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Generally lawyers charge by their time, or by the results, or a set amount, or sometimes by a combination. Lawyers should discuss their fee arrangements right away.A lawyer's fee must be reasonable in the particular situation. In family law cases fees are generally charged by the hour. In most Personal Injury cases, including automobile accidents, a lawyer's fee may be charged contingent on the outcome, that is, you are obligated to pay a fee if you win, unless the agreement says you owe expenses for such things as doctors' or police reports, payable regardless of the outcome.In Social Security and Workers' Compensation cases the fees must be approved in advance by a judge or commissioner. In other cases where the lawyer's time can be estimated with some precision the fees may be fixed, such as some traffic or criminal cases. In those cases the lawyers may charge a deposit or retained to be held for future services rendered or expenses incurred.What follows is a detailed discussion of the rules governing representation and fee agreements presented by Mr. Beard at a seminar for lawyers.
Hourly Billing is used in matters where the total number of hours to be expended on a case is not readily ascertainable. Common types of cases that use hourly billing are domestic matters, on-going litigation and insurance defense work.
A Discounted Hourly Rate is a reduced rate given to major clients, or those who have a high volume of cases. This allows a lawyer to become more competitive and to acquire new and larger clients. However, until new clients are established, an attorney will be working harder for less money. This type of billing is appropriate wherever hourly billing is used.
A Blended Hourly Rate is a flat hourly rate charged to a client regardless of who works on the case. This rate is an average of the partner, associate, and support staff rates. This is most profitable for those lawyers that have highly skilled employees at the lower end of the pay scale. However, if too much work is assigned to the lower skilled employees without attorney supervision, the quality of work could suffer. Also, if the attorney must do a majority of the work, profitability could be decreased.
Fixed Fees and Flat Rates are predetermined amounts a lawyer sets to handle a case. These rates are agreed upon by the client to eliminate billing disputes and any uncertainties they may have. By billing the client a set amount, a lawyer is allowed more freedom to manage the case. However, if lawyer under-estimates the amount of work a case will require, it could decrease profitability. These methods of billing are often used in transactional work, such as real estate, securities and taxation, as well as litigation work, such as criminal defense and insurance defense.
Capped Fee is a way of billing the client hourly, which also sets an amount not to be exceeded. This type of billing eliminates uncertainties the client has as to the overall cost he or she will be charged. However, an accurate estimate as to the amount of time a case will take is required to make this billing method profitable. Any case in which a time estimate can be attached may use this method.
Project Billing is basically the same as flat rate or fixed fee billing although it is used for special assignments, such as handling part of on-going litigation. These assignments could include: drafting client opinion letters, negotiating a plea in a criminal case, or reviewing or drafting a contract.
Incentive Billing is the same as fixed rate or capped billing with an added bonus if the attorney obtains specific results. This type of billing rewards the results rather than the time spent to obtain such results. However, the lawyer bears a portion of the risk because the outcome is indefinite. This billing method is used in litigation insurance defense, negotiations and certain transactions. One example is an action to set aside a fraudulent transaction and recover property for a client.
A Contingency rate is compensation dependent upon the outcome of the matter. The advantage to the client is that no fee is due until the successful outcome of the case. It is used in accident and malpractice claims, and social security cases. A Modified Contingency rate is a reduced hourly rate with an additional compensation dependent upon the outcome of the matter. This works the same as incentive billing.
Defense Contingency fee billing is totally or partially dependent upon the outcome of the case. In this type of billing, compensation depends upon results, rather than time spent. Therefore, an attorney assumes the risk of providing services without the guarantee that he or she will be paid.
A Hybrid Arrangement is a combination of two or more methods of billing. This allows an attorney to create a billing structure that effectively meets the needs of both the client and the attorney.
In a new attorney-client relationship, an understanding as to the fee should be promptly established. See Maryland Rules of Professional Conduct, Rule 1.5. See also notes at pp. 486-487 and 499 of the Maryland Rules, Annotated Code of Md., Vol. 2.
