Practice Pointer: Avoiding Fee Disputes and the Bar Complaints That Sometimes Accompany Them
by Kate A. Toomey
Disputes between lawyers and clients over fees are not in and of themselves disciplinary matters, and the Office of Professional Conduct ("OPC") typically dismisses or declines to prosecute complaints that solely concern the amount an attorney has charged or collected. Although the Rules of Professional Conduct prohibit lawyers from charging or collecting a "clearly excessive fee,"1 and offer guidance for evaluating the reasonableness of the fee,2 they don't dictate the terms of attorney-client contracts, nor do they insulate either party from entering into a bad bargain. The fact that many clients are dismayed by the amount owed at the conclusion of a representation is not, without more, a disciplinary issue.
Nevertheless, the OPC receives a substantial number of informal complaints that include allegations that the attorneys' fees were exorbitant, and attorneys sometimes have to respond to these complaints.3 Even if the attorney isn't requested to respond, the very existence of a Bar complaint can cause anxiety, and most attorneys would prefer to avoid having one filed even if it goes no further. This article will offer some simple suggestions for avoiding fee disputes.
Effective Communication Is Key
As is so often the case in attorney-client relations, good communication is about as effective as anything for avoiding misunderstanding and disagreements. The duty to communicate is so central to the attorney-client relationship that the rules codify it.4 Employed skillfully, good communication not only fosters effective representation, but also protects the attorney from complaints.
Start by hammering out an explicit written memorandum that identifies what you'll do and how much you'll charge. Sure, not every representation requires a written fee agreement, but it's a good idea to have one anyway.5 That way, there will be no misunderstandings about issues such as whether the advance or retainer is the entire amount of the fee, whether the client has to pay even if the outcome isn't satisfactory, or whether the attorney is responsible for out-of-pocket costs. If you charge clients for phone calls and overhead such as copying, a fee agreement or memorandum is a good place to explain this.6
Billing can be another effective communication tool if you do it at regular intervals and include enough information.7 If you send your client a monthly statement identifying the nature of the work you performed, the amount of time you spent on it, and the rate you charged for it, the client is less likely to be surprised by the final bill. The client also has an opportunity to review the statement for honest errors on your part, and to raise questions about services performed. It's certainly easier to correct errors right away and, in the long run, if the amount of the initial bill prompts the client to reconsider whether she can afford your services, that too is better known as soon as possible.
Related to this, it's a good idea to collect on your bill as you perform the work, and to forecast this in your written fee agreement. The Rules of Professional Conduct permit you to withdraw from the representation if "the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled."8 Including such a provision in a written fee agreement is an important first step in giving "reasonable warning," thereby insulating you from a Bar complaint filed by a disgruntled client after you've terminated the relationship because the client wouldn't pay the bill.
At the conclusion of the representation, take the time to talk to your client. If the outcome wasn't what the client sought, explain the reason for the result. Answer questions. Discuss your client's concerns about the fee. If this doesn't sufficiently address the concerns, suggest that the client review the fees with another attorney.
Resolving the Dispute You Can't Avoid
One way to provoke a Bar complaint is to sue your client for fees. I'm not saying you shouldn't; the Rules of Professional Conduct certainly don't prohibit it, and sometimes that's the only way to collect money the client owes. But consider a couple of things before you take this step.
Many attorneys adjust the fee. If you can keep the client happy and collect enough to cover your expenses and still make a profit, this is often the wise solution even if it means discounting the amount you are legitimately owed. It's a good way to cultivate continued goodwill and referrals, and you avoid the mess and expense of adversarial proceedings.
If you can't informally resolve the dispute, another option is to seek arbitration. The Utah State Bar sponsors a fee arbitration program9 that provides hearings before a panel of volunteer arbitrators who hear the parties, review the records presented, and decide what the fee should be. Both parties must agree to submit the case for arbitration, and not all clients are willing to go this route, but it's still worth considering because it's a quick and inexpensive means of putting the conflict behind you. The comment following the rule encourages it, and your willingness to participate goes a long way toward deflecting a complaint.10
You need not employ the procedure provided through the Bar; other services are available. You could even agree in advance of the representation to use arbitration or mediation, provided the client is fully apprised of the advantages and disadvantages and gives informed consent.11 This is an approach endorsed by the American Bar Association's Standing Committee on Ethics and Professional Responsibility, but it's not unanimously favored in other jurisdictions.
