Material Covered in Assignment 3-2: Fees, Billing & Fiduciary Duties

Material Covered in Assignment 3-2:Fees, Billing & Fiduciary Duties • Mandatory: all feesMUST be reasonable [R. 1.5(a)] • Mandatory: Scope & basis of fee MUST be communicated R. 1.5(b) • There are some exceptions • Some jurisdictions require this to be in writing (e.g. PA) • Mandatory: There are special rules for contingency fees [R. 1.5(c)] 4. Prohibited Fees: There are some cases that MAY NOT be handled on a contingency fee basis. [R. 1.5(d)] 5. Usemandatory rules when splitting fees with other lawyers [R.1.5(e) • Special conflicts rules found in Rule 1.8 (all except 1.8b & k) [Q.3-17-25] • Don’t commingle!Rule 1.15(a) [and 1.15(b)] [Questions 3-26 to 3-29] • Keep records. Rule 1.15(a) • Allocating money as between lawyer and client (“retainers”) [R.1.15(c) • Notification, deliverance, & accounting obligations [Rules 1.15(d)&(e)]

Question 3-11 (p. 248) A company's president telephoned his city's best-known employment attorney and asked her to represent the company in a dispute that had just arisen with the company's chief financial officer. The attorney, who had never previously represented the company, agreed. At the president's insistence, she immediately commenced the representation. A few days later, during a meeting with the president, the attorney first revealed the amount of her customary hourly fee and then explained that the company would also be responsible for reimbursing her expenses. The president responded that her fee was higher than he had expected but that he would be happy for the company to pay it, given her excellent work to date. Although the attorney intended to follow up with a confirming letter, she never did so. For several more months, she assisted the company in resolving its employment dispute. Afterward, she sent the company a bill accurately reflecting her hourly fee and expenses, which were reasonable. Is the attorney subject to discipline?

Question 3-12 (p. ) Is it ethical for an attorney to bill two clients the hourly fees for work performed at the same time (e.g. billing one client for reviewing a contract while traveling for another client)?

Question 3-13 (p. 249) Three of your clients have asked you to analyze the same proposed legislation. Any work you perform for the clients is billed on an hourly basis. If you spend one hour analyzing the legislation, is it ethical to bill each client one hour for one hour?

Question 3-14 (p. 250) When an attorney revises and recycles a document originally prepared for another client, is it ethical for the attorney to bill the current client for more than the revision time? The attorney is billing the current client on an hourly basis.

Question 3-15 (p. 250) If a fee agreement or engagement letter states that "the client agrees to pay expenses including photocopy and facsimile charges," is it ethical for the attorney to make a profit by charging the client fifty cents per page for photocopying that costs the attorney five cent per page?

Question 3-16 (p. 250) In defending a major securities fund case, a law firm uses attorneys who receive an hourly salary. If the salaried attorneys are paid $100 per hour, is it ethical for the firm to bill the client $150 per hour?

Question 3-20 (p. 284) An attorney entered into a written retainer agreement with a defendant in a criminal case. The defendant agreed in writing to transfer title to her automobile to the attorney if the attorney successfully prevented her from going to prison. Later, the charges against the defendant were dismissed. Is the attorney subject to discipline for entering into this retainer agreement?

Question 3-24 (p. 288) In a medical malpractice case, Attorney Alpha's contract with Client provides for a contingent fee of 20% of the recovery by settlement and 30% if the case is tried, with a total fee not to exceed $50,000. Alpha associated Attorney Beta, a sole practitioner, in the case, with Client's written consent and after full disclosure of the fee agreement between Alpha and Beta. Beta is both a medical doctor and a lawyer and is well qualified by experience and training to try medical malpractice cases. The fee agreement between Alpha and Beta reads as follows: "The total fee in this case is 20% of recovery by settlement and 30%, if tried, with a maximum fee of $50,000. Alpha will help with discovery and will be the liaison person with Client. Beta will prepare the case and try it if it is not settled. Alpha and Beta will divide the fee, 40% to Alpha and 60% to Beta." Are Alpha and Beta subject to discipline for their agreement for division of the fee?

