When does a rounding error become an unreasonable fee?

Rule 1.5(a) prohibits a lawyers from making an agreement for, charging, or collecting an unreasonable fee.  I’ve often mentioned that the Professional Responsibility Program receives few, if any, complaints about fees.  Indeed, my quick research reveals that the last disciplinary decision involving Rule 1.5(a) issued in October 2002.

Still, it’s good to know what’s good and what isn’t.

Undoubtedly, you have at least one friend or relative who frequently announces how wonderful it would be to be a lawyer, if only to bill 6 or 15 minutes for a quick phone call. Earlier today, I stumbled across two cases that shed some light on that exact issue.

The ABA Journal and the Legal Profession Blog covered a recent decision from the Wyoming Supreme Court.  The decision involved a client’s challenge to a firm’s practice of billing in 15 minute increments.  The Court concluded that, on the record before it, the evidence supported a conclusion that the firm’s billing practice was not unreasonable.

In its decision, the Court distinguished the case from one it decided in 2014.  It’s the 2014 decision that prompted this blog.

The 2014 case is here.  The lawyer’s license was suspended 30 days for, among other things, charging an unreasonable fee.  More specifically, the Court concluded that the lawyer violated Rule 1.5(a) by billing in 15 minute increments for tasks that, quite simply, did not take even close to 15 minutes to complete.

If your typical practice is to bill in minimum increments, the decision is worth a read.  A quick summary:

  • An attorney’s use of a minimum billing increment is not, standing alone, a violation.
  • Billing for work that was not done is a violation.
  • Double-billing for the same work is a violation.

In the abstract, those 3 statements don’t (and shouldn’t) seem surprising.

What’s key is to take a look at what the lawyer did.  Remember, per the fee agreement, she billed her client in minimum 15-minute increments.  The lawyer wrote down each task as it was completed.  If the task did not take at least 15 minutes, she did not record how long it actually took.  Thus, every single task was billed as having taken at least 15 minutes.  Among other things, the lawyer:

  • “routinely billed .25 hours to sign such documents as subpoenas, stipulated orders, and pleadings.”
  • regularly billed the client .25 hours for reviewing one-page scheduling orders, one-page pleadings, and one-page letters.
  • often billed the client .25 hours to review a document and another .25 hours to sign it.

Again, it wasn’t the minimum billing increment that resulted in the sanction.  Rather, per the Wyoming Supreme Court, an attorney’s billing practices necessarily involves application of “billing judgment.”  That is, an exercise of professional judgment demonstrated by “writing off unproductive, excessive, or redundant hours.”

On this issue, the Court concluded that the lawyer’s “practice of billing 15 minutes for such tasks as signing subpoenas, stipulated orders, and one page letters demonstrated a complete failure to exercise business judgment, which would have required her to write off unproductive, excessive, or redundant hours.”

To be very clear: I am not telling you that a minimum billing increment violates Rule 1.5(a).  I am, however, telling you that at least one Supreme Court has concluded that, if abused, the practice can lead to an unreasonable fee.

 

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Monday Morning Answers: #112

Good morning! Friday’s questions are here.  Aunt Kate would’ve needed her sunglasses as she walked east on Pearl to Abernathy’s this morning.  Alas, and sadly, even though it’s April 9, she also would’ve need her hat, scarf, and mittens.

Spoiler alert: the answers follow today’s Honor Roll.

Honor Roll

(hyperlinks when available.  lack of a link doesn’t reflect a lesser score or lower honors)

Answers

Question 1

Which is a rule?

When lawyers are associated in a firm:

  • A.  only one may have signature authority on a trust account.
  • B.  each is professionally liable for the misconduct of any other.
  • C.  none of them has a duty to report the misconduct of any other.
  • D.  none of them shall knowingly represent a client when any one of them would be prohibited from doing so by the conflict rules, unless the conflict is a personal one and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.  

That is Rule 1.10(a).

