplate that the fee
will be affected by later events. Among the factors to be considered, where
appropriate, in determining the conscionability of a fee are the
following:
(1) The amount of
the fee in proportion to the value of the services
performed.
(2) The relative
sophistication of the member and the client.
(3) The novelty and
difficulty of the questions involved and the skill requisite to perform the
legal service properly.
(4) The likelihood,
if apparent to the client, that the acceptance of the particular employment
will preclude other employment by the member.
(5) The amount involved
and the results obtained.
(6) The time limitations
imposed by the client or by the circumstances.
(7) The nature and
length of the professional relationship with the client.
(8) The experience,
reputation, and ability of the member or members performing the
services.
(9) Whether the fee
is fixed or contingent.
(10) The time and
labor required.
(11) The informed
consent of the client
CALIFORNIA MANDATORY ATTORNEY FEE ARBITRATION:
California has a mandatory fee arbitration program (mandatory for the attorney, voluntary for the client).
Rules regarding fee arbitration are found in the California Business & Professions Code 6200 et seq.:
ARTICLE 13 ARBITRATION
OF ATTORNEYS' FEES
§6200. Establishment of System
and Procedure; Jurisdiction; Local Bar Association Rules (a) The board of governors shall, by rule, establish, maintain, and administer a system and procedure for the arbitration, and may establish, maintain, and administer a system and procedure for mediation of disputes concerning fees, costs, or both, charged for professional services by members of the State Bar or by members of the bar of other jurisdictions. The rules may include provision for a filing fee in such amount as the board may, from time to time, determine. (b) This article shall not apply to any of the following:
(1) Disputes where a member of the
State Bar of California is also admitted to practice in another jurisdiction
or where an attorney is only admitted to practice in another jurisdiction,
and he or she maintains no office in the State of California, and no material
portion of the services were rendered in the State of California.
(c) Unless the client
has agreed in writing to arbitration under this article of all disputes
concerning fees, costs, or both, arbitration under this article shall be
voluntary for a client and shall be mandatory for an attorney if commenced
by a client. Mediation under this article shall be voluntary for an attorney
and a client.
(d) The board of
governors shall adopt rules to allow arbitration and mediation of attorney
fee and cost disputes under this article to proceed under arbitration and
mediation systems client, civil law, if the attorney's representation involved
civil law, or criminal law, if the attorney's representation involved criminal
law, as follows:
(1) If the panel is composed of three
members the panel shall include one attorney member whose area of practice
is either, at the option of the client, civil or criminal law, and shall
include one lay member.
(2) If the panel is composed of one member, that
member shall be an attorney whose area of practice is either, at the option
of the client, civil or criminal law.
(f) In any arbitration
or mediation conducted pursuant to this article by the State Bar or by a
local bar association, pursuant to rules of procedure approved by the board
of governors, an arbitrator or mediator, as well as the arbitrating association
and its directors, officers, and employees, shall have the same immunity
which attaches in judicial proceedings.
(g) In the conduct
of arbitrations under this article the arbitrator or arbitrators may do all
of the following:
(1) Take and hear evidence pertaining to the
proceeding.
(2) Administer oaths and
affirmations.
(3) Compel, by subpoena, the attendance of witnesses
and the production of books, papers, and documents pertaining to the
proceeding.
(h) Participation
in mediation is a voluntary consensual process, based on direct negotiations
between the attorney and his or her client, and is an extension of the negotiated
settlement process. All discussions and offers of settlement are confidential
and may not be disclosed in any subsequent arbitration or other proceedings.
(Added by Stats. 1978, ch. 719. Amended by Stats. 1984, ch. 825; Stats. 1989,
ch. 1416; Stats. 1990, ch. 483; Stats. 1990, ch. 1020; Stats. 1993, ch. 1262;
Stats. 1994, ch. 479; Stats. 1996, ch. 1104.)
6201. Notice to Client; Request for
Arbitration; Client's Waiver of Right to Arbitration
(a) The rules adopted
by the board of governors shall provide that an attorney shall forward a
written notice to the client prior to or at the time of service of summons
or claim in an action against the client, or prior to or at the commencement
of any other proceeding against the client under a contract between attorney
and client which provides for an alternative to arbitration under this article,
for recovery of fees, costs, or both. The written notice shall be in the
form that the board of governors prescribes, and shall include a statement
of the client's right to arbitration under this article. Failure to give
this notice shall be a ground for the dismissal of the action or other
proceeding. The notice shall not be required, however, prior to initiating
mediation of the dispute. The rules adopted by the board of governors shall
provide that the client's failure to request arbitration within 30 days after
receipt of notice from the attorney shall be deemed a waiver of the client's
right to arbitration under the provisions of this
article. (b) If an attorney, or the attorney's assignee, commences an action in any court or any other proceeding and the client is entitled to maintain arbitration under this article, and the dispute is not one to which subdivision (b) of Section 6200 applies, the client may stay the action or other proceeding by serving and filing a request for arbitration in accordance with the rules established by the board of governors pursuant to subdivision (a) of Section 6200. The request for arbitration shall be served and filed prior to the filing of an answer in the action or equivalent response in the other proceeding; failure to so request arbitration prior to the filing of an answer or equivalent response shall be deemed a waiver of the client's right to arbitration under the provisions of this article if notice of the client's right to arbitration was given pursuant to subdivision (a).