The factors that involve the computation of the hourly fee in a particular case should be explained to the client at the first meeting. As a general principle, all transactions between a client and a lawyer must be fair and reasonable to the client. See Maryland Rules of Professional Conduct 1.8. 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. Ibid.
Rule 1.5 of the Maryland Rules of Professional Conduct states that a lawyer's fee shall be reasonable. The factors to be considered in determining the reasonableness of the fee include the following:
Separate hourly rates should be set forth for each attorney, associate and paralegal. If lead counsel will charge for reviewing work of associates and paralegals, that contemplated method of billing should be enumerated. If the agreement provides for periodic increases in rates, the client must be given time to reject the increase, otherwise the increase may constitute an "excessive fee."
It is sufficient to state that the basic fee is an hourly charge, or a fixed amount, or an estimated amount, and to identify the factors that may be taken into account in finally fixing the fee. Ibid. When developments occur during the representation of a client that render an earlier estimate substantially inaccurate, a revised estimate should be provided to the client. Ibid. Furnishing the client with a simple memorandum, or a copy of the lawyer's customary fee schedule, is sufficient if the basis or rate of the fee is set forth. Ibid.
If fees are not paid in a timely manner, counsel may terminate services as opposed to merely "suspend further services." Counsel may need permission of a court to withdraw which should be reflected in the retainer agreement. If the agreement provides for periodic increases in rates, the client must be given time to reject the increase, otherwise the increase may constitute an "excessive fee." If you will be providing computerized research service, that charge should be enumerated. You should also give the client the option of providing copies of some documents at client's expense.
A written Legal Representation Agreement which provides for the agreed upon hourly rate will reduce potential misunderstandings during the representation. A lawyer should not exploit a fee arrangement based on hourly charges by using wasteful procedures. There is nothing ethically improper about including a provision in the agreement charging interest on unpaid overdue fees. Committee on Ethics, Ethics Docket No. 92-12.
It is inappropriate for an attorney to ask a court in some circumstances to set the attorney's fee as the attorney is in the best position to assess the skill, time, labor and effort the case requires and set the value of his or her own services. Llead v. Llead, 66 Md. App. 655, 505 A.2d 868 (1986).
When preparing a bill for a client who pays a discounted hourly rate, the attorney can take the opportunity to remind the client (via the bill) that (s)he receives a special discounted rate. This can be accomplished by a variety of techniques such as printing the phrase "DISCOUNTED RATE $[HR] PER HOUR" on the bill, or reflecting the regular hourly rate on the bill and then crossing out the total due and marking the discounted hourly total due next to it.
Rule 1.6, which governs the matter of excessive fees, does not apply to a case involving one lawyer's attempt to enforce an agreement he or she made with another. See Voyelhut v. Kandel, 66 Md. App. 170, 502 A.2d 1120, aff'd, 308 Md. 183, 517 A.2d 1092 (1986).
Attorneys should review the provisions of Subtitle #3 of the "Business Occupations and Professions Article" of the Annotated Code of Maryland, which limits the manner in which an attorney may place a client's money in an interest bearing account without crediting the interest to the client.
If the agreement provides for periodic increases in rates, the client must be given time to reject the increase, otherwise the increase may constitute an "excessive fee." A client must be able to understand the legal services for which additional payment is required. Ethics Docket, 93-24.
Counsel should be aware that a client might not object to billing errors for legitimate reasons (e.g., illness, absence from the country, etc.). Consequently the legality of a clause such as the one below could be open to question and/or legal challenge:
Rule 1.6(a) of the Maryland Rules of Professional Conduct provides that a lawyer shall not reveal information relating to representation of a client unless the client consents, with certain exceptions. Maryland Rules of Professional Conduct, Rule 1.6(a).
In cases involving representation of minor children, it is vital that the agreement identify whether the attorney also represents the child(ren)'s parent(s). This element of the agreement is important in determining the bounds of the attorney-client relationship and the presentation of each client's confidentiality, as well as determining the attorney's choice in protecting the client's interest, such as preventing fraud. Docket 92-36.
