TOPIC E: FEE ARRANGEMENTS AND FEE-SPLITTING P.R Prof. Janicke

FEES MUST BE “REASONABLE” NOT MUCH GUIDANCE ON WHAT IS REASONABLE R. 1.5(a): GIVES FACTORS TO CONSIDER >>> 2016TOPIC E: FEES and SPLITTING2

TIME AND LABOR NEEDED SKILL NEEDED CUSTOMARY CHARGES IN THE LOCALITY AMOUNT AT STAKE and VALUE OF RESULTS POSSIBLE TIME CONSTRAINTS IMPOSED BY CLIENT NATURE OF CLIENT RELATIONSHIP EXPERIENCE, REPUTATION, AND ABILITY OF LAWYER INVOLVED 2016TOPIC E: FEES and SPLITTING3

HOURLY, FIXED, OR CONTINGENT? EACH TYPE IS USUALLY PERMISSIBLE HOURLY IS STILL MOST COMMON –SEEMS FAIR –BUT INVOLVES A CONFLICT OF SORTS FIXED: EDWARD BENNETT WILLIAMS 2016TOPIC E: FEES and SPLITTING4

TERMS MUST BE “COMMUNICATED” WRITING IS USUALLY NOT NEEDED (EXCEPT FOR CONTINGENT FEE), BUT IS HIGHLY DESIRABLE CLIENTS, LIKE CUSTOMERS, HATE SURPRISES SCOPE OF REPRESENTATION AND BASIS OF FEE MUST BE COMMUNICATED TO CLIENT R.1.5(b) 2016TOPIC E: FEES and SPLITTING5

EXPENSES: MUST BE REASONABLE AS WELL, AND MUST BE COMMUNICATED R. 1.5(a), (b) –DINNERS? –HOTELS? –BUSINESS CLASS FLIGHTS? 2016TOPIC E: FEES and SPLITTING6

ACCEPTING PAYMENT FROM OTHER THAN CLIENT IS GENERALLY RESTRICTED R. 1.8(f): IS OK PROVIDED: 1.CLIENT GIVES INFORMED CONSENT 2.NO INTERFERENCE WITH THE LAWYER’S JUDGMENT 3.CLIENT CONFIDENCES ARE PROTECTED 2016TOPIC E: FEES and SPLITTING7

SPECIAL RULES FOR CONTINGENT FEES MUST BE IN WRITING, AND SIGNED BY THE CLIENT R. 1.5(c) CANNOT BE USED FOR: 1.CRIMINAL CASES (e.g., ACQUITTAL, LOW SENTENCE) R. 1.5(d)(2) >>> 2016TOPIC E: FEES and SPLITTING8

CANNOT BE USED FOR: 2.DOMESTIC RELATIONS CASES, IF CONTINGENT ON GETTING DIVORCE, ALIMONY, SUPPORT, OR PROPERTY SETTLEMENT R. 1.5(d)(1) BUT OK FOR DOMESTIC ENFORCEMENT ACTIONS, e.g., COLLECTING CHILD SUPPORT 2016TOPIC E: FEES and SPLITTING9

CONTINGENT FEE RATE: NO BLACK LETTER RULE % MUST BE “REASONABLE” USUALLY SLIDING %, INCREASING BY STAGE OF CASE WHEN $$ IS COLLECTED –PRE-SUIT 25% –PRE-DISCOVERY 33% –AFTER TRIAL 40% –AFTER APPEAL 50% 2016TOPIC E: FEES and SPLITTING10

CALCULATION METHOD MUST BE STATED R. 1.5(c) ESP. WHETHER EXPENSES COME BEFORE OR AFTER THE CUT 2016TOPIC E: FEES and SPLITTING11

EXAMPLE: “1/3 PLUS EXPENSES” –AMBIGUITY: IS 1/3 BEFORE OR AFTER EXPENSES ARE REPAID? –ASSUME $1,000,000 RECOVERY; $100K EXPENSES –IS THE FEE PORTION PAID: $333,333 (TOT. = $433,333)? OR $300,000 (TOT. = $400,000)? 2016TOPIC E: FEES and SPLITTING12

SPLITTING FEES WITH OTHERS AMONG LAWYERS: –OK IF IN THE SAME FIRM –IF NOT IN SAME FIRM, R.1.5(e): OK IF CLIENT CONSENTS IN WRITING, AND – 1.SPLIT IS PROPORTIONAL TO WORK DONE, or 2.ALL LAWYERS TAKE FULL RESPONSIBILITY TO THE CLIENT 2016TOPIC E: FEES and SPLITTING13

SPLITTING WITH NON-LAWYERS IS GENERALLY PROHIBITED R.5.4 [AS IN TOPIC D] IS OK FOR – 1. PAYOUT TO ESTATE OF DECEASED COLLEAGUE 2.PAYOUT TO LAWYER WHO SOLD THE PRACTICE 3.PAYING INTO FIRM EMPLOYEES’ 401(k) OR SIMILAR PLAN 2016TOPIC E: FEES and SPLITTING14

DISPUTES OVER FEES CAN BE RESOLVED BY AN ADVANCE AGREEMENT (e.g., ENGAGEMENT LETTER) TO USE MEDIATION OR ARBITRATION R. 1.5 C9 CAVEAT: LAWYER CANNOT TAKE TRUST FUNDS UNTIL RESOLUTION OF THE DISPUTE 2016TOPIC E: FEES and SPLITTING15