The California Bar has this to say about it’s fee arbitration
program: The State Bar's Mandatory Fee Arbitration Program (MFA) is an informal, low cost forum for resolving fee disputes between lawyers and their clients. It is mandatory for the lawyer if the client requests it. Since most fee arbitrations are conducted through local bar association programs, parties are encouraged to contact the local bar program with jurisdiction over the fee dispute. Mediation of the dispute may also be available through some local bar associations. For a list of approved local bar arbitration program or other documents relevant to the program, please refer to "Documents and Forms." For more information or assistance call the Office of Mandatory Fee Arbitration 415-538-2020.
FLORIDA FEE
RULES & FEE ARBITRATION PROGRAM:
Florida is unique as compared to
both California and New York. In Florida, the Bar’s attorney fee arbitration
program is completely voluntary, although Florida lawyers are
“encouraged” to utilize the program.
Rules Regulating The Florida
Bar
4 RULES OF PROFESSIONAL CONDUCT
RULE 4-1.5 FEES AND COSTS FOR
LEGAL SERVICES (1) after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee or the cost exceeds a reasonable fee or cost for services provided to such a degree as to constitute clear overreaching or an unconscionable demand by the attorney; or (2) the fee or cost is sought or secured by the attorney by means of intentional misrepresentation or fraud upon the client, a nonclient party, or any court, as to either entitlement to, or amount of, the fee.
(1) Factors to be considered as guides in determining a reasonable fee include: (A) the time and labor required, the novelty, complexity, and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (B) the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer; (C) the fee, or rate of fee, customarily charged in the locality for legal services of a comparable or similar nature; (D) the significance of, or amount involved in, the subject matter of the representation, the responsibility involved in the representation, and the results obtained; (E) the time limitations imposed by the client or by the circumstances and, as between attorney and client, any additional or special time demands or requests of the attorney by the client; (F) the nature and length of the professional relationship with the client; (G) the experience, reputation, diligence, and ability of the lawyer or lawyers performing the service and the skill, expertise, or efficiency of effort reflected in the actual providing of such services; and (H) whether the fee is fixed or contingent, and, if fixed as to amount or rate, then whether the client's ability to pay rested to any significant degree on the outcome of the representation. (2) Factors to be considered as guides in determining reasonable costs include: (A) the nature and extent of the disclosure made to the client about the costs; (B) whether a specific agreement exists between the lawyer and client as to the costs a client is expected to pay and how a cost is calculated that is charged to a client; (C) the actual amount charged by third party providers of services to the attorney; (D) whether specific costs can be identified and allocated to an individual client or a reasonable basis exists to estimate the costs charged; (E) the reasonable charges for providing in-house service to a client if the cost is an in-house charge for services. All costs are subject to the test of reasonableness set forth in subdivision (a) above. When the parties have a written contract in which the method is established for charging costs, the costs charged thereunder shall be presumed reasonable.