If Your Client Files a Bar Complaint Over the Fees
You may be wondering what will happen if your client files a complaint alleging that your fee is too high. The OPC routinely notifies attorneys if it receives information that, if notarized and attested to, would constitute an informal complaint, and it likewise notifies attorneys of informal complaints received, including complaints about fees. You need not respond unless the OPC requests a response; some attorneys submit a response anyway, just to be helpful.
If a response becomes necessary, and the allegations involve the reasonability of the fee, it's helpful if the attorney's response includes a copy of the fee agreement if there is one, and the relevant billing statements. Submitting these documents is often sufficient to allow the OPC to dispose of an informal complaint without further action, either by declining to prosecute it or dismissing it, frequently with the suggestion that the parties consider fee arbitration. If the matter must be referred to a Screening Panel for a hearing, you will be notified, and the panel will receive copies of what you submitted.
The Reasonability of Your Fee Isn't a Matter For the Ethics Hotline
Sometimes lawyers call the Ethics Hotline to discuss matters involving their fees, but there's not much guidance the OPC can offer beyond the factors provided in the rule for determining the reasonability of a fee.12 These are sensible considerations, requiring an attorney to honestly appraise their skills, circumstances, and reputation, as well as the customs of the place where they practice. The considerations are necessarily fluid, and there's no bright-line test. But if you consider all these factors as a dynamic whole, you're likely to reach an amount that would be reasonable within the meaning of the rule - in other words, a fee that is not "clearly excessive."
1. Rule 1.5(a) (Fees), R. Pro. Con. The rule also prohibits attorneys from charging or collecting an "illegal fee." See id. This article does not address issues relating to an attorney's charging or collecting an illegal fee.
2. Factors to be considered as guides in determining the reasonableness of a fee include the following:
(a)(1) The time and labor required, the novelty and difficulty of the questions involved and the skill requisite to perform the legal service properly;
(a)(2)The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(a)(3) The fee customarily charged in the locality for similar legal services;
(a)(4) The amount involved and the results obtained;
(a)(5) The time limitations imposed by the client or by the circumstances;
(a)(6) The nature and length of the professional relationship with the client;
(a)(7) The experience, reputation and ability of the lawyer or lawyers performing the services; and
(a)(8) Whether the fee is fixed or contingent.
Rule 1.5(a) (Fees), R. Pro. Con.
3. Rule 8.1(b) (Bar Admission and Disciplinary Matters) requires attorneys to respond to "a lawful demand for information from an admissions or disciplinary authority." If the other allegations, assuming their truth, would constitute a rule violation, the OPC usually requests an answer from the attorney.
4. See Rule 1.4 (Communication), R. Pro. Con.
5. See Rule 1.5 (Fees), R. Pro. Con. The basis or rate of the fee need not be in writing unless the reasonably foreseeable total fee exceeds $750; contingent fee agreements must be in writing. See id.
6. Remember that some things cannot appropriately be billed, such as charging a client for time spent responding to a Bar complaint! See e.g. In re Lawyers Responsibility Bd. Panel No. 94017, 546 N.W.2d 744 (Minn. 1996).
7. Attorneys sometimes tell me that monthly billing is too expensive, especially if minimal work has been performed on a case, and that providing detailed bills is similarly too expensive. Bear in mind, though, that a client is entitled, upon request, to a prompt and full accounting of funds they have paid an attorney. See Rule 1.15(b) (Safekeeping Property), R. Pro. Con. The only way to be able to promptly and accurately render such an accounting is to contemporaneously keep track of your time and the work performed. It seems to me that this is a significant portion of what's involved in sending monthly bills.
8. Rule 1.16(b)(5) (Declining or Terminating Representation), R. Pro. Con.
9. Call the Utah State Bar at 531-9077 for more information about this program.
10. The Comment provides: "If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the Bar, the lawyer should conscientiously consider submitting to it." Rule 1.5 (Fees), R. Pro. Con.
11. See ABA Formal Ethics Op. 02-425 (2002).
12. See Rule 1.5(a) (Fees), R. Pro. Con.
Kate A. Toomey is Deputy Counsel of the Utah State Bar's Office of Professional Conduct. The views expressed in this article are not necessarily those of the OPC or the Utah State Bar.