Source: http://www.law.cornell.edu/ethics/al/narr/al_narr_1_05.htm
Timestamp: 2014-08-30 00:51:33
Document Index: 115545254

Matched Legal Cases: ['§ 41', '§ 38', '§ 34', '§ 41', '§ 41', '§ 34', '§ 38', '§ 41', '§ 34', '§ 41', '§ 36', '§ 9', '§ 41', '§ 47']

1.5:100 Comparative Analysis of
Background References: ABA Model Rule 1.5,
Alabama Commentary: 1.5:101 Model Rule
ARPC 1.5 specifies three parameters for referral fees.
The division may be in proportion to services performed by each lawyer (ARPC
1.5(e)(1)(a)), by written agreement with the client, and each lawyer assumes
joint responsibility for the representation (ARPC 1.5(e)(1)(6)), or in a contingency
fee case, the division is between the referring or forwarding lawyer and the
receiving lawyer. (ARPC 1.5(e)(1)(c)). In all three scenarios, (1) the client
must be advised of and not object to the participation of all lawyers, (2) the
client must be advised that a division of the fee will occur, and (3) the total
fee must not be clearly excessive. (ARPC 1.5(e)(2),(3), and (4)). Note that
the model rule requires a fee to be reasonable whereas the Alabama rule requires
that the fee be "not clearly excessive." Contingent fees which are
increased in order to pay the referring lawyer will not be deemed a violation
of this rule. Alabama does prohibit fee splitting in non-contingent cases unless
the referring lawyer performs proportional services or retains joint responsibility.
1.5:102 Model Code
1.5:200 A Lawyer's Claim to
Commentary: ABA/BNA § 41:101, ALI-LGL
§§ 38-42, Wolfram §§
Alabama Commentary: {Begin text here}
1.5:210 Client-Lawyer Fee
ARPC 1.5 applies to the reasonableness of both the hourly rate and "the total cost to the client." RO-94-02. In determining a proper fee one must consider the interest of both the client and the lawyer. Id. Consequently, a delicate balance must be reached between providing the lawyer with adequate compensation for effectively serving his client and the fear that excessive costs may deter laymen from using the legal system to protect their rights. Id. ARPC 1.5(b) requires a lawyer to communicate to the client, particularly a client the lawyer does not regularly represent, the basis or rate of his fee, within a reasonable time before he begins representing the client. Rule 1.5(b) imposes on an attorney a "two-fold duty to explain at the beginning of engagement the basis on which fees and other charges will be billed," and to provide the client with a sufficient explanation of what will actually be billed. RO-94-02. In complying with this requirement it is not necessary to recite all the factors that underlie the basis of the fee, but only those that are directly involved in its computation.
The General Counsel has issued opinion RO-94-02 which incorporates ABA formal opinion 93-979, which holds that a lawyer must disclose to a client the basis on which he will be billed and that the attorney must also indicate which professional and non-professional charges will be billed to the client. While a lawyer cannot charge a client for overhead expenses in the absence of consent, he can charge the client for expenses reasonably incurred in connection with his services (such as long distance phone calls, computer research, photocopying, secretarial overtime, etc.). RO-94-02. In the absence of an agreement to the contrary the lawyer should charge for such in-house services no more than the direct cost associated with the service plus a reasonable allocation of overhead expenses directly associated with the provision of the service.
1.5:220 A Lawyer's Fee in
"The general principle is everywhere established that an attorney is in such a case entitled to reasonable compensation for his services, appropriate to his employment, rendered by him to his client." Humes v. Decatur, 98 Ala. 461 (1893). A written fee agreement is not conclusive evidence of a reasonable attorney's fee. Lanier v. Moore-Handley, Inc., 575 So.2d 83, 87 (Ala. 1991). See Peebles v. Miley, 439 So.2d 137 (Ala. 1983), for a detailed list of twelve factors considered important in determining attorney's fees.
1.5:230 Fees on Termination [see
1.16:600]
In Gaines, Gaines & Gaines v. Hare, 554 So.2d 445 (Ala. Civ. App. 1989), the Court stated: "The rule in Alabama is an attorney discharged without cause or otherwise prevented from full performance, is entitled to be reasonably compensated only for services rendered before such discharge." quoting, Hall v. Gunther, 157 Ala. 375 (1908). The Court further stated that the law firm was due an attorney's fee award based on quantum merit. While this decision was a contingent fee case, the same principle would apply in any fixed fee contract as well.
