How ABA Model Rule 1.2 on Client-Lawyer Relationship Impacts What Lawyers Can Charge

July 31, 2017

[Editor’s note: this is another in a series of blog posts discussing how specific ABA Model Prof. Conduct Rules that all lawyers must follow impacts how lawyers can and cannot bill clients.]

In this blog piece, I will discuss how Rule 1.2 Scope of Representation and Allocation of Authority between Client and Lawyer affects how lawyers ethically can bill for their services.

In setting out the allocation of authority between the client and lawyer, Rule 1.2 provides that the big picture items in a representation such as deciding on the “objectives” of the representation including whether to settle or arbitrate or go to trial are the client’s responsibility whereas the details in a representation such as deciding upon the “means” or the steps that need to be taken to carry out the strategy to achieve the objective are the lawyer’s responsibility.

But in deciding upon the steps involved to carry out the objectives of the representation, Rule 1.2 at Comment [2] provides that “lawyers usually defer to the client regarding such questions as the expense to be incurred.”  As a result, lawyers have a duty to discuss the costs of carrying out any proposed strategy with the client and get the client’s consent to the proposed costs.

In an “independent counsel” situation in an insurance context, a lawyer’s statement to a client that the “insurance company will pay my fees and costs” may not be an accurate statement. This would especially be the case if the lawyer has not actually reached an agreement with the insurance company as to the costs of the planned defense.

One of the main reasons clients (or insurers) need “accurate estimates of what their fees will be [is] to make a rational choice between settling now or spending more on legal fees, whether in negotiation or litigation.” See Toothman & Ross, Legal Fees, (Carolina Academic Press 2003) at p. 204. As will be seen in the discussion of Rule 1.4 Communication, the lawyer has a continuing duty to timely update her estimate of costs in order that the client be able to make informed decisions about whether to settle or continue the representation.

Another reason an accurate estimate may be needed is for the client to decide whether or not to employ the particular lawyer. See In re Crown Orthodonic Dental Group, 159 B.R. 307 (Bankr. C.D. Cal. 1993)(“If an attorney estimates the cost of his or her services and that estimate is a critical part of the negotiations upon in employing the attorney, unless there are some real, unexpected changes of circumstances, the attorney should be bound by that estimate”). In other words, a lawyer cannot lowball an estimate just to get the work.

But what if the costs exceed the lawyer’s original estimate given to the client and upon which the client relied in agreeing to the lawyer’s proposed strategy? More importantly, can the lawyer bill for his costs that exceed the original estimate? To use a lawyerly word, it “depends.” For one thing, if it is later shown that the lawyer’s estimate was not an accurate estimate made in good faith, the lawyer could be bound by his original estimate or “some reasonable variation thereon.” See In re Chas. A. Stevens & Co., 105 B.R. 866 (Bankr. N.D. Ill. 1989)(“The court holds that when professionals, especially financial experts, project estimated fees or budgets to a client, they should expect to be held to the same or some reasonable variation thereon.”).

In my next blog piece I will discuss how Rule 1.4 Communication impacts how a lawyer can bill for fees and costs. As a reminder, the Rules I have selected for discussion are the same ones set out in ABA Standing Comm. On Ethics and Prof. Resp., Formal Op. 93-379 (1993) Billing for Professional Fees, Disbursements and Other Costs, beginning at p. 4, as impacting how lawyers can bill for fees and costs.

 

 

 

 

 

 


How ABA Model Rule 1.1 on Competence Impacts How Lawyers Can Ethically Bill

June 21, 2017

[Editor’s note: this is another in a series of blog posts discussing how specific ABA Model Prof. Conduct Rules that all lawyers must follow impacts how lawyers can and cannot bill clients.]

In this blog piece, I will discuss how Rule 1.1 Competence affects how lawyers ethically can bill clients.

Rule 1.1 specifically states that “A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”  What Rule 1.1 means in essence is that when agreeing to take on a representation, a lawyer is impliedly – if not actually – making a representation to the client that the lawyer has the basic “legal knowledge” and “skill” necessary to handle the matter.

While issues related to competency can arise in any type of case, they most often arise in non-routine cases. Knowing as I do that most all lawyers hate to turn down business, lawyers often will say that they are competent to take on a case even though they have not handled that specific type of case before.  But if being fully truthful, what they are really saying is that while they believe that they have the “legal skill” to take on the case, they actually lack the “legal knowledge” on the types of issues involved in the case. Read the rest of this entry »


What Clients Should Know About How Attorney Ethical Rules Impact Billing for Legal Fees & Costs

May 4, 2017

If you were to ask a group of lawyers to name an ethical rule that applies to billing for fees, I would suspect at least 90% would name Rule 1.5 Fees – probably because it is the only ethical rule that has the word “fees” in the title!