Question 3-17 (p. 262) Client was an experienced oil and gas developer. Client asked Attorney for representation in a suit to establish Client's ownership of certain oil and gas royalties. Client did not have available the necessary funds to pay Attorney's reasonable hourly rate for undertaking the case. Client proposed instead to pay Attorney an amount in cash equal to 20% of the value of the proceeds received from the first year royalties Client might recover as a result of the suit. Attorney accepted the proposal and put these terms into the written fee agreement. Is Attorney subject to discipline?

Question 3-18 (p. 268) Software Start-up, Inc. seeks legal representation with regard to its initial public offering. Software wants to hire High Tech Law, but believes it cannot afford High Tech's hourly billing rate. Software also believes that payment of an equity interest will best ensure High Tech's devotion to the matter. Software offers High Tech an equity interest in exchange for representation. High Tech agrees to represent Software in exchange for a 2% equity interest. High Tech provides Software with a written fee agreement explaining that High Tech will take a 2% equity interest in Software and advising Software to consult outside counsel on the propriety of the fee agreement. High Tech explains verbally, but not in the written agreement, that potential conflicts that might arise as a result of High Tech obtaining an equity interest but that no significant risk of a conflict exists under the circumstances. Software decides not to consult outside counsel and signs the agreement. The initial public offering is far more successful than expected and raises the total equity value of Software to $500 million. Software decides that the $10 million in stock that High Tech gains as a result of the initial public offering is an excessive fee and files a disciplinary complaint against High Tech. What result?

Question 3-19 (p. 278) An attorney agreed to represent a plaintiff in a personal injury matter. The original agreement between the attorney and the plaintiff specified a 30% contingent fee, which was a reasonable fee for the type of cases the attorney handled. One year into the litigation, the attorney noted that he was extremely busy and that many potential clients sought his services. As a result, the attorney raised his standard fee to a 35% contingent fee, which was also a reasonable fee. The attorney's agreement with the plaintiff was silent on the possibility of a fee increase. He approached the plaintiff and proposed that she agree to modify the contingent fee percentage from 30% to 35%. The attorney informed the plaintiff that if she did not agree, the attorney would find her another experienced personal injury lawyer at the original fee, but that the attorney was unwilling to continue the representation unless the fee was modified. The plaintiff reluctantly agreed to modify the fee agreement as the attorney proposed. Subsequently, the plaintiff's case was settledThe plaintiff reluctantly agreed to modify the fee agreement . The plaintiff, however, refused to pay the attorney more than a 30% contingent fee, and the attorney sued the plaintiff to recover under the modified fee agreement. Is the attorney likely to prevail?

Question 3-21 (p. 286) Attorney is representing Client, the plaintiff in a personal injury case, on a contingent fee basis. Client is without resources to pay for the expenses of the investigation and the medical examinations necessary to prepare for trial. Client asked Attorney to pay for these expenses. Attorney declined to advance the funds but offered to guarantee Client's promissory note to a local bank in order to secure the funds needed to cover those expenses. Client has agreed to reimburse Attorney in the event Attorney incurs liability on the guaranty. Is Attorney subject to discipline if she guarantees Client's promissory note?

Question 3-22 (p. 287) Gamma is a legal services lawyer. She is representing Client in eviction proceedings. Client needs to buy new shoes for his child to go to school. Which of the following actions is proper? Gamma buys the shoes for the child. Gamma gives the client money to buy the shoes for the child. All of the above None of the above

Question 3-23 (p. 287) Attorney wants to make it easier for her clients to pay their bills for her fees. Which of the following would be proper for Attorney? Accept bank credit cards in payment of Attorney's fees. Arrange for clients to obtain bank loans for the purpose of paying Attorney's fees. If a case is interesting, suggest that the client give Attorney publication rights concerning the case as partial payment of the fee. ##1 and 2 All of the above None of the above

Question 3-25 (p. 289) Attorney was retained by Defendant to represent him in a paternity suit. Aunt, Defendant's aunt, believed the suit was unfounded and motivated by malice. Aunt sent Attorney a check for $1,000 and asked Attorney to apply it to the payment of Defendant's fee. Aunt told Attorney not to tell Defendant of the payment because "Defendant is too proud to accept gifts, but I know he really needs the money:" Is it proper for Attorney to accept Aunt's check?

