Law Tips: Attorney Fees

The ICLEF Law Tips blog this week brings you some thoughts on “Attorney Fees; Reasonable and Otherwise.” We are pleased at ICLEF to partner with the Indiana Disciplinary Commission in producing the “Trust Accounts Made Easy” CLE program that includes pertinent advice from Seth Pruden. As a member of the Disciplinary Commission litigation staff, Pruden investigates and prosecutes violations of the Indiana Rules of Professional Conductfor Lawyers. He lectures extensively on legal ethics and Trust Account Management. We are going to look inside Seth’s segment on attorney fees presented during the above CLE. Wait, you say: “My fees are always within the Rules of Professional Conduct. Don’t need to read any further.” Of course, the majority of Indiana lawyers make reasonable, ethical decisions as to attorney fees. But….might this be an area in which all practitioners could benefit from a few moments of refresher or update?  If you think so, let’s look briefly at examples that Seth presented as unreasonable fees.

First, as introduction, Seth reminds attendees of Indiana Professional Conduct Rule 1.5(a) that requires that an attorney fee be reasonable, and lists several factors to be taken into consideration. There are eight factors familiar to most attorneys listed in the rule that can be found at the Indiana Disciplinary Commission’s website: http://www.in.gov/judiciary/rules/prof_conduct/

Seth also provides this alert: “Although these factors may be a useful guide to determine the reasonableness of a lawyer’s fee, evidence on each factor is not required to determine whether a lawyer’s fee is reasonable. See, Shell Oil Co. v. Meyer, 684 N.E.2d 504 (Ind. App. 1997). In fact, charging and collecting excessive legal fees may be professional misconduct without there being any evidence of the enumerated factors. See Matter of Gerard, 634 N.E.2d 51 (Ind. 1994).”

His presentation covered a wide-ranging list of examples where attorneys made poor decisions in matters of fees and were then subject to disciplinary action.  Included here are selections that might offer some guidance in the event a question arises and you need a point of reference.

Your fee might be unreasonable if …

you charged your client a contingency fee for a simple uncontested matter.
Matter of Gerard, 634 N.E.2d 51 (Ind. 1990), that a lawyer may have a duty to renegotiate his fee in a contingency matter if it becomes apparent that representation of the client involves a simple, uncontested matter. Respondent was hired by an elderly woman to recover her money from various bank accounts that she believed had been lost or stolen. They agreed the lawyer would receive one-third of all the assets recovered. After he entered this agreement with his client, the Respondent learned that the money was all safely deposited in accounts at the proper financial institutions with a value of more than $450,000. The lawyer claimed his one-third contingency fee in these assets.

The Court found that the lawyer’s “actions in identifying and collecting the certificates were largely administrative in nature and required no specific legal skill.” Id. at 53. The Court held that the lawyer’s fee was excessive in violation of former Ind. Code of Professional Responsibility Disciplinary Rule 2-105(A). The Court concluded: “Respondent’s acts in securing the inflated fee represent greedy overreaching. His proper course of action would have been to renegotiate his fee after it became apparent that collection of [his client’s] assets was a simple, uncontested matter.” Id. At 54.

you charge a fee greater than that allowed by law.
Matter of Benjamin, 718 N.E.2d 11 11 (Ind. 1999). The lawyer agreed to represent a client in a medical malpractice case for a fee of 40% of any recovery. The medical provider agreed to settle the case with the injured party for $100,000, the maximum liability of the medical provider under the Indiana Medical Malpractice Act. The settlement was for the medical provider to pay the injured party an initial payment of $50,000, with the remaining $50,000 to be paid in structured payments over several years. When the injured party’s lawyer received the initial payment of $50,000, the lawyer retained $40,000 as his fee and forwarded $10,000 to his client. The Indiana Supreme Court concluded that the lawyer’s retention of “his entire contingency fee from the first settlement payment amounted to exacting an unreasonable fee.” Id. At 1113.

you kept a fee greater than the agreed amount.
Matter of Galanis, 744 N.E.2d 423 (Ind. 2001) represented a client in a personal injury matter. The lawyer and client agreed that the lawyer would represent the client for a contingent fee of 40% of the gross recovery, and the client would pay an additional 10% of the gross recovery if the matter was appealed. A jury returned a verdict for $250,000 for the client. The defendant filed a motion to correct errors in which she claimed that the damages awarded by the jury were excessive. The defendant’s insurance coverage was limited to $100,000. The trial court denied this motion. However, the lawyer began investigating whether the defendant had any assets from which he could collect the excess judgment directly from the defendant. The lawyer determined that the defendant was judgment proof. That led the lawyer to investigate whether the defendant might have grounds for a claim against the defendant’s insurer for bad faith and seeking an assignment from the defendant to pursue the bad faith claim against the defendant’s insurer. The lawyer discovered that the defendant had a factual basis for a bad faith claim against the insurer but did not receive the assignment or pursue the bad faith claim against the defendant’s insurer. In the end, the lawyer negotiated a settlement with the defendant’s insurer for $200,000. At the time of disbursing the settlement funds to his client, the lawyer claimed and received $100,000, or 50% the total settlement, as his fee. The $100,000 attorney fee was $20,000 more than the fee the lawyer was entitled to under his fee agreement with his client.

The Indiana Supreme Court held that the lawyer violated Prof: Cond. R. 1.5(a) by charging an unreasonable fee. The Court explained: “Where there is a written fee agreement specifying the amount of legal fees the client will pay, an attorney’s retention of a fee greater than that specified in the agreement is strongly indicative of an unreasonable fee.” Id. At 424.

……The above cases are a sample of the valuable presentation by Seth Pruden and his fellow Indiana Disciplinary Commission staff attorney, Angie Ordway, covering these and other trust-account-related issues for “Trust Accounts Made Easy.”  The additional ICLEF faculty member for this CLE  is Chuck Dunlap, Executive Director of the Indiana Bar Foundation, who contributes key information in the area of  the  IOLTA Trust Account program.

______________________________________________________________________

The ICLEF CLE Seminar “Trust Accounts Made Easy”  walks through the management of trust accounts with you, using forms and other applicable tools provided in the materials.  To see a Video Replay, Online/On Demand Seminar, or Publication for “Trust Accounts Made Easy, Click Here.

Thank you again to the ICLEF faculty for this important presentation for Indiana lawyers.  Come back to “Law Tips” for more clips from our speakers. Let us know what you think about our blog or other ICLEF matters at www.facebook.com/ICLEF.   We are listening!

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

Leave a Reply