ACTEC COMMENTARIES ON THE MODEL RULES OF PROFESSIONAL CONDUCT
MRPC 1.5
Fees.
(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 question 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 or rate of the fee shall be communicated to the client, preferably in writing, 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 another law. A contingent fee arrangement 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 a 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 agreement for, charge, or collect:
(1) any fee in a domestic relations matter, the payment 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, by written agreement with the client, each lawyer assumes joint responsibility for the representation;
(2) the client is advised of and does not object to the participation of all lawyers involved; and
(3) the total fee is reasonable.
* * * * * * * * * * * * * * ACTEC COMMENTARY ON MRPC 1.5
Basis of Fees for Trusts and Estates Services. Fees for legal services in trusts and estates matters may be established in a variety of ways provided that the fee ultimately charged is a reasonable one taking into account the factors described in MRPC 1.5(a). Fees in such matters frequently are primarily based on the hourly rates charged by the attorneys and legal assistants rendering the legal services or upon a mutually agreed upon fee determined in advance. In all cases the lawyer should advise the client of the basis upon which the legal fees will be charged and obtain the client's informed consent to the fee arrangement. The lawyer should also inform the client in advance of the extent to which the client will be charged for other items, including duplicating expenses, and the time of secretarial or clerical personnel. Basing a fee for legal services solely on any single factor set forth in MRPC 1.5 is generally inappropriate unless required or allowed by the law of the applicable jurisdiction. In recent years courts in several states have, in effect, prohibited or seriously limited the use of fees based upon a percentage of the value of the estate.
Most states allow a lawyer who serves as a fiduciary and as the lawyer for the fiduciary to be compensated for work done in both capacities. However, it is inappropriate for the lawyer to receive double compensation for the same work.
Fee Paid by Person Other than Client. One person, perhaps an employer, insurer, relative, or friend, may pay the cost of providing legal services to another person. Notwithstanding the source of payment of the fee, the person for whom the services are performed is the client, whose confidences must be safeguarded and whose directions must prevail. Under MRPC 1.8(f) (Conflict of Interest: Prohibited Transactions) the lawyer may accept compensation from a person other than a client only if the client consents after consultation, there is no interference with the lawyer's independence of judgment or with the lawyer-client relationship, and the client's confidences are maintained. See ACTEC Commentary on MRPC 1.8 (Conflict of Interest: Prohibited Transactions).
No Rebates, Discounts, Commissions or Referral Fees. The lawyer should not accept any rebate, discount, commission or referral fee from a nonlawyer or a lawyer not acting in a legal capacity in connection with the representation of a client. Even with full disclosure to and consent by the client, such an arrangement involves too great a risk of overreaching by the lawyer and the potential for actual or apparent abuse. The client is generally entitled to the benefit of any economies that are achieved by the lawyer in connection with the representation. The acceptance by the lawyer of a referral fee from a nonlawyer may involve an improper conflict of interest. See MRPC 1.7 (Conflict of Interest: General Rule) and MRPC 1.8 (Conflict of Interest: Prohibited Transactions). In those jurisdictions that permit referral fees between lawyers, the lawyer should comply with the requirements of local law governing such matters, including full disclosure to the client. A lawyer is prohibited from sharing legal fees with nonlawyers. See MRPC 5.4 (Professional Independence).
ANNOTATIONS
(Refer to Caveat)
Percentage, Excessive and Reasonable Fees:
Cases:
California:
Estate of Trynin, 264 Cal. Rptr. 93 (1989). The Supreme Court of California, construing California's statute governing extraordinary compensation for attorneys, here held that in an appropriate case attorneys may be compensated for legal services rendered in preparing and prosecuting a claim for prior extraordinary legal services (so-called "fees on fees"). The Court observed that the trial court retains the discretion to reduce or deny additional compensation for fee-related services if the court finds that the fees otherwise awarded the attorneys for both ordinary and extraordinary services are adequate, given the value of the estate and the nature of its assets, to fully compensate the attorneys for all services rendered.
Colorado:
Estate of Painter, 567 P.2d 820 (Colo. App. 1977), appeal after remand, 628 P.2d 124 (Colo. App. 1980), appeal after remand, 671 P.2d 1331 (Colo. App. 1983). Fee awards for personal representative and counsel based on expert testimony applying percentage method of determining fees were reversed. The Colorado legislature had repealed authorization for percentage fees and adopted a reasonable fee standard.