Question 2

Many lawyers advertise.   Indeed, an exception to a rule allows a lawyer to “pay the reasonable costs of advertisements.”   It’s one of the exceptions to the rule that prohibits a lawyer from:

  • A.  Giving anything of value to a person for recommending the lawyer’s services.
  • B . Direct contact with prospective clients.
  • C.   Using a misleading firm name.
  • D.  All of the above

Option A is an exception to Rule 7.2(b)’s prohibition on giving anything of value to a person for recommending the lawyer’s service.  Choices B & C are in different rules.

This is a good time to post this reminderReferral Fee? Think Thrice.

Question 3

Fill in the blank. (verbatim)

There’s a rule that prohibits a lawyer involved in the investigation or litigation of a matter from making “____________________ that the lawyer knows or reasonably should know will be disseminated by means of public communication and will have a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter.”

  • A.   Any statement
  • B.   An extrajudicial statement
  • C.   A statement during jury selection
  • D.  A social media post.

Rule 3.6(a).  The key word is “extrajudicial.”   

.Question 4

Attorney represents Client in matter vs. Litigant.  Litigant is self-represented and does not have a lawyer.

The matter is close to resolving.  Attorney has reduced a proposed settlement to writing.  Attorney shows it to Litigant.  Litigant asks Attorney what paragraph 2 means.

True or False:  Vermont’s rules authorize Attorney to explain Attorney’s view of the proposed settlement and Attorney’s view of the underlying legal obligations created by paragraph 2.

TRUE.  See, Rule 4.2, Comment [2] (“So long as the lawyer has explained that the lawyer represents an adverse party and is not representing the person, the lawyer may inform the person of the terms on which the lawyer’s client will enter into an agreement or settle a matter, prepare documents that require the person’s signature, and explain the lawyer’s own view of the meaning of the document or the lawyer’s view of the underlying legal obligations.”)

Question 5:

Alan Page was elected to the Minnesota Supreme Court in 1992 and served until reaching mandatory retirement age in 2015.  When first elected, Page had been working for several years as an Assistant Attorney General in Minnesota.

I often blog on the duty of competence.  Prior to becoming a lawyer, Page excelled in a different profession.  Indeed, as a member of the famed “Purple People Eaters,” Page was among the most competent ever to do that particular job.

What was Page’s job prior to becoming a lawyer.

Alan Page was a professional football player. He was the NFL MVP in 1971 and is in the Pro Football Hall of Fame.  Page was a defensive lineman for the Minnesota Vikings (and, at the end of his career, for the Chicago Bears.)  The “Purple People Eaters” were the defensive line for the Vikings teams that went to 4 Super Bowls in the 70’s.

See the source image

 

See the source image

Monday Morning Answers: Carvel & WPIX

Wow!  I had no idea that a post about Carvel & WPIX would resonate with so many.   Thank you readers for sharing your thoughts! I’ve pasted some of them in below the answers.

Friday’s questions are here.  The answers follow the Honor Roll.

Honor Roll

  • Karen Allen, Esq.
  • Matthew AndersonPratt Vreeland Kennelly & White
  • Evan Barquist, Montroll, Backus, & Oettinger
  • Penny Benelli, Dakin & Benelli
  • Leslie Black, Black & Govoni
  • Robert Grundstein, Esq.
  • Gregg Harris, Assistant Attorney General, Buildings & General Services
  • Glenn Jarrett, Jarrett & Luitjens
  • Keith KasperMcCormick, Fitzpatrick, Kasper & Burchard
  • Jeanne Kennedy, JB Kennedy Associates
  • Shannon LambPratt Vreeland Kennelly & White
  • John LeddyMcNeil, Leddy, & Sheahan
  • Michael Lipson, Esq.
  • Lon McClintockMcClintock Law Offices
  • Jeffrey MessinaBergeron Paradis Fitzpatrick
  • Hal Miller, First American
  • Herb Ogden, Esq.
  • Nancy Rogers, Chamberlin Elementary School
  • James Runcie, Ouimette & Runcie
  • Jay Spitzen, Esq.
  • Allison Wannop, Esq.
  • Thomas Wilkinson, Jr., Esq, Cozen O’Connor
  • Carole Zangla, Grafton County (N.H.) Senior Citizens Council
  • Peter Zuk, Kyocera Copiers, PRB hearing panel member

 

Answers

Question 1

What’s Vermont’s rule?  A lawyer shall:

  • A.  Charge a reasonable fee.
  • B.   Not charge an unreasonable fee.
  • C.   Not charge or collect an unreasonable fee.
  • D.   Not make an agreement for, charge, or collect an unreasonable fee.  V.R.Pr.C. 1.5(a).