Question 3-26 (p. 290) An attorney represented a client as a plaintiff in a personal injury matter under a standard contingent fee contract. The client agreed to settle the case for $1,000,000, from which funds the attorney would receive $250,000. The client informed the attorney that she planned to take $25,000 of the settlement funds and spend the money purchasing lottery tickets. The attorney told the client that he disagreed withthis plan and encouraged the client to take some classes on investing money. The client agreed to take the classes, but still insisted on playing the lottery. The attorney received the check for $1,000,000 three days before the client was to attend the investing classes. The attorney held the check for one week, giving the client at least a few days of classes. The attorney then informed the client of the receipt of the funds, disbursed the funds according to the agreement, and also furnished the client with an accounting. The attorney told the client that he had delayed notice to allow time for the client to come to her senses. The client laughed and said, "I guess your plan worked, because these classes have convinced me to invest my money in the stock market instead of playing the lottery.“ Is the attorney subject to discipline?

Question 3-27 (p. 291) An attorney regularly represents a certain client. When the client planned to leave on a world tour, she delivered to the attorney sufficient money to pay her property taxes when they became due. The attorney placed the money in his clients' trust account. When the tax payment date arrived, the attorney was in need of a temporary loan to close the purchase of a new personal residence. Because the penalty for late payment of taxes was only 2 percent while the rate for a personal loan was 6 percent, the attorney withdrew the client's funds from the clients' trust account to cover his personal check for the closing. The attorney was confident that the client would not object. Ten days later, after the receipt of a large fee previously earned, the attorney paid the client's property taxes and the 2 percent penalty, fully satisfying the client's tax obligation. After the client returned, the attorney told her what he had done, and the client approved the attorney's conduct. Is the attorney subject to discipline?

Question 3-28 (p. 292) A client retained an attorney to appeal his criminal conviction and to seek bail pending appeal. The agreed-upon fee for the appearance on the bail hearing was $100 per hour. The attorney received $1,600 from the client, of which $600 was a deposit to secure the attorney's fee and $1,000 was for bail costs in the event that bail was obtained. The attorney maintained two office bank accounts: a fee account, in which all fees collected from clients were deposited and from which all office expenses were paid, and a clients' trust account. The attorney deposited the $1,600 in the clients' trust account the week before the bail hearing. She expended six hours of her time preparing for and appearing at the hearing. The effort to obtain bail was unsuccessful. Dissatisfied, the client immediately demanded return of the $1,600. What should the attorney do with the $1,600?

Question 28 Choices • Transfer the $1,600 to the fee account. • Transfer the $600 to the fee account and leave $1,000 in the clients' trust account until the attorney's fee for the final appeal is determined. • Transfer $600 to the fee account and send the client a $1,000 check on the clients' trust account. • Send the client a $1,000 check and leave $600 in the clients' trust account until the matter is resolved with the client.

Question 3-29 (p. 293) A client telephoned an attorney who had previously represented him. The client described a problem on which he needed advice and made an appointment for the following week to discuss the matter with the attorney. Prior to the appointment, the attorney performed five hours of preliminary research on the client's problem. At the end of the appointment the client agreed that the attorney should pursue the matter and agreed to a fee of $100 per hour. The client then gave the attorney a check for $5,000 to cover the five hours already worked and as an advance on additional fees and expenses. The attorney gave the check to the office bookkeeper with directions to deposit the check into the client trust account and immediately transfer $3,000 to the general office account to cover the five hours of research already conducted plus the 25 additional hours she would spend on the matter the following week. At that time, the attorney reasonably believed that she would spend 25 additional hours on the case. The bookkeeper followed these directions. The next week, the attorney worked diligently on the matter for 23 hours. Reasonably believing that no significant work remained to be done on the matter, the attorney directed the bookkeeper to transfer $200 from the general office account to the client trust account. The attorney then called the client and made an appointment to discuss the status of the matter. Is the attorney subject to discipline?

Question 3-30 (p. 305) Joan Lawyer represents a class of plaintiffs in a civil rights case against the State of Fordham. Fordham's counsel agrees to provide substantially all the relief plaintiffs seek so long as Joan Lawyer agrees to waive court-awarded attorney's fees under the applicable statute. The parties agree to the settlement. Plaintiffs then appeal the settlement on the ground that Fordham's demand for a waiver of court-awarded attorney's fees undermines the goal of the relevant statute in encouraging private attorney's genera l. What result? [Omit question]

Material Covered in Assignment 3-2: Fees, Billing & Fiduciary Duties