Florida:
Florida Bar v. DellaDonna, 583 So. 2d 307 (Fla. 1991). A lawyer acting as personal representative was disbarred for five years for gross mismanagement of estate, conflicts of interest, and excessive fees. The court rejected the argument that discipline could not be imposed on the lawyer since the lawyer was not acting as a lawyer.
In re Estate of Platt, 586 So. 2d 328 (Fla. 1991). The court here held that it was inappropriate to determine the fees of a fiduciary and the fiduciary's lawyer solely according to a percentage of the value of the estate when governing statutes provide a number of factors to be considered in determining fees. (See discussion of Florida statute below.)
Teague v. Estate of Hoskins, 709 So. 2d 1373 (Fla. 1998). In this case of first impression the Supreme Court of Florida held that the attorneys' fees awarded to a widow's guardian against an estate's personal representative in the guardian's successful litigation with the personal representative over the widow's homestead, and elective share rights constituted a claim of the highest priority against the estate's assets. Two dissenting judges argued that the majority's opinion "exacts no toll from the personal representative for initiating and pursuing a fruitless claim."
Illinois:
In re Estate of Pfoertner, 700 N.E.2d 438 (Ill. App. 1998). An attorney filed a successful will contest on behalf of some, but not all, of the intestate heirs of a decedent. The attorney moved for an order assessing his fees and costs against each heir's intestate share of the estate to the extent such heir's interest exceeded what the heir would have received under the challenged will. The appellate court affirmed the trial court's authority and broad discretion to award fees and costs pursuant to the common fund doctrine (described as an equitable exception to the "American Rule" that each party to litigation must bear its own attorneys' fees). The appellate court nevertheless remanded the case to the trial court to make an award on the basis of quantum meruit.
Indiana:
In re Matter of Gerard, 634 N.E.2d 51 (Ind. 1994). A lawyer was here suspended for one year for enforcing contingent fee agreement under which the lawyer received over $150,000 with respect to largely administrative work in locating certificates of deposit that belonged to elderly hospitalized client. The lawyer's conduct involved fraud and charging a clearly excessive fee.
Maine:
In re Estate of Davis, 509 A.2d 1175 (Me. 1986). The practice of basing a lawyer's fee on a percentage of the estate being handled should carry little or no weight in determining a reasonable fee.
Massachusetts:
In re Matter of Tobin, 628 N.E.2d 1273 (Mass. 1994). A lawyer was suspended for 18 months for fraudulently inducing a client unnecessarily to probate an estate, all of the assets of which passed to her as surviving joint tenant, for charging excessive fees based on bar association's former fee schedule, and misrepresenting facts to probate court.
Missouri:
Estate of Perry, 978 S.W.2d 28 (Mo. App. 1998). This was an action brought by the decedent's son by a prior marriage to remove the decedent's surviving husband as personal representative and for an accounting. The trial court declined to remove the husband as personal representative but entered a money judgment against him for certain claims made on jointly secured obligations. The court also adjudicated the husband's request for an allowance of exempt property. The appellate court, reversing the trial court on the issue of attorneys' fees, held that the son was entitled to a fee award since the estate had benefitted from the judgment against the husband and the fact that the son was not successful in his removal action was not determinative on the attorneys' fees issue.
Montana:
Hauck v. Seright, 964 P.2d 749 (Mont. 1998). In this will contest action where the decedent had executed two wills within four days, counsel for the personal representative was unsuccessful in defending the validity of the second will. Nevertheless, in admitting the first will to probate, the trial court awarded attorneys' fees to the personal representative under the second will. On appeal by the contestant, the Supreme Court of Montana, construing Montana's statute, held that a personal representative is entitled to recover fees from an estate when he defends or prosecutes a proceeding in good faith, whether successful or not.
New York:
In re Estate of Freeman, 311 N.E.2d 480 (N.Y. 1974). This case lists the factors to be taken into account by a Surrogate in determining the fees of counsel in estate matters, which include the amount involved, results obtained and the skill and time required.