The principle of confidentiality is given effect in two related bodies of law, the attorney-client privilege (which includes the work product doctrine) in the law of evidence and the rule of confidentiality established in professional ethics. See editorial comments and the Maryland Rules of Professional Conduct, Rule 1.6. Whether a fee arrangement is protected from disclosure in judicial proceedings is governed by the attorney-client privilege, and not by the Rules of Professional Conduct. The attorney-client privilege is generally not violated by disclosing the payment of attorney's fees and expenses. In Re Criminal Investigation No.1/242Q, 326 Md. 1, 602 A.2d. 1220 (1992).
A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer's duty of loyalty to the client. Maryland Rules of Professional Conduct, Rule 1.8(f).
Be mindful of the difference between retainers and engagement fees when drafting fee agreements. If an advance fee is paid so the attorney is deprived from the right of rendering services for another party, it is categorized as an engagement fee. If the advance represents an advance payment of fees which must be earned by the attorney at a later date, it is a retainer.
This distinction becomes important when determining where the fee should be held. If the advance is an "engagement fee," it can be placed in the firm's general account. If it is an advance for work yet to be performed, it must remain in the firm's escrow account until the fee is actually earned. The purpose of the fee, as set forth in the written agreement, will determine where the fee should be held.
A lawyer may collect advance payment of a fee but should return any unearned portion to the client. Maryland Rules of Professional Conduct, Rule 1.16(d). The New York Court of Appeals has ruled that non-refundable retainers are unethical and violate the model rules. Under this arrangement, the lawyer obtains a retainer as an advance and security for payment of fees, and keeps the retainer even if the client chooses to terminate the services or the entire amount has not been earned. In re Cooperman, 187 A.D. 2d 56, 591 N.Y.S. 2d 855 (NY App 1993), aff'd, 83 N.Y. 2d 465, 611 N.Y.S.2d 465 (1994). A lawyer may require advance payment of a fee, but is obliged to return any unearned portion. See Editor's comments to Maryland Rules of Professional Conduct, Rule 1.16(d). Each agreement should provide language that explains "No retention until the retainer is paid." Sample language is:
This firm will not render any services, nor will the firm consider that we have been retained to perform any services until the sum of ________ dollars has been received. If the full sum has not been received by ________, we will refund any funds in our trust account and will consider that our services have been terminated.
An excellent discussion of retainers and engagement fees is contained in Hirshman, "Aspects of Attorney's Fees: Engagement Fee, Non-Refundable Retainer, Limitations on the Ability of Counsel to Set a Fee," Maryland Bar Journal, p.17 (April 1984).
An engagement fee is compensation paid to an attorney being retained by a client that includes a concomitant responsibility not to act or give advice professionally adverse to the person retaining the attorney. Ethics Docket, 93-24. An engagement fee is earned upon receipt and does not require that any additional legal services be rendered. Ethics Docket, 93-24.An engagement fee must comply with the provisions of Maryland Rules of Professional Conduct, Rule 1.5 which require that a fee be reasonable and which set forth the various factors which may be considered in determining the reasonableness of a fee. Ibid. An engagement fee is not required to be placed into escrow. Ibid. A retainer cannot serve as both an engagement fee and an advanced fee. Ibid. Any written agreement between an attorney and a client should clearly set forth whether the retainer is an engagement fee or is an advanced fee to be used to pay for future services. Ibid. An engagement fee may not be a substitute for the entire fee arrangement under which a client must pay for legal services. Ibid. A client must be able to understand the legal services for which additional payment is required. Ibid.
Fee arrangements that contemplate a retainer require that a payment be made in the form of a deposit and the costs of legal services be billed at an hourly rate against the deposit. Ibid. Under a fee arrangement involving a retainer, if the services are not rendered, any such funds are refundable to the client because the advanced fee retainer remains the property of the client until it is earned and payment is due. Ibid. Counsel may be required to terminate services as opposed to merely "suspend further services."