(1) 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 subdivision (f)(3) or by 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. (2) Every lawyer who accepts a retainer or enters into an agreement, express or implied, for compensation for services rendered or to be rendered in any action, claim, or proceeding whereby the lawyer's compensation is to be dependent or contingent in whole or in part upon the successful prosecution or settlement thereof shall do so only where such fee arrangement is reduced to a written contract, signed by the client, and by a lawyer for the lawyer or for the law firm representing the client. No lawyer or firm may participate in the fee without the consent of the client in writing. Each participating lawyer or law firm shall sign the contract with the client and shall agree to assume joint legal responsibility to the client for the performance of the services in question as if each were partners of the other lawyer or law firm involved. The client shall be furnished with a copy of the signed contract and any subsequent notices or consents. All provisions of this rule shall apply to such fee contracts. (3) A lawyer shall not enter into an arrangement for, charge, or collect: (A) 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 (B) a contingent fee for representing a defendant in a criminal case. (4) A lawyer who enters into an arrangement for, charges, or collects any fee in an action or claim for personal injury or for property damages or for death or loss of services resulting from personal injuries based upon tortious conduct of another, including products liability claims, whereby the compensation is to be dependent or contingent in whole or in part upon the successful prosecution or settlement thereof shall do so only under the following requirements: (A) The contract shall contain the following provisions: (i) "The undersigned client has, before signing this contract, received and read the statement of client's rights and understands each of the rights set forth therein. The undersigned client has signed the statement and received a signed copy to refer to while being represented by the undersigned attorney(s)." (ii) "This contract may be cancelled by written notification to the attorney at any time within 3 business days of the date the contract was signed, as shown below, and if cancelled the client shall not be obligated to pay any fees to the attorney for the work performed during that time. If the attorney has advanced funds to others in representation of the client, the attorney is entitled to be reimbursed for such amounts as the attorney has reasonably advanced on behalf of the client." (B) The contract for representation of a client in a matter set forth in subdivision (f)(4) may provide for a contingent fee arrangement as agreed upon by the client and the lawyer, except as limited by the following provisions: (i) Without prior court approval as specified below, any contingent fee that exceeds the following standards shall be presumed, unless rebutted, to be clearly excessive: a. Before the filing of an answer or the demand for appointment of arbitrators or, if no answer is filed or no demand for appointment of arbitrators is made, the expiration of the time period provided for such action: 1. 33 1/3% of any recovery up to $1 million; plus 2. 30% of any portion of the recovery between $1 million and $2 million; plus 3. 20% of any portion of the recovery exceeding $2 million. b. After the filing of an answer or the demand for appointment of arbitrators or, if no answer is filed or no demand for appointment of arbitrators is made, the expiration of the time period provided for such action, through the entry of judgment: 1. 40% of any recovery up to $1 million; plus 2. 30% of any portion of the recovery between $1 million and $2 million; plus 3. 20% of any portion of the recovery exceeding $2 million. c. If all defendants admit liability at the time of filing their answers and request a trial only on damages: 1. 33 1/3% of any recovery up to $1 million; plus 2. 20% of any portion of the recovery between $1 million and $2 million; plus 3. 15% of any portion of the recovery exceeding $2 million. d. An additional 5% of any recovery after institution of any appellate proceeding is filed or post-judgment relief or action is required for recovery on the judgment. (ii) If any client is unable to obtain an attorney of the client's choice because of the limitations set forth in subdivision (f)(4)(B)(i), the client may petition the court in which the matter would be filed, if litigation is necessary, or if such court will not accept jurisdiction for the fee division, the circuit court wherein the cause of action arose, for approval of any fee contract between the client and an attorney of the client's choosing. Such authorization shall be given if the court determines the client has a complete understanding of the client's rights and the terms of the proposed contract. The application for authorization of such a contract can be filed as a separate proceeding before suit or simultaneously with the filing of a complaint. Proceedings thereon may occur before service on the defendant and this aspect of the file may be sealed. A petition under this subdivision shall contain a certificate showing service on the client and, if the petition is denied, a copy of the petition and order denying the petition shall be served on The Florida Bar in Tallahassee by the member of the bar who filed the petition. Authorization of such a contract shall not bar subsequent inquiry as to whether the fee actually claimed or charged is clearly excessive under subdivisions (a) and (b).