RO-86-02 discussed delivery of papers and property to which the client is entitled. Subject to the attorney's lien on any recovery provided in Ala. Code § 34-3-61, the attorney must provide copies of a client's complete file to the client upon request. The attorney is not required to provide copies of legal analysis unless he has previously agreed to do so and is not required to furnish notes which went towards the completion of the final project unless he has previously agreed to do so. When the attorney has received full compensation for his services in regard to a particular file, he must surrender those materials to the client upon request. See also RO-89-58.
1.5:240 Fee Collection
While the Office of the General Counsel takes the position
that mandatory fee arbitration agreements with clients violate the ARPC, there
has been no definitive court decision as to whether it is permissible to include
mandatory arbitration of fee disputes in a lawyer's fee agreement with a client.
Consider the impact of Rule 1.8(h) versus the Alabama Supreme Court's
decisions regarding arbitration agreements. Many local bar organizations provide
mechanisms for voluntary arbitration of fee disputes.
1.5:260 Forfeiture of Lawyer's
1.5:270 Remedies and Burden of
Persuasion in Fee Disputes
See Section 1.5:22 and 1.5:230.
1.5:300 Attorney-Fee Awards (Fee
Commentary: ABA/BNA § 41:301, Wolfram
Alabama Commentary: 1.5:310 Paying for Litigation:
Alabama generally follows the American Rule that each
party to a lawsuit bears the cost of its own lawyer.
1.5:320 Common-Law Fee
Alabama adheres to the common law rule that generally
precludes recovery of attorney's fees in the absence of express authorization
in a statute, contract or rule of court - for example, recovery of fees from
the creation of a common fund for a class of persons.
1.5:330 Statutory Fee
1.5:340 Financing Litigation
[see 1.8:600]
See discussion under 1.8:600 below.
1.5:400 Reasonableness of a Fee
Background References: ABA Model Rule 1.5(a), Other
Commentary: ABA/BNA § 41:301, ALI-LGL
§ 34, Wolfram §
Alabama Commentary: 1.5:410 Excessive Fees
A reasonable contingent fee is one that "compensate[s] the lawyer for the time reasonably expended" and does not "take advantage of the client." RO-94-02. In Smesler v. Trent, 698 So.2d 1094, 1095 (Ala. 1997) the Alabama Supreme Court upheld a one-third contingent fee arrangement on the sale price of a farm focusing on the nature and extent of the attorney's work, the amount involved and the results obtained.
1.5:420 "Retainer Fees:" Advance
Payment, Engagement Fee, or Lump-Sum Fee
There is no prohibition against retainer fees, advance payment, engagement fee, or lump-sum fees. However, the client has the absolute right to terminate the services of his or her lawyer, with or without cause, and to retain another lawyer of their choice. This right would be substantially limited if the client was required to pay the full amount of the agreed on fee without the services being performed. A lawyer is entitled to be reasonably compensated only for the service rendered before discharge by the client. See Gaines, Gaines & Gaines v. Hare, Wynn, 554 So.2d 445 (Ala. Civ. App. 1989); and Hall v. Gunter, 157 Ala. 375, (Ala. 1908). Further, ARCP 1.16(d) requires, among other things that upon termination of representation a lawyer must refund "any advance payment of the fee that has not been earned." Therefore, no retainer should be nonrefundable to the extent that it exceeds a reasonable fee for services rendered. (RO-92-17). Indeed, the mere designation of a retainer as nonrefundable may constitute a violation of ARCP 1.16(d).
Alabama does not permit nonrefundable retainer fees. The mere denomination of a retainer as "nonrefundable" is a per se violation.
1.5:500 Communication Regarding
Background References: ABA Model Rule 1.5(b), Other
§ 38, Wolfram §
Alabama Commentary: Rule 1.5(b) suggests, but does not mandate that attorneys provide their clients with a written statement detailing the basis or rate for the fee. However, ARPC 1.5(c) requires a lawyer to put a contingent fee agreement in writing. The writing must include: the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from recovery, and whether such expenses shall be deducted before or after the contingent fee is calculated. The lawyer must also provide the client with a written statement indicating the outcome of the matter and in the case of recovery, a showing of the remittance to the client how it was determined.
Background References: ABA Model Rule 1.5(c), Other
Commentary: ABA/BNA § 41:901, ALI-LGL
§§ 34, 35, Wolfram §
Alabama Commentary: 1.5:610 Special Requirements
Concerning Contingent Fees
A lawyer may participate in a confidential settlement even though there may be a possibility of adverse consequences on third parties or the public. It is not a violation of the rules for a confidential settlement agreement to impose more restrictions on plaintiff's lawyers than the plaintiff. Further, a defendant or defendant's counsel may require confidentiality as to plaintiff's counsel as a condition of settlement even though counsel is technically not a party to the suit. (RO-92-17).