Because a fixed fee or flat rate is a predetermined amount set by the lawyer to handle a particular kind of case, the lawyer and the client know in advance the total amount that will be billed for the work. In these instances lawyers typically ask for an advance payment of fees, or retainer. Fee arrangements under which an attorney would retain a deposit to be billed against time at an hourly rate is required to be placed into an escrow account. Ibid. The United States Bankruptcy Court for the District of Maryland has disallowed non-refundable engagement fee retainers in Chapter 11 cases. See In re Printing Dimensions, Inc., Case No. 909-4-2489-S.D. (J. Derby, entered May 4, 1993).
A lawyer is prohibited from making an agreement prospectively limiting the lawyer's liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement. See Maryland Rules of Professional Conduct, Rule 1.8(h).
A lawyer is prohibited from settling a claim for malpractice with an unrepresented client, or former client, without first advising that person in writing that independent representation is appropriate in connection with the matter. Ibid. If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the bar, the lawyer should seriously consider submitting to it. See Editor's comments to Maryland Rules of Professional Conduct, Rule 1.5
Language requiring a client to enter into "binding arbitration" with respect to a fee dispute may create a business transaction between the client and the attorney which requires that the client be advised of his/her right to advice of counsel separate from the attorney involved in the execution of the retainer agreement.
Execution of a "Deed of Trust" Promissory Note or Confessed Judgment Note to protect attorney fees may require counsel to advise his/her client of their right to seek counsel with respect to entering into that portion of the agreement. Execution of such an agreement creates a business transaction between the attorney and the client that entitles the client to separate legal advice.
The Maryland Rules of Professional Conduct directs a lawyer to be zealous in his/her efforts to avoid controversies over fees with clients and to resolve amicably any differences on the subject. The Committee on Resolution of Fee Disputes of the Maryland State Bar Association does not exercise jurisdiction over any fee dispute which is within the jurisdiction of a local bar association that has a fee dispute procedure in place that has met the criteria and approval of M.S.B.A.
A clause is not permissible which simply provides that all disputes arising out of the attorney-client relationship must be submitted to mandatory arbitration. See Ethics Docket, 90-12 and Maryland Rules of Professional Conduct, Rule 1.8. The client must be represented by independent counsel in connection with such a written agreement, otherwise the language limits the lawyer's malpractice liability which is prohibited by Maryland Rules of Professional Conduct, Rule 1.8.
A retainer agreement requiring arbitration of fee disputes only is permissible in limited circumstances. The agreement should advise the client that the agreement to arbitrate on a mandatory basis may affect the client's legal rights, including a relinquishment of a right to a jury trial. The client should also be advised of a right to confer with other counsel with respect to any adverse consequences which might result from agreeing to mandatory arbitration, including the possible effects of res judicata or collateral estoppel. See Kristen Ltd. v. Fairfax Savings, 100 Md. App. 25, 639 A.2d 206 (1994) and Ethics Docket 94-40.
The Maryland Rules of Professional Conduct direct a lawyer to be zealous in his or her efforts to avoid controversies over fees with clients and to resolve amicably any differences on the subject. Since a retaining lien on a client's papers may generate adverse effects on a client's ongoing case, a lawyer should consider also the provisions of arbitration under the auspices of the Maryland State Bar Association. It is advisable for an attorney to obtain from the state bar its pamphlet in this regard. Maryland State Bar Association, "Procedures and Policies Manual," 6/90, containing the laws and provisions.
Attorneys should also review the provisions contained in Subtitle B6, Chapter 1100 of the Maryland Rules entitled "Attorney Trust Accounts." CF Docket 90-2. A lawyer should hold property of others with the care required of a professional fiduciary. See Editor's comments to Maryland Rules of Professional Conduct, Rule 1.5. All property which is the property of clients or third persons should be kept separate from the lawyer's business and property, and if monies, in one or more trust accounts. See Maryland Rules of Professional Conduct, Rule 1.15. A lawyer is prohibited in general from acquiring a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client. However, a lawyer may acquire a lien granted by law to secure the lawyer's fee or expenses. Also, a lawyer may contract with a client for a reasonable contingent fee in certain civil cases. See Maryland Rules of Professional Conduct, Rule 1.2 and 1.8.
