Fee Agreements

The rules treat various types of fee agreements differently.  I thought I’d run through them.

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Hourly Fee

The rule: Rule 1.5(b).

An agreement to charge an hourly fee need not be in writing.  That being said, I can’t imagine NOT putting the agreement in writing.  As I’ve blogged, a well-written fee agreement provides a perfect opportunity to avoid complaints by setting reasonable expectations.  The Oregon State Bar has also written on the importance of managing client expectations.

While there’s no requirement to reduce an hourly fee agreement to writing, a lawyer must communicate to the client the scope of the representation and the basis or rate of the fee within a reasonable time after commencing the representation.  Per the rule, it’s preferable that the communication be in writing.

Contingent Fee

The rule: Rule 1.5(c).

A contingent fee MUST:

  • be in a writing that is signed by the client;
  • state the method by which the fee is to be determined, including the percentage that the lawyer will take if the case resolves by settlement, trial or appeal;
  • notify the client of the expenses for which the client will be responsible, including expenses for which the client will be responsible even if the client does not prevail;
  • specify the litigation & other expenses that will deducted from any recovery; and,
  • state whether those expenses will be deducted before or after the contingent fee is calculated.

In Vermont, the failure to reduce a contingent fee in writing has resulted in lawyers being reprimanded and admonished.

Discipline aside, as we learned from Captain Jack Sparrow, the lack of a written contingent fee agreement might cost a lawyer a heckuva lot of coin.

Fee Divided Among Lawyers in Different Firms

The rule:  Rule 1.5(e).

Vermont does not allow straight referral fees. I’ve written on that here, here, and here.

If lawyers in different firms want to share any portion of a fee:

  • the division must be in proportion to the services performed by each, or, both must assume joint responsibility for the representation;
  • the client must agree to the arrangement, including the share that each lawyer will receive;
  • the agreement must be confirmed in writing; and
  • the total fee must be reasonable.

Advance Fees that are Earned upon Receipt

The rules: 1.5(f), 1.5(g), 1.15(c).

My post on the distinction between advance fees that must remain in trust and fees that may be considered earned upon receipt is here.

When a fee is paid in advance, a lawyer may treat it as earned, even though no work has yet to be performed, only if:

  • before or within a reasonable time after the representation begins, a lawyer confirms to the client in writing:
    • the scope of availability & services that the client will receive; and,
    • that the fee is not refundable.

FINAL POINT

The rule: Rule 1.5(a).

No matter the type of fee, it must be reasonable.

 

 

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