Question 2

Fill in the blank.

The third comment to a particular rule defines __________ ___________ as involving “the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representationw would materially advance the client’s position in the subsequent matter.”

It’s the definition of:

  • A.  when matters are “substantially related”.  V.R.Pr.C. 1.9(a), Comment [3].
  • B.   what type of information qualifies as a “client confidence”
  • C.   a concurrent conflict of interest
  • D.  a non-waivable conflict of interest

Question 3

Which is different from the others?

  • A.  Friending an adverse & represented party.
  • B.  Reviewing a potential juror’s Twitter account.
  • C.  Advising a client to “take down” social media posts.
  • D.  Crowdfunding litigation.

“A” is most likely to be a rules violation.  Violations including contacting a represented party and engaging in dishonest conduct.  For more, see these advisory opinions from the District of Columbia, New Hampshire & Massachusetts.

Reviewing a juror’s public Twitter feed is not a violation. Arguably, the duty of competence requires it.  

Crowdfunding is not a violation. I’ve blogged about it here.

Advising a client to “take down” social media posts is not, in and of itself, a violation.  For example, see these advisory opinions from Florida and Pennsylvania

Question 4

Isaiah meets with Lawyer to discuss a potential claim against Lonzo.  Isaiah mentions that Attorney represents Lonzo   Attorney and Lawyer are married to each other.

Which is most accurate in Vermont?

  • A.   Lawyer is prohibited from representing Isaiah.
  • B.   Lawyer is prohibited from representing Isaiah unless Isaiah provides informed consent that is confirmed in writing.
  • C.  Lawyer is prohibited from representing Isaiah and the conflict is imputed throughout Lawyer’s firm.
  • D.  Both Isaiah & Lonzo are entitled to know of the Attorney/Lawyer marriage and, ordinarily, Attorney & Lawyer may not continue unless each client gives informed consent.  V.R.Pr.C. 1.7, Comment [11]

Question 5

A woman named Linda passed away earlier this week.  She was 76 and grew up in Topeka, Kansas.  I don’t know whether anyone who reads this blog ever met her.  But, I’m positive that nearly every single person who reads this blog & who went to law school read about her in class.

What was Linda’s last name?

Linda Brown was 8 years old when she was turned away from Sumner  Elementary School in Topeka.  4 years later, the U.S. Supreme Court issued its decision in Brown v. Board of Education.  Linda’s passing was covered by many outlets, including NPR, the Huffington Post, the Chicago Tribune, and the New York Times.

See the source image

*************************************************************************************Comments on WPIX & Carvel’s Ice Cream