Now ask those same lawyers to name other ethical rules that may also apply to fee billing and you would probably get mostly puzzled looks. For based upon my own experience in counseling scores of lawyers over the years on ethical issues involved in fee billing, I doubt that 1 in 100 lawyers could correctly name  another ethical rule, let alone several other ethical rules, that might also apply to their billing for fees and costs.

So what are the other attorney ethical rules that apply to billing for fees and costs? Most can be found in ABA Standing Comm. On Ethics and Prof. Resp., Formal Op. 93-379 (1993) “Billing for Professional Fees, Disbursements and Other Costs.” At page 4 of this opinion is a discussion of the various RPCs that may be implicated in legal billing. They include among others, Read the rest of this entry »


A Primer on Increasing Hourly Billing Rates During the Course of a Representation

April 12, 2017

If you recently have had any of your attorneys ask for a 5% increase in their billing rates you might want to refer them to Judge Richard Posner’s recent decision in Prather v. Sun Life . In that case, he found a 5% increase in billing rate to be “excessive!”

Just for kicks, I encourage you to read Judge Posner’s entire opinion in the Prather case. The Judge is well known for his often thought provoking opinions and statements on a wide variety of subjects. He also sometimes has an entertaining tongue-in-cheek way of presenting his opinions and Prather is an example of this.

But back to the subject of increases in billing rates. I often come across this issue in reviewing legal bills in cases or other legal matters which drag on for years. So I thought it time to set out some basic facts on the subject. Read the rest of this entry »


CLM Advisors’ “Snapshot” is Interesting Picture on Use of Third-Party Legal Bill Review Vendors

March 10, 2017

CLM Advisors periodically conducts informal surveys of industry executives to capture how industry executives feel about different litigation and claim strategies. These results of these informal CLM Advisors surveys are compiled into a “snapshot.” Unlike CLM Advisors more formal in-depth “studies,” snapshots are intended to be more informal, point-in-time, “State of the Unions” on particular important aspects of the insurance industry.

With an end view of compiling a snapshot on the state of the use or non-use of third-party legal bill review (LBR) vendors in the insurance industry, CLM Advisors recently surveyed some 125 senior litigation and claims officers. The results of this survey presented an interesting picture on the “State of the Union” on the use of third-party legal bill review vendors in the industry.

But before getting into this Statue of the Union, a brief review of the history of the third-party legal bill review industry may be in order. Read the rest of this entry »


E-Filing is So Easy That Even a Lawyer Can Do It.

January 11, 2017

Electronic filing (e-filing) of documents with state courts  is sweeping the country. If it is not yet in your state, chances are that it will be soon. Here is a list of the status of e-filing in state courts in the states.

Preceding the implementation of e-filing programs, seminars and written material have been provided to lawyers and their staffs on how to use the e-filing system in their jurisdictions. Having attended some of those seminars, I can attest to the fact that e-filing is so easy that even lawyers can do it.

And judging from the time entries in legal bills that I review, many lawyers have begun to e-file their own documents instead of having the legal secretaries or assistants do it for them. Thus, the question: will attorney e-filing of their own documents eventually lead to another round of support staff layoffs like we experienced during the Great Recession? Read the rest of this entry »


Why Legal Fee Dispute Case Law Does Not Change

November 29, 2016

Whenever I make a deduction in a legal bill, I set out a reason for making the deduction.  Usually the reason I set out is grounded in an ethics rule or in well settled case law. And it is not unusual that the case I cite to is 20 or 30 years or more old.  As a result, I have been asked why I do not cite to more recent cases. One of the main reasons I generally give for not citing to more recent case law is that that often there is no more recent case law. Also the case law does not change in this area.

One of the older cases I frequently cite to is Hensley v. Eckerhart, 461 U.S. 424 (1983). Hensley is considered to be the seminal case in attorney fee dispute cases on a number of issues including the burden of proof on an attorney seeking fees in a fee dispute case (prove and establish the reasonableness of each dollar, each hour, above zero”).  Since Hensley was decided in 1983, it has been cited to in 12,487 cases involving fee disputes. That’s 31 cases a month or 1 case every day for the past 33 years including the latest case, Blake v. New York City Health and Hospitals Corp., 110316 NYSDC, 14 Civ. 23340 (JGK)(S.D. N.Y. Nov. 3, 2016).

Another big reason that the case law on legal fee disputes does not change is that unlike tort law that may be “evolving,” legal fee dispute case law stays the same. And unlike some tort law that may be different from jurisdiction to jurisdiction, legal fee dispute case law does not shift from jurisdiction to jurisdiction. As a result, there are very few, if any, splits of authority or “minority” views on legal fee dispute issues.

This main reason for all of this uniformity in fee bill dispute law is that courts basically are applying ABA Model Rule 1.5 (Fees). Read the rest of this entry »