The traditional general rule that prohibits lawyers from acquiring a proprietary interest in litigation has its basis in common law champerty and maintenance. It is subject to the specific exceptions developed in decisional law and continued in the Maryland Rules of Professional Conduct, such as the exception for reasonable contingent fees (Rule 1.5) and certain advances of the costs of litigation (Rule 1.8(e)).
An attorney's advancement of funds to a client for medical treatment and transportation to a medical office for treatment has been found to violate the Maryland Rules of Professional Conduct, Former DR 5-103(B). See also Attorney Grievance Commission v. Andel, 137 Md. 274, 563 A.2d 387 (1989). An attorney is prohibited from advancing certain living expenses of the client while the case is pending. See Attorney Grievance Commission v. Eisenstein, 333 Md. 464, 635 A.2d 1327 (1994).
An attorney may deduct from the proceeds of a tort recovery a sum that represents interest on the litigation expenses advanced by the attorney provided that this arrangement is spelled out in the fee agreement, the interest deducted is reasonable, and the basic fee agreement itself is reasonable. However, the attorney should be satisfied that (s)he is complying with all the provisions of typical lending laws and charging an allowable rate of interest. At minimum, the fee agreement should clearly spell out what expenses will be advanced (those requiring and those not requiring prior express client approval), when the interest charges will begin to run and the client's right to reimburse the attorney at any time for expenses advanced with interest thereon. See in part, Ethics Docket No. 94-24.
A lawyer shall not enter into an agreement for, charge, or collect an illegal, or clearly excessive fee. For example, absent extenuating circumstances, it is improper for an attorney to charge a contingency fee for simply transferring funds received by the client to a medical care provider. Ethics Docket 86-31. In Maryland, there is no per se rule regarding the reasonableness of attorneys' fees; each case is decided individually, on its facts. Fraidin v. Weitzman, 93 Md. App. 168, 611 A.2d 1046 (1992); see Md. Rules of Professional Conduct, R.1.5 (Fees), with comments and annotations, particularly "Code Comparison.." Since a lawyer is a fiduciary every agreement is subject to review by a court on grounds that it may be unreasonable.
An attorney's contract with a client providing for 50 percent contingency fee if the case was tried, and a lesser fee if the case was not, did not provide for an excessive fee and was a valid contract. A 50 percent fee included appellate work, and the case was not routine and its outcome was not a certainty. Ibid. The Maryland Court of Appeals has found that modification of a contingent fee agreement from 40 percent to 60 percent to 75 percent made the fee ultimately charged clearly excessive. Attorney Grievance Commission v. Korotki, 318 Md. 646, 569 A.2d 1224 (1990).
Under Section 1.5(c) of the Rules of Professional Conduct, contingent fee agreements must be in writing. An agreement must describe the method by which the fee will be determined, including the percentage to be charged by the attorney from the ultimate settlement, the fee involved in trial in appeal, the costs to be deducted, and whether the expenses are deducted before or after the contingent fee is calculated. See also, Frederick, Alvin I., Hirshman, Melvin, and Weston, William I., "10 Rules of Ethics That the Ethical lawyer Must Know," (MICPEL 1995).
Where an attorney has been retained on a contingent fee agreement and has been discharged without cause prior to the occurrence of the contingency, the attorney's claim for the reasonable value of the legal services rendered prior to discharge accrues immediately upon discharge. Skeens v. Miller, 331 Md. 332, 628 A.2d 185 (1993).
The ordinary rule of construction of contingent fee contracts is that, in the absence of an express provision that addresses possible appeal, services rendered by an attorney in upholding a judgment on appeal are within the undertaking under the contingent fee contract. The attorney is not entitled to any additional compensation for such appellate representation, even if the reasonable value of all of the services rendered through the successful, final outcome on appeal exceeds the fee calculated under the contingent fee agreement. Ibid.
