Rule 1.5 Fees

COMMENTS:

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. Pursuant to Rule 1.5(b), however, in a new client-lawyer relationship, an agreement as to the fee and expenses must be promptly established in writing, for example by furnishing the client with at least a simple memorandum or a 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 (if applicable); 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) of these Rules. 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) of these Rules. However, a fee paid in property instead of money may be subject to the requirements of Rule 1.8(a) of these Rules 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. 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 Haw. Rev. Stat. § 607-15.5.

Contingency fee agreements may be proper in proceedings to enforce or satisfy a judgment for property distribution or past due alimony or child support.

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) does not require disclosure to the client of the share that each lawyer is to receive, though 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. See Rule 5.1 of these Rules. A lawyer should refer a matter only to a lawyer the referring lawyer reasonably believes is competent to handle the matter. See Rule 1.1 of these Rules.

[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.

Special Duties Regarding Flat Fees

[10] A lawyer accepting a flat fee must reduce the agreement to a writing that includes the information specified in Rule 1.5(c)(1) through (6) of these Rules. Compliance benefits both the client and the lawyer, as the information is vital for reconciling future disputes should the representation terminate before the ultimate goal of the representation is achieved. The right to an accounting upon request, referred to in Rule 1.5(c)(5), above, ensures the client will receive information concerning the work performed by the lawyer sufficiently detailed to aid in the resolution of any fee dispute or request for a refund by the client.