  • Your post today brought back some fond memories for me as well, I grew up in Northern NJ and used to watch channel 11 regularly.  As for the Carvel commercials and can still hear “Cookie Puss” and “Fudgie the Whale” in my mind if I close my eyes…
  • Get Smart was a silly favorite of mine.
  • How could you forget the classic (and now most politically incorrect!) F Troop?!  Sgt. O’Rourke, Cpl. Agarn, the Hekawi’s.  Only 65 episodes
  • Carvel’s was almost closest to my house; not as high quality as Marcus Dairy, out on Rt. 7, but closer…and we always had a craving for their “Flying Saucers”, wonderful ice cream sandwiches with crispy chocolate wafers! Bought them by the dozen to put in the freezer. I even remember “Mr. Carvel” who did the tv ads…can’t remember the pitch, but he was an “old guy” with a mellifluous voice.
  • What about The Mod Squad!?!?  Linc was the best! Peggy Lipton won an Emmy!
  • WPIX – Home of the Yankees.  My sister’s roommate in college was Cindy Rizzuto, The Scooter’s daughter.  “Holy Cow, can you believe that?”  AND …..There was nothing I wanted more on my birthday than a Carvel Ice Cream Cake.
  • Did you actually watch Yankee games on WPIX?  How did your Dad allow that?
  • Wow, that Magic Garden song made me laugh out loud. 
  • I did live near a Carvel – and yes – that was a treat – BUT, what I recall was going to a place called Jahn’s  Ice Cream Parlor.  They had “everything but the kitchen sink”  and it served at least 8.  It was served in a mini kitchen sink – with all flavors.  Kind of disgusting, actually.  They also had a .02 cent plain.  This was a glass of seltzer.  I love how your intros each week bring back memories.
  • Your blog on Carvel and WPIX brought back so many memories.  Hours spent watching Abbott and Costello reruns, Superman, Batman and not to mention Chiller Theater.  It was the only station on TV that regularly got me into trouble.  My mom thought Batman was way too violent and Chiller was beyond the pale.  That being said, she had no objections to watching The Bells of St. Mary’s or John Wayne in the Quiet Man, movies that ran almost monthly on WPIX.  Between WPIX in the afternoon and MAD magazine, I expressed my grade school rebellion. Oh those days. 
  • Love your blog this am,Especially since I grew up in Queens and Carvel was the height of taste bud heaven. To this day, I love ice cream! And who says ice cream doesn’t help one’s bp? Here’s to Carvel and WPIX!

Referral Fees: Think Thrice

I continue to encounter confusion about referral fees.  This week, the topic arose during an inquiry I received, and again at a CLE seminar I presented.

My position remains that Vermont’s rules do not authorize straight referral fees.

Here’s my quick analysis:

  1. Rule 7.2(b) prohibits a lawyer from “giving anything of value to a person for recommending the lawyer’s services;”
  2. Rule 7.2(b)(4) authorizes lawyers to make referrals and enter into reciprocal referral arrangements; but,
  3. Comment [8]  states that “[e]xcept as provided in Rule 1.5(e), a lawyer who receives referrals from a lawyer or nonlawyer must not pay anything solely for the referral . . .”
  4. Rule 1.5(e) authorizes lawyers who are not in the same firm to share fees if:
    • the division is in proportion to the services each performs, OR, each lawyer assumes joint responsibility for the representation;
    • the client confirms in writing the client’s agreement to the division of the fee; and,
    • the overall fee is reasonable.

Here’s a primer on referral fees.  And, here’s a post that discusses what it means”to assume joint responsibility for a representation,” and thereby trigger Rule 1.5’s authorization of a division of fees.

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Throwback Thursday: Referral Fees

Every now & then, I run a column where I link to a post from the past.

“Every now & then” is defined as “whenever it’s Thursday, I am lazy have writer’s block, but need to post something.”

Not sure what your calendar says, but on mine, it’s every now & then.

Really, this isn’t a “throwback.” It’s a reminder.

I continue to run across lawyers who don’t realize that the Vermont Rules of Professional Conduct prohibit straight referral fees. So, I’m re-posting Referral Fee? Think Twice.  It links to, and expands upon, my primer on Referral Fees.

Please feel free to share this post.  I don’t want lawyers to stumble into a violation.

Plus, it makes me laugh to think about the days when mix tapes were my most valuable possessions.  Don’t forget to come back tomorrow for the #fiveforfriday trivia quiz!

Throwback Thursday

Throwback Thursday: Crowdfunding

Earlier this week, I received my first inquiry on the ethics of crowdfunding litigation.  It reminded me of a blog I posted in January 2016.

The post is HERE and it’s on, you guessed it, the ethics of crowdfunding litigation.  Given the inquiry, I thought I’d revisit the post.