1.5:620 Quantum Meruit in
Background References: ABA Model Rule 1.5(d), Other
Commentary: ABA/BNA §§ 41:901,
ALI-LGL § 36, Wolfram §§ 9.3.2;
Alabama Commentary: 1.5:710 Contingent Fees in
ARPC 1.5(d)(2) precludes the use of contingent fees for representing a defendant in a criminal case.
1.5:720 Contingent Fees in
ARPC 1.5(d)(1) prohibits an attorney from charging or collecting a contingent fee in domestic relations matters that are contingent upon securing a divorce or upon the awarded amount of alimony, child support or property settlement. Contingency fee arrangements in initial divorce proceedings are prohibited. One concern is that a contingent fee in such a situation is unnecessary since the spouse retaining the majority of the property will have sufficient funds to compensate the lawyer and the spouse without assets will also be protected by a court order directing the spouse with the greater assets to pay the other spouse's attorney's fees. RO-96-01. In addition to fairness concerns, the rules take into account a fear that allowing a contingent fee arrangement would give the lawyer an interest in discouraging or thwarting reconciliation of the parties. 54 Alabama Lawyer 20 (1993). A lawyer is prohibited from using contingent fees where the fees are in any way contingent upon securing a divorce. RO-96-01.
A lawyer may enter into a contingent fee agreement once a final divorce decree has been entered awarding alimony, child support or as to the collection of arrearage. Therefore a lawyer can accept representation in a paternity action on a contingent fee basis (RO-87-96) and in actions seeking money damages for the breach of an anti-nuptial contract (RO-88-103). The General Counsel reasoned that allowing lawyers to accept cases where the representation is limited to collecting an existing judgment does not violate ARPC 1.5 because that rule specifically prohibits contingent fee arrangements based on winning the action, rather than collecting on a preexisting judgment. (RO-90-98). Thus, the General Counsel previously held that an attorney may use a contingent fee arrangement in collecting a divorce judgment because it is analogous to any other collection. However, in order to accept such a case on a contingency basis, the attorney must charge a fair and reasonable fee, and verify "that the client is indigent. . . and there are no means available to the client to collect arrearage." (RO-91-05).
However, based upon recent decisions in Alabama Appellate Courts and federally mandated changes which effect child support proceedings, the General Counsel has narrowly limited its holdings in opinion RO-91-05, almost to the point of overruling it. (RO-98-01). The first development which led the General Counsel to revise its decision was the fact that a number of Alabama Appellate Courts have held in child support cases that the money belongs to the child and not the custodial parent. Secondly, in response to new federal rules, the Department of Human Resources is now required "to provide collection services to any individual, regardless of his or her economic status or ability to pay." In light of these recent developments, the Disciplinary Commission has difficulty envisioning any circumstances where a contingent fee contract would be ethical. However, the Commission has emphasized that an attorney can accept a contingency fee arrangement if the attorney reasonably thought that it would be in the child's best interest. In addition to the stringent requirement that focuses on the child's best interest, the Commission also instructs the attorney to carefully consider the following factors before accepting a child support arrearage case on a contingency basis: that the parent understands collection services are available from the state at no cost, that the fee is reasonable and not excessive and that the attorney has conducted a sufficient inquiry to make a good faith determination that the parent cannot pay an hourly rate from funds other than those designated for support of the child. An attorney's failure to adequately advise the parents about the services of the state's collection agency would be an ethical violation. Thus, in effect, it is virtually impossible for an attorney to ethically accept a child support collection case on a contingency basis. 1.5:730 Other Illegal Fees in
ARPC 1.5(f) prohibits a court appointed lawyer from collecting a fee from an indigent criminal defendant. However, a lawyer may accept a fee from the defendant or someone acting on his behalf if the lawyer obtains prior approval from the court. A lawyer may also accept a fee from a defendant who is indigent at the time of appointment but is later able to pay, in which case the fee should be placed in a trust to be disbursed later pursuant to the court's directions. Certain fees are statutory and must be court awarded, such as in worker's compensation cases.
1.5:800 Fee Splitting (Referral
Background References: ABA Model Rule 1.5(e), Other
Commentary: ABA/BNA § 41:701, ALI-LGL
§ 47, Wolfram §
Alabama Commentary: See generally, 1.5:101. An attorney who refers a case because of a conflict of interest should not share in the fee eventually recovered. (RO-87-92).