An attorney may deduct from the proceeds of a tort recovery a sum that represents interest on the litigation expenses advanced by the attorney provided that this arrangement is spelled out in the fee agreement, the interest deducted is reasonable, and the basic fee agreement itself is reasonable. However, the attorney should be satisfied that (s)he is complying with all the provisions of typical lending laws and charging an allowable rate of interest. At minimum, the fee agreement should clearly spell out what expenses will be advanced (those requiring and those not requiring prior express client approval), when the interest charges will begin to run and the client's right to reimburse the attorney at any time for expenses advanced with interest thereon. See in part, Ethics Docket No. 94-24.
The contingencies that would increase the fee to the lawyer must be reasonable. The conditions have to involve a legitimate risk and not present a regime of automatic payments. The possibilities must be realistic and the client should clearly understand what is at stake. For example, the amount of damages sought by a plaintiff in the original complaint may not always present a legitimate risk of exposure to a client on its face.
In almost every case there will be a self-defined upper limit on a permissible fee charge - the amount to which the lawyer and client have agreed. Any charge by a lawyer in excess of that figure is plainly impermissible and thus excessive or unreasonable under the lawyer codes unless the parties have made a proper agreement to modify the amount. See C. Wolfram, "Modern Legal Ethics" � 9.3 (1986).
Attorneys' fees as related to structured settlements involve complex legal, ethical, and tax considerations. The attorney should consult additional resources to ensure a complete understanding of these issues. Of particular concern is whether the attorney's fee should be calculated on the basis of the present value of the periodic payments or on the basis of the cost of an annuity used to fund the structured settlement.
Any mental or physical condition of a client that renders him or her incapable of making a considered judgment on his own behalf creates additional responsibilities for the attorney. In matters of decisions allowed by law to be made, the lawyer should consider all circumstances then prevailing and act with care to safeguard and advance the interests of his or her client. See Maryland Rules of Professional Conduct, Rule 1.14 and Editor's Comments.
Under Maryland Rules of Professional Conduct, Rule 7.2(e), an advertisement or communication indicating that no fee will be charged in the absence of a recovery must also disclose whether the client will be liable for any expenses.
Rule 1.5(e) of the Maryland Rules of Professional Conduct governs fee sharing agreements between attorneys in Maryland. That rule reads as follows:
Rule 1.5. FEES.
(e) A division of fees between lawyers who are not in the same firm may be made only if: (1) the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation; (2) the client is advised of and does not object to the participation of all the lawyers involved; and (3) the total fee is reasonable.
Under Maryland Rules of Professional Conduct, Rule 1.5(e), a lawyer shall not divide a fee for legal services with another attorney who is not a partner in or an associate of his or her law firm or law office unless the division is made in proportion to the services performed and the responsibility assumed by each. In dividing fees between an attorney making a referral of a client and the attorney receiving the referral, as a rule of thumb, in the absence of a specific agreement determining the division, the Maryland and American Bar Associations have generally recognized as one-third the fee to be appropriate fee for the services of the forwarding attorney. See however, Maryland Rules of Professional Conduct, Rule 89-31.
Generally a lawyer or law firm is prohibited from sharing legal fees with a non-lawyer. Maryland Rules of Professional Conduct, Rule 5.4. These limitations are to protect the lawyer's professional independence of judgment.
I. MULTIPLE PARTIES AND SOURCES OF PAYMENT
A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents, and the arrangement does not compromise the lawyer's duty of loyalty to the client. See Maryland Rules of Professional Conduct, Rule 1.8 (f).
Maryland Rules of Professional Conduct, Rule 1.8(g) recognizes that an attorney who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients unless each client consents after consultation, including disclosure of the existence and nature of the claims and of the participation of each person in the settlement. Under Maryland Rules of Professional Conduct, Rule 1.7, a lawyer may not represent opposing parties in litigation. The rule also explains the circumstance governing simultaneous representation of parties whose interests in litigation may conflict, such as co-plaintiffs or co-defendants. Ordinarily a lawyer may not act as advocate against a client the lawyer represents in some other matter, even if the matter is wholly unrelated. See Editor's comments to Maryland Rules of Professional Conduct, Rule 1.7.
