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Handling Client Fee Arrangements -- Ethically

By Jonathan R. Tung, Esq. on July 20, 2016 | Last updated on March 21, 2019

If you're like the majority of attorneys, you got into this business to be paid. In an ideal world, you do the work and your clients pay you upon completion -- promptly. Alas, this is not the ideal world.

Fed up with the undeniable costs of having to maintain an accounts receivable, many attorneys have implemented means that just skirt the boundaries of legal ethics in order to defray the costs of lost money and time. But what techniques can you use to ethically handle client fees? We're here to help.

A Stitch in Time Saves -- Malpractice

Sometimes being careful can pay big dividends in the end. Too often, attorneys are so eager to sign up a client that they'll print up any old fee agreement found on the internet and shove it into the new client's face. This is unprofessional and potentially unethical.

Best practices demands that the ethical lawyer take certain preventative steps before committing an arrangement to paper -- particularly when the attorney should have reason to believe that the relationship could be for a big sum of money. Usually, the more money involved, the more cautious the lawyer should be.

1. Communicate Fees Arrangements CLEARLY

Time and time again, lawyers fail to do this crucial step. You will save yourself much headache and hassle in the future by simply making the fee details crystal-clear to the client before you both sign a fee agreement.

The two of you basically have three choices of fees (besides gratis): a flat fee, hourly fee, or contingency fee. You are not responsible for making your client an expert in fees, but you must make sure that she has been placed on notice of what the terms mean. Once there is mutual understanding, memorialize this on paper. Sample fee forms that cover all the major fee arrangement types are widely available at your local law library or even on the web.

2. Reasonable Fees; California's "Not Unconscionable" Fees.

For the most part, your fee arrangements must be "reasonable" in order to stay compliant with a host of ethics rules. These may be the Model Rules, ABA comments, your state's business and professions code, etc. For years, lawyers have collectively pushed fees northward just to the very limits of "reasonable." Many factors go into what constitutes a reasonable fee, including your experience and expertise, time invested, etc. Check the ABA rules for the latest factors if you need to.

On the other end of the spectrum is California's "not ... unconscionable" fee under the Rules of Professional Conduct. Rule 4-200. This is generally accepted to mean "beyond reasonable" and just below "outrageous." At least that's the case for many lawyers. However, we urge you not to push your luck. Unless you have a particularly unique skill or other value you bring to the client, trying to squeeze a few extra dollars from your client under California's unfortunately worded rule can come and bite you.

3. Writing, Writing, Writing

We all remember the statute of frauds from school and the SOF should be the rule rather than the exception in your practice. Fee arrangements are a first line of insurance you can point to when your client gets confused or even upset at your work.

You may be tempted to write every contingency under the sun into your contracts. Although this will "cover" you, this will also have the effect of making the client annoyed with you. It's best to strike a balance. You should pick your clients with the same level of scrutiny that clients pick lawyers -- maybe more! If you feel that representation is not possible, immediately write a non-engagement letter.

Don't Bill to Learn a Topic

Remember, you cannot bill the client for you to learn a topic. If you spend 14 hours getting fluent in ADA, that was on your own dime, not theirs. Bill her at your own peril. Many attorneys have gotten lax with client fees and money once a signature was acquired. You ought to treat that signature as a liability, not a license to run afoul of the rules.

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