STATE BAR OF CALIFORNIA
STANDING COMMITTEE ON
PROFESSIONAL RESPONSIBILITY AND CONDUCT
June 21, 2000
American Bar Association
Commission on the Evaluation of the
Rules of Professional Conduct
Attention: Susan Campbell
541 North Fairbanks, 14th Floor
Chicago, IL 60611
Re: Proposed changes to Model Rule 1.5 (public comment draft, dated April 20, 2000)
I write on behalf of the State Bar of California's Standing Committee on Professional Responsibility and Conduct (COPRAC), whose activities are funded in part by the Foundation of the State Bar of California. COPRAC offers the following comments on this draft rule:
- Paragraph (a) of the Text. With regard to paragraph (a) of the draft rule, there are several open points:
1. The drafting of (a)(4) continues to leave an uncertainty because it still speaks only of amount, which suggests that only money is a consideration. Examples of non-monetary matters the defense of criminal charges, adoptions, and countless other situations whose importance might not be measurable in monetary terms. We see no reason why the drafting should leave any ambiguity as to whether non-monetary factors properly can be considered in determining the reasonableness of a fee, as it should be. In addition to including a factor identical to (a)(4), California's Rule 4-200 also evaluates fees on the basis of "[t]he amount of the fee in proportion to the value of services performed". Cal. Rule of Prof. Conduct 4-200(B)(1). We suggest that the Commission include a similar provision as an additional factor.
2. Paragraph (a)(8) has been rewritten so as to make it clear that it covers fee arrangements of all kinds, which is an improvement, but the use of the word "risk" might cause confusion in the future. Does "risk" mean only the risk of non-payment, as might happen with a contingency fee in a case that seeks to change the law, or might happen with an hourly fee if the client's ability to pay is doubtful? Does it also include other risks, such as the risk involved in opposing someone who is notoriously litigious, creating a risk of further entanglements for the lawyer? We believe the rule should clarify that a lawyer properly may consider all the burdens of the representation when negotiating, agreeing to, and collecting a fee.
3. The proposal continues to omit an important concept found in California's Rule 4-200(B)(11): the informed consent of the client. This requirement was omitted, apparently under the idea that a fee agreement is an arms length transaction. This is correct under California law, but only in the sense that the presumption of undue influence of Probate Code 16004 does not apply to fee agreements, and that customary fee agreements are not considered to be business transactions with the client under our Rule 3-300. This does not mean, however, that all bets are off. It is difficult to see why the arms length comment would not apply equally to eliminate the need for the several other factors listed in Rule 1.5. The question is whether it is proper to discipline a lawyer who, for example, enters into a fee agreement that is misleading. We believe it is proper to discipline a lawyer who enters into a misleading fee agreement, and we therefore urge the inclusion in Rule 1.5 of informed consent in determining whether a fee is unreasonable.
4. For the same reason stated in point 3, we believe that it is proper to include as a factor the relative sophistication of the lawyer and the client. In our view, this is related to the question of whether the fee agreement is misleading and therefore properly is considered in determining whether a fee is unreasonable
- Paragraph (b) of the Text. With regard to the requirement of written fee agreements contained in paragraph (b) of the proposed rule, the latest revision leaves the following open points:
5. Paragraph (b) continues to subject a lawyer to discipline for failing to have confirmed in writing the financial terms and scope of the representation. We do not believe that a lawyer's fitness to practice law is implicated by a violation of this rule. We believe that the potential consequences should be limited to the lawyer's inability to enforce the fee agreement so that, while an attorney should be able to recover for the reasonable value of services even if the written fee agreement requirement is not met, he or she should not be able to enforce the fee agreement unless it meets all applicable standards. This is the approach of the California rules found at Business & Professions Code 6147 and 6148. Compare this view to our point 3 on paragraph (a), above: in our view the fitness of a lawyer to practice is implicated when he or she takes advantage of an unsophisticated client with a misleading fee agreement; it is not implicated simply by not having confirmed the fee agreement in writing. In short, as a prophylactic matter, we believe it is proper to make the fee agreement unenforceable without written confirmation, but we do not believe this should subject the lawyer to discipline.
6. This latest draft still does not require the client's written or even express consent, which apparently can be implied. We believe it is essential to the protective purposes of this rule, and for the maintenance of confidence in lawyers and the legal profession, that the rule specify the need for the client's written agreement in each situation in which consent is required.
