COMMENT
Reasonableness of Fees and Expenses [1] Paragraph (a) requires that lawyers charge fees that are reasonable under the circumstances. The factors specified in (1) through (10) 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, she or he 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. Paragraph (d) further prohibits a lawyer from charging a fee to administer a probate estate when payment is based upon a percentage of the value of the estate.
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 subject to certain conditions. The client must consent to the employment of the other lawyer and to the terms for the division of the fees, after full disclosure, which disclosure must be confirmed in writing. In addition, the total fee must be reasonable. Contingent fee agreements must be in a writing signed by the client and must otherwise comply with paragraph (c) of this Rule. 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, nor does paragraph (e) prohibit payment to a former partner or associate pursuant to a separation or retirement agreement. Paragraph (e) further does not address the issue of the fee division when a lawyer is terminated before the matter is completed, and new counsel is engaged.
Disputes over Fees [9] A mandatory fee arbitration procedure has been established for resolution of fee disputes. Lawyers must conscientiously comply with the procedure set forth in Maine Bar Rule 9. This Rule prescribes 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 shall comply with the prescribed procedure.
REPORTER’S NOTES:
Model Rule 1.5 substantively is equivalent to M. Bar R. 3.3 and replaces M. Bar. R. 8. Because the Task Force thought Model Rule 1.5 clearly and comprehensively set forth the rules governing lawyer’s fee arrangements and included the rules governing contingent fees, it recommended its adoption, subject to the noted modifications.
The Task Force recommended Rule 1.5(a) track M. Bar R. 3.3(a)’s more expansive description of what constitutes an “unreasonable fee.” The language added to Model Rule 1.5(a)(4) reflects the recommended addition to the Maine Rules of Professional Conduct Rule 1.2(c)(1) and (c)(2), allowing, under certain circumstances, lawyers’ provision of limited representation to clients. The Task Force recommended two additional provisions to Rule 1.5:
(i) the allowance of credit cards as a method of payment for legal services, and
(ii) a recognition of mandatory fee arbitration, in accordance with the provisions set forth in Rule 9.
The Task Force further recommended, consistent with established law, lawyers not be paid a fee for administering a probate estate based on a percentage of the value of a probate estate.
In 2005, the Supreme Judicial Court asked the Advisory Committee on Professional Responsibility (the “Advisory Committee”) to consider whether Maine should adopt the Model Rule version of the fee division rule, that allows fee sharing “in proportion to the services performed by each lawyer” or if the referring lawyer “assumes joint responsibility for the representation.” In contrast, M. Bar R. 3.3(d) allows fee division between unaffiliated lawyers if the terms of the fee division are disclosed to the client, and if the total fee is reasonable. The Advisory Committee observed the fee division rule as set forth in M. Bar R. 3.3(d) has been serving its intended purpose of encouraging the early referral of cases to lawyers with greater experience and expertise to handle them. The Advisory Committee solicited comments from members of the Maine Bar, and held an open forum to discuss the fee division issues. Because the vast majority of comments were in favor of maintaining the existing Maine Bar Rule, the Advisory Committee recommended that the language of Model Rule 1.5(e) be replaced with the language of M. Bar R. 3.3(d). The Task Force thought misunderstandings could be avoided, however, if the disclosure to the client about the fee division was confirmed in writing.
Finally the Task Force stressed that Rule 1.5(d) does not address the issue of the fee division when a lawyer is terminated before the matter is completed, and new counsel is engaged. In such a case, the fees paid to the old lawyer and new lawyer must meet the standards set forth in Rules 1.5(a) and
(b) .
Advisory Committee’s Note – June 2014
Paragraph (a) has been amended to make clarifying changes regarding the considerations that bear on the reasonableness of a fee.
In paragraph (a)(2), the requirement that the preclusion of a lawyer’s employment be apparent to the client has been removed. A lawyer’s reasonable perception of the risk of loss of other employment is relevant to the reasonableness of the fee, whether or not the client is aware of potentially conflicting engagements.
Paragraph (a)(3) has been amended to clarify that in any particular locality, a range of fees, rather than a single precise fee, can very well be charged for a particular service, and that range, rather than any one particular fee, is relevant to determining the zone of reasonableness of fees in any particular case.
Paragraph (a)(11) is new. It highlights the fact that, as with many commercial contracts, parties to a fee agreement enter the agreement in order to allocate various risks and in the expectation of, or pursuit of, certain potential benefits. Parties make those agreements lacking perfect foresight. The reasonableness of the agreement is to be judged by the reasonableness at the time of contracting, in light of the parties’ desire to allocate risks and pursue benefits, not in hindsight. An agreement entered into by parties reasonably seeking certainty despite (or even because of) their lack of perfect foresight should be respected, even if one party might regret it in hindsight or, if the party had had perfect foresight, might not have entered it.
Paragraph (d)(1) is amended to update the current rule prohibiting fees that are contingent upon securing a divorce or contingent upon the amount of alimony, support, or property settlement in lieu thereof. The amendment expands the Rule to include all family matter actions in which a contingent fee arrangement is not appropriate. Neither the existing Rule, nor the amendment prohibits a contingent fee arrangement in a family matter enforcement proceeding.