North Carolina:
Estate of Smith v. Underwood, 487 S.E.2d 807 (N.C. App. 1997). The appellate court here upheld a trial court's award in favor of the beneficiaries of a trust who had sued the attorney/trustee (together with an accountant and the accountant's firm) for breach of fiduciary duty and professional negligence. The attorney had filed an initial trust accounting and obtained approval of his fees and commissions in 1955, the year after the decedent died, but from 1956 until 1991 filed no annual accountings and did not obtain the probate court's approval of the fees and commissions that he collected. The award against the attorney included statutory double damages allowed under state law when an attorney has committed a fraudulent practice.
Ohio:
Estate of Haller, 689 N.E.2d 612 (Ohio App. 1996). An attorney/administrator sought fees for his firm's representation of himself in an estate administration. Introducing no expert testimony, the attorney did support his application by a 67-page itemization of his services. In affirming the trial court's approval of the entire fee requested (approximately $39,000), the court observed that, "[w]hile the better practice may be to introduce expert testimony as to the reasonableness of the fees, a probate court judge is nevertheless qualified to make a determination, upon evidence, of the reasonable attorney fees to be paid from the estate without the necessity of expert testimony." 689 N.E.2d at 615.
Pennsylvania:
In re Estate of Preston, 560 A.2d 160, 165 (Pa. Super. 1989). The compensation allowed by the lower court was reduced: "The lower court's use of the Attorney General's [percentage] schedule for calculating fees is clearly improper and must cease."
In re Estate of Sonovick, 541 A.2d 374, 376 (Pa. Super. 1988). In this case the compensation of the lawyer and the fiduciary were reduced. The court stated that: "Thus, the fiduciary's entitlement to compensation should be based upon actual services rendered and not upon some arbitrary formula."
South Dakota:
Estate of O'Keefe, 583 N.W.2d 138 (S.D. 1998). In this action decedent's two nephews, who had acted as fiduciaries in taking care of his property, were found liable for both compensatory and punitive damages for breach of their fiduciary duties, conversion, fraud and deceit. The plaintiff, who, with the nephews, was the only other beneficiary of the estate, sought an order to prevent the two nephews from receiving any part of the punitive damages as estate beneficiaries and requested the court to assess the estate's attorneys' fees incurred in the prior litigation against the nephews' distributive shares. After the trial court so ruled, the Supreme Court of South Dakota, interpreting that state's version of the Uniform Probate Code, upheld the trial court's order regarding the punitive damages but reversed the award of attorneys' fees, finding that such fees could only be awarded by contract or when explicitly authorized by statute.
Washington:
Bennett v. Ruegg, 949 P.2d 810 (Wash. App. 1999). In this case the court, interpreting statutory law, found that the state's broadly drawn statute permitting attorneys' fees to be awarded in a probate proceeding "as justice may require" applies to permit the personal representative's recovery of attorneys' fees from a beneficiary who has unsuccessfully sought removal of the personal representative.
Estate of Morris, 949 P.2d 401 (Wash. App. 1998). A corporate personal representative personally incurred attorneys' fees in successfully defending a suit for removal brought by the beneficiaries of two estates. Its request for reimbursement from the estates was disallowed. The appellate court affirmed the trial court's decision denying any fees on the grounds that the bank's conduct had conferred no "substantial benefit" on the estate as required by the applicable Washington statute.
Statute:
Florida:
Florida has enacted a revised comprehensive statute governing compensation of the attorney for a personal representative. Attorneys for personal representatives are entitled to "reasonable compensation" without court order. If the compensation is calculated pursuant to a statutory percentage fee schedule set forth in the statute, it is presumed to be "reasonable". Provision is made for payment for certain "extraordinary services," examples of which are included in the statute. Upon the petition of any interested person the court may increase or decrease the compensation for ordinary services or award compensation for extraordinary services (if the facts and circumstances of the particular administration warrant.) The statute also includes a list of factors for the court to use in determining what is "reasonable" and gives the court discretion to give such weight to each such factor as the court determines to be appropriate. Fla. Stats. ' 733.6171 (eff. July 1, 1995).