(C) Before a lawyer enters into a contingent fee contract for
representation of a client in a matter set forth in this rule, the lawyer
shall provide the client with a copy of the statement of client's rights
and shall afford the client a full and complete opportunity to understand
each of the rights as set forth therein. A copy of the statement, signed
by both the client and the lawyer, shall be given to the client to retain
and the lawyer shall keep a copy in the client's file. The statement shall
be retained by the lawyer with the written fee contract and closing statement
under the same conditions and requirements as subdivision (f)(5). (i) To the lawyer assuming primary responsibility for the legal services on behalf of the client, a minimum of 75% of the total fee. (ii) To the lawyer assuming secondary responsibility for the legal services on behalf of the client, a maximum of 25% of the total fee. Any fee in excess of 25% shall be presumed to be clearly excessive. (iii) The 25% limitation shall not apply to those cases in which 2 or more lawyers or firms accept substantially equal active participation in the providing of legal services. In such circumstances counsel shall apply to the court in which the matter would be filed, if litigation is necessary, or if such court will not accept jurisdiction for the fee division, the circuit court wherein the cause of action arose, for authorization of the fee division in excess of 25%, based upon a sworn petition signed by all counsel that shall disclose in detail those services to be performed. The application for authorization of such a contract may be filed as a separate proceeding before suit or simultaneously with the filing of a complaint, or within 10 days of execution of a contract for division of fees when new counsel is engaged. Proceedings thereon may occur before service of process on any party and this aspect of the file may be sealed. Authorization of such contract shall not bar subsequent inquiry as to whether the fee actually claimed or charged is clearly excessive. An application under this subdivision shall contain a certificate showing service on the client and, if the application is denied, a copy of the petition and order denying the petition shall be served on The Florida Bar in Tallahassee by the member of the bar who filed the petition. Counsel may proceed with representation of the client pending court approval. (iv) The percentages required by this subdivision shall be applicable after deduction of any fee payable to separate counsel retained especially for appellate purposes. (5) In the event there is a recovery, upon the conclusion of the representation, the lawyer shall prepare a closing statement reflecting an itemization of all costs and expenses, together with the amount of fee received by each participating lawyer or law firm. A copy of the closing statement shall be executed by all participating lawyers, as well as the client, and each shall receive a copy. Each participating lawyer shall retain a copy of the written fee contract and closing statement for 6 years after execution of the closing statement. Any contingent fee contract and closing statement shall be available for inspection at reasonable times by the client, by any other person upon judicial order, or by the appropriate disciplinary agency. (6) In cases in which the client is to receive a recovery that will be paid to the client on a future structured or periodic basis, the contingent fee percentage shall be calculated only on the cost of the structured verdict or settlement or, if the cost is unknown, on the present money value of the structured verdict or settlement, whichever is less. If the damages and the fee are to be paid out over the long term future schedule, this limitation does not apply. No attorney may negotiate separately with the defendant for that attorney's fee in a structured verdict or settlement when such separate negotiations would place the attorney in a position of conflict.
(1) the division is in proportion to the services performed by each lawyer; or (2) by written agreement with the client: (A) each lawyer assumes joint legal responsibility for the representation and agrees to be available for consultation with the client; and (B) the agreement fully discloses that a division of fees will be made and the basis upon which the division of fees will be made.
STATEMENT OF CLIENT'S
RIGHTS
______________________________ Comment
The Florida Bar offers a free guide to consumers regarding it’s fee arbitration program. The guide is informative for Florida lawyers to gain insight to the Florida Bar’s attorney fee arbitration program, so is reproduced following:
“Consumer Guide to the Legal
Fee Arbitration
Program · any records you have of the time spent by the attorney on the case; · copies of any written fee agreements; · copies of correspondence between the parties regarding the fee dispute; · copies of all work done by the lawyer (i.e. marital separation agreement, deeds, contracts, etc.); and · any other documents relating to the attorney's fee or the case.
· When a deposit or "retainer" is requested, discuss whether or not any part of it will be refunded if the case does not proceed. · If an attorney is billing by the hour, discuss the need for a monthly statement so the client can be aware of the costs associated with the case. · If an attorney accepts a case on a contingency basis, make sure both parties understand how it will work. Contingency means the client won't be charged attorney's fees if the case is lost; but the client may still be responsible for costs such as filing fees, investigators and/or transcripts. If the client wins, the attorney is paid a percentage of the money awarded by the court. Both parties should be knowledgeable of the attorney's percentage and whether or not it will be taken before or after court costs are subtracted. · Request that provision for arbitration of fee disputes be included in your written fee agreement.
SUMMARY OF ETHICAL RULES GOVERNING ATTORNEY’S
FEES AND CALIFORNIA, FLORIDA AND NEW YORK FEE BAR ASSOCIATION ARBITRATION
PROGRAMS
Generally, attorneys may not charge or collect an illegal, excessive or unconscionable fee. The bar’s rules define what constitutes these improper fees (see supra).
California, Florida and New York have established attorney fee arbitration programs. California’s program is mandatory for attorneys in most all cases, New York’s program is a “mixed” program with both mandatory and voluntary provisions, and Florida’s attorney fee arbitration is purely voluntary for the attorney, who is encouraged to participate.
The additional substantive written materials included with this activity include the fee arbitration rules and additional materials of the California, Florida and New York bars.
ADDITIONAL SUPPLEMENTAL SUBSTANTIVE WRITTEN MATERIALS: The additional materials are provided with this activity. You can refer to (or print out) these supplemental substantive written materials by clicking on the links below.
Using the Online version of this program, you can RIGHT CLICK on the links, then select "save target as" to save them to your computer. Using the CD version of this program, these additional materials are included on the program CD.
California Bar Attorney Fee Arbitration Rules Florida Bar Rules of Professional Conduct - Attorney's Fees New York Attorney Fee Arbitration Standards New York Fee Arbitration Program Rules
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