In estate administration, the identity of the client may be unclear under the law of a particular jurisdiction. Under one view, the client is the fiduciary and under another view the client is the estate or trust, including its beneficiaries. The lawyer should make clear the relationship to the parties involved. Ibid.
An attorney is prohibited from attempting to represent multiple clients who have differing interests at the same time or that have not given consent. Ethics Docket, 86-58. Common representation is permissible where the clients are generally aligned in interest, even though there is some difference of interest among them. See Ethics Docket, 94-17.
It is not a violation of the Maryland Rules of Professional Conduct for an attorney to represent both an insured party as well as the subrogated insurer who provided medical services for that injured party. See Ethics Docket 94-17. It is inappropriate for an attorney for a claimant who has charged a full fee from the gross amount of a settlement against a third party, apart from his or her employment in a worker's compensation case, to be paid a second time for recovery involving additional compensation to the client for reduction of the lien of the worker's compensation carrier. See Docket 91-23.
An attorney may not ask a client to sign a power of attorney authorizing the attorney to endorse, on behalf of the client, settlement checks payable jointly to the client and the attorney except in limited circumstances. See Ethics Docket, 95-31. The practice is generally disapproved in the State of New Jersey. See Advising Committee on Professional Ethics Opinions, 635, 125 N.J. 181, 592 A.2d 1210 (1991), and In re Conroy 56 N.J. 279, 266 A.2d 279 (1970).
Whether an attorney can make special provisions with a client, such as empowering the attorney to endorse settlement checks, is both an ethical and legal question. For example, a power of attorney should not be made without compliance with Maryland Rules of Professional Conduct, Rule 1.8: The transaction must be fair and equitable to the client and the client is advised to seek advice of independent counsel. He or she must also be given a reasonable opportunity to do so. Furthermore, the attorney has to determine whether counsel has the appropriate legal authority to endorse the checks and whether there is a dispute involving any of the parties. See Ethics Docket 95-31.
Attorneys should review the provisions of Subtitle 3, of the Annotated Code of Maryland, Business Occupations and Professions Article, which limits the manner in which an attorney may place a client's money in an interest bearing account without crediting the interest to the client.
Attorneys should also review the provisions contained in Maryland Rules of Procedure, Rule BU, Chapter 100 "Attorney Trust Accounts." Cf Ethics Docket, 90-2. There is a question whether the retainer agreement can bind the client to accept this provision without the client being advised of the right to separate independent counsel to advise him/her in the matter.
In workers compensation cases, an attorney cannot charge or collect a fee unless approved by the Workers Compensation Commission and, when approved, it becomes a lien on compensation awarded the claimant, Maryland Ann. Code, Labor and Employment � 9-731. Under this section, a lien does not represent a statutory right in the attorney to remuneration for legal services, but merely places a charge upon the compensation award as security for the legal fee owed by the claimant and approved by the Commission. Feissner v. Prince George's County, 282 Md. 413, 384 A.2d 742 (1978).
A schedule of fees is set out in COMAR 14.09.01.25. An attorney seeking a fee in excess of the schedule must submit a detailed petition in accordance with COMAR 14.09.01.24. The procedure for filing a petition for attorney's fees can be eliminated if the claimant signs a "Consent to Pay Attorney Fees and Doctor Fees" form and it is submitted at the hearing. If this is done, attorney's fees are included in the award. See Appendix A for a copy of the "Claimant's Consent to Pay Attorney Fee and Doctor's Fee Form.
If the consent form is not used, then when the employer and insurer receive the compensation award they must withhold the amount of fee requested in the claimant's petition pending approval by the Commission. Typically the insurer withholds the estimated amount of the fee from the amount sent to the claimant. The fee is usually awarded to be paid from the final weeks of compensation so that payment to the claimant is not interrupted.