Ethics Opinions:
ABA:
ABA Formal Op. 93-379 (1993). This opinion articulates more particularly the duties of a lawyer to disclose the basis of fees and charges as provided in MRPC 1.5. In addition,
In matters where the client has agreed to have the fee determined with reference to the time expended by the lawyer, a lawyer may not bill more time than she actually spends on a matter, except to the extent that she rounds up to minimum time periods (such as one-quarter or one-tenth of an hour). A lawyer may not charge a client for overhead expenses generally associated with properly maintaining, staffing and equipping an office; however, the lawyer may recoup expenses reasonably incurred in connection with the client's matter for services provided in house, such as photocopying, long distance telephone calls, computer research, special deliveries, secretarial overtime, and other similar services, so long as the charge reasonably reflects the lawyer's actual cost for the services rendered. A lawyer may not charge a client more than her disbursements for services provided by third parties like court reporters, travel agents or expert witnesses, except to the extent that the lawyer incurs costs additional to the direct costs of the third-party services.
Arizona:
Ariz. Op. No. 94-09 (1994). (For a more detailed summary see the Annotations following the ACTEC Commentary on MRPC 1.6.) A lawyer who believes that the fees charged by another lawyer in connection with the administration of an estate are clearly excessive has a duty to report the other lawyer's violation of the rules to the state bar.
Contingent Fee Agreements:
Case:
Indiana:
In re Matter of Gerard, 634 N.E.2d 51 (Ind. 1994). This case, summarized above, involved a contingent fee agreement that resulted in an excessive fee. The "enormity of Respondent's fee in relation to the amount of service rendered is fraudulent". 634 N.E.2d at 53.
Ethics Opinion:
New York:
New York City Bar Formal Op. 1993-2 (1993). This opinion concludes that a lawyer may enter into a contingent fee contract with a client in connection with a dispute involving a will. The lawyer may not enter into a joint fee agreement among the lawyer, clients and a private investigator under which the investigator would receive a contingent fee.
Payment of Fee by Person Other Than Client:
Ethics Opinion:
ABA:
ABA Inf. Op. 86-1517 (1986). A lawyer may bill a corporation for personal services provided to the corporation's shareholder, director, officer or employee, if the corporation and the personal client agree and the bill identifies the services as personal services and the amount of the charge for the services.
Reduced Rates for Employees of Corporate Client:
Ethics Opinion:
Illinois:
Ill. Op. 92-8 (1993) approved an arrangement under which a law firm that represents a corporation would represent corporate employees at reduced rates in return for the corporate president's recommendation that the employees use the law firm's services. However, the opinion observes that the promise of "reduced" rates may be misleading unless the fees charged are less than the firm's normal and customary fees. The same may be true unless the fees charged are less than the fees generally charged in the locality for similar legal services. There is also a substantial risk of a conflict of interest between the employees and the employer.
Rebates, Discounts, Commissions or Referral Fees:
Cases:
Kansas:
In re Matter of Farmer, 747 P.2d 97 (Kan. 1987). It is improper for a lawyer to negotiate discounts on a client's medical expenses that were payable from personal injury settlement, charge the client for the full amount of the claims without disclosure, and retain the difference as an additional fee.
New York:
In re Estate of Clarke, 188 N.E.2d 128 (N.Y. 1962). The lawyer for a personal representative who entered into an agreement with a real estate broker to split the broker's fee on the sale of real property belonging to the estate had a conflict of interest that required denial of all of the lawyer's fees.
Ethics Opinions:
ABA
ABA Formal Op. 93-379 (1993). This opinion covers a number of subjects relating to attorneys' fees and disbursements. It states, in part, that, "if a lawyer receives a discounted rate from a third-party provider, it would be improper if she did not pass along the benefit of the discount to her client rather than charge the client the full rate and reserve the profit to herself. Clients quite properly could view these practices as an attempt to create additional undisclosed profit centers when the client had been told he would be billed for disbursements."
California:
L.A. County Op. 443 (1987). A lawyer may not accept payments from a physician to whom the lawyer refers clients for medical treatment.
San Diego Op. 1989-2 (1989). A lawyer for the executor of a decedent's estate may not ethically demand payment of referral fee by a real estate broker as a condition to retention of the broker. "Disclosure and consent by the client (per Rule 3-300) does not cure the abuse."
New Jersey:
N.J. Op. 514 (1983). This opinion is summarized in the Annotations following the ACTEC Commentary on MRPC 1.7.
New York:
N.Y. Formal Ops. 481 (1977) and 610 (1990). These opinions are summarized in the Annotations following the ACTEC Commentary on MRPC 1.7.
Public Home Page |
Private Home Page
Whats New |
Resources |
Membership |
College Information