 

Crowdfunding

I’m aware that January 2016 isn’t much of a “throwback.”  But that’s okay.  At GW Law, I was the quarterback on O.P.P., the first law school team to win the “grad school” division of GW’s IM flag football league.  We advanced to the Final Four where we were utterly smoked in the semis by the team that won the “staff” division. In any event, back then I wasn’t known for throwing deep; pinpoint accuracy was my thing.   So, a throwback of a mere 14 months might not be much of a throw, but the topic is relevant. So, I consider it the equivalent of an 11-yard out that keeps the chains moving.

Back to the Basics: Contingent Fees

Sometimes a column must get back to the basics and discuss legal ethics without reference to music, tv, movies or sports.

As a result of a few seminars I’ve taught over the past few weeks, I’d like to get back to the basics of contingent fees.

Rule 1.5(a) prohibits lawyers from agreeing to, charging, or collecting unreasonable fees and expenses.  Contingent fees, and expenses in contingent fee cases, are subject to the rule.

In addition, Rule 1.5(c) states that a contingent fee agreement:

  • MUST be in a writing that is signed by the client;
  • MUST state the method by which the fee is to be determined, including:
    • the percentage that will accrue to the lawyer in the event of settlement, trial or appeal;
    • the litigation & other expenses that will be deducted from any recovery; and,
    • whether such expenses will be deducted before or after the contingent fee is calculated.
  • MUST clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party.

Upon the conclusion of a contingent fee matter, a lawyer:

  • MUST provide the client with a written statement showing the outcome of the matter and, if there is a recovery, the remittance to the client and the method by which it was determined.

Lawyers are NOT allowed to agree to, charge, or collect:

  • a contingent fee in a criminal case;
  • a fee that is contingent upon the securing of a divorce; or,
  • a fee that is contingent upon the amount of spousal maintenance or support, or property settlement in lieu thereof, in a domestic relations matter.

However, lawyers may use contingent fees in domestic relations matters that involve the collection of:

  • spousal maintenance or support due AFTER a final judgment has been entered; or,
  • child support and maintenance arrearages due AFTER a final judgment has been entered, provided that the court approves the reasonableness of the fee agreement.

In other words, contingent fees are okay in some POST-JUDGMENT divorce & custody matters.

So, there you have it.  The basics of contingent fees.

Of course, speaking of “back to the basics,” this is not one of those columns sans reference to music, tv, movies or sports.  Who could forget the Barden Bellas and their version of Back to the Basics in Pitch Perfect 2?

Pitch Perfect 2

 

 

Referral Fee? Think twice.

Vermont’s Rules of Professional Conduct do not allow straight referral fees.

If you didn’t know that, don’t worry, you’re not alone.

About a year ago, I blogged on referral fees.  The post is HERE.  A quick summary:

  • Scenario: Client asks Lawyer for help in an area that Lawyer doesn’t practice.  Lawyer refers Client to Attorney.  Lawyer and Attorney do not work in the same firm. Lawyer wants to be paid for the referral.  Under what circumstances, if any, can Attorney ethically pay Lawyer for the referral?
  • Conclusion: Rule 1.5(e) is Vermont’s rule on dividing fees between lawyers who do not work together. The rule authorizes a division of fees Lawyer and Attorney if:
    1. the division is in proportion to the services performed by both Lawyer & Attorney, or, both Lawyer & Attorney assume joint responsibility for the representation;
    2. Client agrees to the arrangement, including the share that both Lawyer and Attorney will receive, and the agreement is confirmed in writing; and
    3. the total fee is reasonable.

The original post goes into much more detail.

The question that often arises is “what does joint responsibility for the representation mean?”  Comment [7] to Rule 1.5(e) makes it clear that lawyers can divide fees based on “the proportion of services they render or if each lawyer assumes responsibility for the representation as a whole.”  It goes on to indicate that “[j]oint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership.” (emphasis added).

In April, the ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 474.  The opinion reaches the same conclusion as my original post. It also endeavors to shed some light on “joint responsibility for the representation.”  Finally, the ABA opinion reminds us that the referring lawyer is subject to the conflict rules and must avoid conflicts of interest as if representing the client.

The ABA Journal summarized Formal Opinion 474 here.

Caution