Opinion ID: 1775311
Heading Depth: 1
Heading Rank: 1

Heading: fee arrangements

Text: Appellant proposed initially that the client firm would pay to the service a fee to be calculated on an hourly, daily, weekly or monthly basis, depending upon the period of engagement of the temporary by the firm. The temporary would be compensated by the service on the basis of the contractual agreement entered into with the service. The service's profit would be taken from the difference between the fee charged to the client firm and the compensation paid to the temporary attorney. As stated above, the KBA viewed this arrangement as an impermissible sharing of fees. Reaching a contrary result, the American Bar Association Ethics Committee concluded that such a payment scheme does not violate either the Code or the Model Rules because the total amount paid to the service is not a legal fee as the term is commonly understood. A legal fee is paid by a client to a lawyer. Here the law firm bills the client and is paid a legal fee for services to the client. The fee paid by the client to the firm ordinarily would include the total paid the lawyer and the agency, and also may include charges for overhead and profit. There is no direct payment of a `legal fee' by the client to the temporary lawyer or by the client to the placement agency out of which either pays the other. ABA Op. 88-356 at 12. While this analysis of what constitutes a legal fee may be technically correct, we believe the arrangement proposed to the KBA has the potential to jeopardize the professional independence of the temporary attorney rendering legal services to the ultimate client. Model Rule 5.4(c) provides: A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such services. This Court is of the opinion that an attorney's primary loyalty will, as a practical matter, rest with the person or entity who pays him. Appraising a payment scheme similar to the arrangement we consider, the New York City Bar observed: The temporary placement agency may well seek to extend the time a lawyer spends on a particular matter or, alternatively, to have the lawyer finish one project quickly so that the lawyer is available to undertake a more lucrative project. The agency's position on such matters would be influenced chiefly by profits, not by the client's interests. NYC Bar Op. 1988-3. For the reasons stated, we cannot approve the fee arrangement appellant proposed. However, unlike the KBA, we find an alternative mitigates our concerns substantially. The ABA Ethics Committee approved an arrangement whereby a law firm pays to a temporary lawyer compensation in a fixed dollar amount or at an hourly rate and pays a placement agency a fee based upon a percentage of the lawyer's compensation, does not involve the sharing of legal fees by a lawyer with a nonlawyer in violation of Rule 5.4. . . . There is a distinction between the character of the compensation paid to the lawyer and the compensation paid to the placement agency. The temporary lawyer is paid by the law firm for the services the lawyer performs under supervision of the firm for a client of the firm. The placement agency is compensated for locating, recruiting, screening and providing the temporary lawyer for the law firm just as agencies are compensated for placing with law firms nonlawyer personnel (whether temporary or permanent). ABA Op. 88-356 at 12. We perceive no adverse impact upon the exercise of the temporary lawyer's independent professional judgment in the lawyer's work for the law firm which results from payment of a placement agency fee as a percentage of or in proportion to the lawyer's compensation. Id. Therefore, we would approve a fee arrangement in which the client firm pays to the temporary attorney service a fixed placement fee or a fee based upon a percentage of the temporary lawyer's compensation or duration of employment, as long as the client firm compensates the temporary lawyer directly for legal services rendered. We further agree with the ABA that the agreement between a temporary lawyer and a placement agency should make clear in explicit terms that the agency will not exercise any control or influence over the exercise of professional judgment by the lawyer, including limiting or extending the amount of time the lawyer spends on work for the clients of the employing firm. Moreover, the law firm must make certain that the compensation received by the temporary lawyer is adequate to satisfy the firm that it may expect the work to be performed competently for the firm's clients. These matters fall within the responsibilities of the law firm. ABA Op. 88-356 at 13.