Paragraph (f) has been amended to clarify that a lawyer can accept an advance paid by credit card or other means that requires initial deposit into the lawyer’s operating account, so long as the lawyer complies with the requirements set forth in newly amended Rule 1.15(b)(1). See the Advisory Committee’s Note June – 2014 to Rule 1.15 for discussion of this issue.
Paragraph (g) has been amended to change the reference to “Bar Rule 9” in light of coming revisions to the organization and content of the Bar Rules. No substantive change is intended.
Paragraph (h) is new. It clarifies the conditions that apply to a lawyer’s acceptance of a nonrefundable fee.
Paragraph (h)(1) provides that nonrefundable fees are permissible, subject to the requirement of reasonableness that applies to all fees. The paragraph requires certain safeguards to ensure the client’s informed consent to the nonrefundability of a fee. Although the safeguards in paragraph (h)(1) are required, they will not guarantee a finding of informed consent in every case and are not exclusive of the factors that otherwise bear on the existence of informed consent. See Rule 1.0(e). When fees are paid prior to the rendition of services and in the expectation that such future services will be rendered, the Committee believes that a client’s default expectation will be that the payment is an advance rather than a nonrefundable fee. In order to avoid client confusion, paragraph (h)(1) requires clear disclosure to the client that the fee is nonrefundable and a description of the scope of future services that the client is entitled to receive.
The Committee intends that Opinion No. 206 (Dec. 12, 2012) of the Professional Ethics Commission shall not apply to nonrefundable fees that lawyers accept in compliance with this new paragraph. The amendment differs from the law as stated in Opinion No. 206 in two important ways: (1) it permits nonrefundable fees for more than a lawyer’s mere “availability,” and allows such fees even though the parties fully expect the lawyer to render specified future services; (2) it requires (where Opinion No. 206 forbids) description of the fee as nonrefundable, in order to ensure the client’s informed consent thereto.
A lawyer who accepts payment before services are rendered cannot treat such payment as a nonrefundable fee, unless the lawyer complies with the disclosure requirements of paragraph (h)(1). Without the client’s informed consent to nonrefundability in accordance with this paragraph, the lawyer must treat the funds as an advance to be credited against future bills for services and must keep such funds in a trust account, in accordance with Rule 1.15, until future services are rendered, and must refund the unearned portion of any such funds upon termination of representation, in accordance with Rule 1.16(d). If conditions (h)(1) and (h)(2) are met, nonrefundable fees cannot be deposited in the lawyer’s trust account as those nonrefundable fees are not the property of a client.
Paragraph (h)(2) prohibits a lawyer from securing a client’s advance waiver of the right to challenge the reasonableness of a fee. A client’s written agreement to a fee is a factor under paragraph (a) in the determination of its reasonableness. A lawyer should not press further and request or require the client to waive the client’s right to have the reasonableness of a nonrefundable fee determined in accordance with law.
CONTINGENT FEE AGREEMENT To Be Executed In Duplicate
Date , 20
The client, (Name) (Street & Number) (City or Town) retains the attorney (Name) (Street & Number)
(City or Town)
to perform the legal services mentioned in par. (1) below. The attorney agrees to perform them faithfully and with due diligence.
(1) The claim, controversy, and other matters with reference to which the services are to be performed are:
(2) The contingency upon which compensation is to be paid is:
(3) The client is not to be liable to pay compensation otherwise than from amounts collected for the client by the attorney, except as follows:
(4) Reasonable compensation on the foregoing contingency is to be paid by the client to the attorney, but such compensation (including that of any associated counsel) to be paid by the client shall not exceed the following maximum percentages of the gross (net) (indicate which) amount collected. Here insert the maximum percentages to be charged in the event of collection. These may be on a flat basis or in a descending scale in relation to amount collected.)
(5) The client is to be liable to the attorney for the attorney's reasonable expenses and disbursements as hereinafter specified.
A. Litigation costs. Costs of the action, including: 1. Filing fees paid to the clerk of courts; 2. Fees for service of process and other documents; 3. Attendance fees and travel costs paid to witnesses; 4. Expert witness fees and expenses; 5. Costs of medical reports; 6. Costs of visual aids; and 7. Costs of taking depositions.
B. Travel expenses. Expenses for travel by the attorney on behalf of the client.
C. Telephone. Disbursements for long-distance telephone calls made by the attorney on behalf of the client.
D. Postage. Postage paid by the attorney for mailings on behalf of the client; and
E. Copying. Costs of photocopying and facsimile telecopying done by the attorney on behalf of the client. F. Other: (Specify). (The client agrees that fees paid pursuant to this agreement will be divided. Attorney________________ will receive ___________ (dollars or percent of the contingent fee) and Attorney ________________ will receive (dollars or percent of the contingent fee).)
(6) This agreement and its performance are subject to Rule 1.5 of the Maine Rules of Professional Conduct.
WE HAVE EACH READ THE ABOVE AGREEMENT BEFORE SIGNING IT.
Witnesses to signatures
To client: Signature of Client
To attorney: Signature of Attorney
(If more space is needed, separate sheets may be attached and initialed.)