7. This latest proposal still contains no exceptions, at least as to new clients. The corresponding California rules (Business & Professions Code 6147 and 6148) have two essential exceptions. These are for emergency situations (in which, for example, it might be possible to complete the work and be fully paid before a fee agreement even is written; we believe this does not implicate the fitness of the lawyer to practice or the right to charge, collect, or retain the fee) and for de minimus matters (California defines this as a fee that does not exceed $1,000; again, we do not believe an attorney's fitness is called into question by failing to have a written fee agreement in such modest matters). The Minutes of the March 24, 2000 Commission Meeting state that there is no need to exempt de minimus matter because a receipt is sufficient to constitute a writing. While this comment seems to go more to the emergency than the de minimus situation, it nevertheless is hard to see how a receipt communicates to the client, "[t]he scope of the representation [or] the basis or rate of the fee [or of the] disbursements for which the client will be responsible".
8. We believe the written fee confirmation exception for a " regularly represented client" be modified because the issue should not be the regularity of the representation (a concept which, in any event, is not defined) but whether an existing relationship communicates to the client the basis for the fees in a new matter: Although there is some improvement in the language, the central problem remains. The "regular" problem was recognized in the March 24, 2000 Minutes, which says it will be eliminated. It was not.
- Paragraph (e) of the Text. With regard to paragraph (e) of the draft rule, there are two points we would like to bring to your attention:
9. Proposed paragraph (e) has been significantly revised in a way we think is quite helpful, but one problem remains: the latest revision continues to omit as a factor that the total fee not be increased as a result of the fee division. We consider this important and urge its inclusion.
10. The "same firm" requirement of (e)(1) left unclear the status of retired attorneys. Comment  partly resolves this by allowing retired attorneys to share in fees from work done before their retirement. We recommended that consideration be given to treating retired attorneys the same with regard to work done at the firm after their retirement. Comment  in the current revision continues this dichotomy. We see no reason, for example, why attorneys could not agree to a partnership arrangement under which a retired partner is allowed to share in the value of work he has brought to the firm, as he might have while he was there, even with regard to work done in the firm after his or her retirement, again so long as the client's total fee is not increased.
- With regard to the comments of the draft rule, there are three points we would like to make, two concerning Comment  and one concerning Comment :
11. Comment  requires a written description of the work to be performed. This suggests that any omission from the description might be a source of criticism of the attorney, a possible basis for a client to attempt to argue that fees should not be collectable, and the basis for discipline. Instead, we believe that it should be sufficient for the written agreement to describe "the general nature of the legal services to be provided to the client". This earlier comment was not acknowledged, and we reemphasize it because we consider it an essential drafting point. The rule will be essentially flawed, and will cause needless risk and uncertainty to lawyers, if it suggests the fee agreement must be an exercise in elaborate and detailed drafting; in fact, we believe that fee agreements of excessive length are more likely to confuse the client and therefore do not lead to client protection.
12. Comment  would also require a written explanation to the client if an earlier description of the engagement or estimate of the fee becomes substantially inaccurate. We continue to disagree with this. If the lawyer satisfies the duty to keep the client informed of significant developments, the client already will have the explanation. While it might be good client relations in a particular situation to have a redundant explanation of such changes, we do not believe its absence implies the lawyer is not fit to practice law or should be prevented from collecting the fee. Among other things, the redundant explanation might result in an unnecessary cost to the client.
13. Comment  in the latest revision continues to propose the deletion of the current second to last sentence. We disagree with the Reporter's explanation of this and urge retention of the concept contained in that sentence. As we explained in our point 3 regarding paragraph (a), above, California law provides that lawyers do not have fiduciary duties in the negotiation of fee agreements, but we believe the sentence has value as a comment rather than as a rule that can be the basis for discipline. We believe that an hourly fee always is an alternative to a contingency if the client has the financial ability to pay for services, and that the lawyer should explore the alternatives with the client before agreeing to a contingency fee. Presumably if the lawyer does not give the client the alternative, it is because it is in the lawyer's interest and not in the client's. If the lawyer does not work on an hourly basis, then he or she should consider referring the client to another lawyer.
This comment from the State Bar of California Standing Committee on Professional Responsibility and Conduct does not constitute the position of the State Bar of California or its Board of Governors. The Board of Governors is free to submit its own comment on behalf of the State Bar of California.
Robert L. Kehr,
cc: Board of Governors
Randall Difuntorum, Esq. COPRAC Staff Counsel
COPRAC - ABA2000 - Rule 1.5 Letter - Final (062100).wpd