Opinion ID: 1121486
Heading Depth: 1
Heading Rank: 1

Heading: excessive fee cases

Text: Five clients complained to the Bar that the accused had entered into nonrefundable fee contracts with them between August 1988 and September 1989, but that the accused did not complete the work undertaken by him in return for payment made to him. [3] The Bar charged the accused with collecting an excessive fee in all those cases with intentionally failing to carry out a contract of employment in some of them, and failing to provide competent representation in several of them. [4] A summary of that contract follows. The form of contract used by the accused in these cases calls for payment in advance and in full of a fixed-fee amount in return for the accused's promise thereafter to perform a stated professional task. The task involved is described only in brief general terms entered in handwriting in the printed form contract. The fee paid clearly is described as nonrefundable. Under the contract's provisions, only the accused is given the option to terminate the employment contract, which he can do only for nonpayment by the client. In the contract, the [c]lient agrees that if not paid, attorney may perform no further legal services until paid and that the accused could refuse to present any final decree or order until paid. In none of the cases involved in this proceeding, however, does the accused seek to justify his failure to perform any of the agreed-upon services on the basis of nonpayment. The printed contract provides that the fees and costs set forth in it do not include representation on any other matters except those stated in the handwritten parts of the contract. The contract of employment expressly does not apply to post-trial motions or appeals of this case. There is some inconsistency among provisions of the contract concerning payment of the nonrefundable retainer. For example, the contract requires that the fee be paid in full before the accused will act as attorney for client, but it also states that the retainer will be applied toward the fees and costs to be earned by the accused's performance. As detailed above, the contract contemplates both that the lawyer may terminate the relationship without finishing performance of the specified task if the lawyer is not paid and also that the nonrefundable retainer, specifically tailored to that task, will be paid in full in advance. The contract with each client includes a specific amount of professional time, stated in an exact number of hours, that the nonrefundable fee amount is agreed to cover and provides that the retainer shall be applied toward the attorney fees and costs, and that hours in excess of the time for which attorney is hereby retained    will be charged to client and billed in addition to the retainer. Billing is to be monthly. The last provisions are more common in a minimum fee contract covering work to be performed than they are to either a nonrefundable retainer paid as the price for the lawyer's initial acceptance of professional responsibility in the client's case under an agreement that none of the lawyer's services are paid for thereby, or a flat fee for whatever professional services are required with regard to a specific legal problem. [5] Nonetheless, in all the matters before us involving the form contract, the accused treated the fee amount as a flat fee for the task described. No complaint before us involves a case in which the accused charged by the hour for any time beyond the stated amount that the initial fee was agreed to cover, nor did the accused keep contemporaneous time records on any of these cases (or on his nonrefundable contract cases in general). The clients also treated the contract as one for a flat fee. Thus, the accused and his clients agreed on that interpretation of the contract. The stated fee was for the accused's effortsfor the process of representationnot any hoped-for result. Use of disciplinary rules to regulate the amount of lawyers' fees is a relatively new development. For many years, the standard applied to determine prohibited excessiveness of fees was taken from equitable concepts for contracts. See In re Complaint Oren R. Richards, 202 Or. 262, 264, 274 P.2d 797 (1954) (lawyer disciplined for charging unconscionable and exorbitant fee). The American Bar Association promulgated its Model Code of Professional Conduct in 1969. Oregon adopted DR 2-106 from that code in 1970. The accused first argues that there can be no excessive fee violation under DR 2-106, where the fees were reasonable at the time that the initial agreements were entered into. The Bar's response stresses that the fees became clearly excessive due to the accused's non-performance in the cases. The dispute in this case, then, is over when a fee may be viewed as clearly excessive where the accused fails to perform the services for which the fee was paid. [6] The Bar has the better of that argument. A close examination of the text and context of the excessive-fee rule demonstrates that a lawyer may violate DR 2-106(A) by failing to refund an unearned fee under certain circumstances even though the initial advance payment was not unreasonable for the task that a lawyer was to perform in the future. DR 2-106(A) provides that [a] lawyer shall not enter into an agreement for, charge or collect an illegal or clearly excessive fee. (Emphasis added.) The disjunctive use of the word collect means that the excessiveness of the fee may be determined after the services have been rendered, as well as at the time the employment began. Also telling in the interpretation of the scope of the rule is the fact that one factor for determining the appropriateness of the amount of a fee, stated in DR 2-106(B)(4), requires consideration of the results obtained. That wording, at least, suggests that the work for which the fee was agreed has been completed. This interpretation is consistent with In re Thomas, 294 Or. 505, 526, 659 P.2d 960 (1983), where the court stated: It would appear that any fee that is collected for services that is not earned is clearly excessive regardless of the amount. Moreover, Legal Ethics Opinions No. 509 (1986), which served as a guideline during the period of time that the excessive fee charges against the accused arose, stated: Assuming the [nonrefundable] fee fixed by Law Firm [initially] is not clearly excessive, Law Firm does not violate DR 2-106(A) by entering into the agreement. However, DR 2-106(A) also provides that a lawyer shall not `charge or collect' a clearly excessive fee. Law Firm may therefore have an ethical duty to refund a portion of the fixed fee if it turns out to be clearly excessive in light of the work actually done. (Emphasis added.) [7] We conclude that a lawyer violates DR 2-106(A) when he or she collects a nonrefundable fee, does not perform or complete the professional representation for which the fee was paid, but fails promptly to remit the unearned portion of the fee. In this case, the accused expected the clients to live up to the letter of the contract whether or not he performed the agreed services that his part of the contract promised. He acted in accordance with that interpretation of the contract. The accused himself set the amount of the fee in relation to the work to be done. The fees, being for work that the accused never performed, were clearly excessive. In the accused's second argument to support the proposition that his fees were not excessive in the five cases, he states as follows: The mere fact that the `nonrefundable' fee may result in a fee in excess of a reasonable hourly fee does not in itself make them unethical either. (Emphasis added.) We do not disagree, but that argument is nonetheless beside the point. We are not dealing here with the issue whether the amount of the fee initially agreed to was excessive for the future work contemplated. None of the fees in the excessive-fee complaints in this case was clearly and convincingly excessive for the tasks that the accused agreed to perform; they became clearly excessive when he failed to perform as he agreed. Nor are we dealing with a situation where a lawyer agrees to take a number of cases from one source with a flat fee charge per case, although some cases take but a short time to complete, while others may take substantially longer. The accused further contends that a fee cannot become excessive only because later representation is incompetent. The accused also points to the good results in one case, albeit results that were obtained, finally, by another lawyer. We do not agree that those arguments have relevance in this case. It was the accused's failure to do the agreed work that created the clear excessiveness of the fee. Although incompetence may be a reason why one fails to do the work, it is the lack of agreed effort that causes the excessive fee violation. In each of the cases in which the accused set a specific fee for specific work and collected the fee for it, but failed to perform that work, the accused is guilty of violating DR 2-106(A) by collecting a clearly excessive fee. One cause of complaint in this case is a bit different, but still results in a finding of a violation of DR 2-106(A). In that case, which involved access to a driveway, the accused did continue to perform until the clients terminated his services for lack of beneficial results. However, the accused already had been paid a flat fee to secure the driveway access when he exacted a second nonrefundable fee for a court hearing on a temporary restraining order related to that matter. Therefore, the second fee was a clearly excessive fee, because the accused already had been paid for the work and had not, in any event, expended any time in excess of the time stated in the contract.