In cases where benefits are paid over the lifetime of the claimant (permanent total or total dependency death cases), fees are paid by reducing the weekly payment to the claimant until the reduced amount equals the fee, and then restoring it to the full amount.
In some instances the insurer will send the entire amount due the claimant to the attorney with a notice to protect the fee. The attorney should promptly disburse the net amount to the claimant and place the requested fee in the Attorney Escrow Account until the Commission approves it. T. Cornblatt, H. Meredith, B. Sevel, Workers' Compensation Manual, (MICPEL 2000).
The agreement should provide that in the event of a necessary appeal to the circuit court or further appeals to the Court of Special Appeals and Court of Appeals, those fees will also be subject to approval by the Worker's Compensation Commission.
There is a question whether counsel can preclude a client from discussing the matter that is the subject of a retainer with another lawyer. This may be unenforceable. The parties may want to set forth in writing the people authorized by the client and the firm to discuss the matter. In addition, other parties involved in the negotiations may need to be enumerated. Bar Counsel believes it is prudent to enumerate the specific crimes, statutory citations, and penalties in criminal matters. If the client is going to enter a guilty plea, counsel should spell out in detail all the rights the client will give up and/or waive in entering a guilty plea in writing.
An attorney is prohibited from advancing certain living expenses of the client while the case is pending. See Attorney Grievance Commission v. Eisenstein, 333 Md. 464, 635 A.2d 1327 (1994).
Some counsel use the term "results obtained" which seems to imply a contingency arrangement which is not permissible, in a criminal matter, under the Maryland Rules of Professional Conduct.
If interest will be charged, the rate of interest should be clearly set forth and the date when interest will commence should be clearly stated. Some billing programs (e.g., "Timeslips") automatically add interest to the monthly statement. Any interest charges should be clearly stated in the agreement and provisions should comply with the federal and state "truth in lending" statutes. Tying fees to a result in family law cases may run afoul of ethics opinions. It would be more proper to spell out an hourly rate. This phrasing almost makes a divorce a "contingency event" which may not be ethical or legal. When terminating an attorney-client relationship and turning the file over to the client, counsel is well advised to make a complete inventory of correspondence, pleadings and other matters turned over to the client. Have the client sign a receipt acknowledging receipt and date and have the receipt witnessed. Failure to do this may place counsel at a severe disadvantage if a dispute later arises with the client.
At what point is an attorney who is discharged or withdraws from representation entitled to compensation? The Maryland Court of Appeals has adopted the "New York Rule," When an attorney is discharged without cause or withdraws with justification, the attorney is entitled to be compensated. The attorney's claim in "quantum meruit" accrues immediately upon discharge. If the attorney is discharged with cause or withdraws without justification, the attorney is not entitled to compensation. Skeens v. Miller, 331 Md. 332, 628 A.2d 185 (1993). In the future project billing may be used more and more to decrease the overall costs of litigation. Attorneys in some areas of the country have already begun to charge predetermined flat rates for each part of the lawsuit, i.e., drafting the complaint, conducting depositions, attending pre-trial conferences, etc. In making a fee agreement with a client whose cause of action (e.g., accident) arose in another state, the agreement may have to comply with the laws of the jurisdiction where the cause of action arose. For example, the amount of a fee may be reduced under another state's sliding scale regime. An attorney should be aware of the possibility that conflicts of law principles may apply in determining which state's laws are controlling.
When terminating the attorney-client relationship, be unequivocal. Leave no doubt that the relationship has been terminated. One could argue that to plead certain types of damages, e.g., treble damages, and, at the same time, caution the client that they are not likely to be forthcoming, probably creates a Rule 11 problem. This is a delicate matter. Nevertheless, in cases where these types of damages may correctly be pled, some communication of this sort seems warranted because less sophisticated clients all too frequently take as accomplished fact everything their lawyers put in court papers, making settlement a difficult task.
A practical way to making arrangements better understood in the beginning of a professional relationship and throughout the representation is to focus on making a good agreement in the first place. The most common cause of breakdown in the attorney/client relationship that stems from a fee dispute can be attributed not just to whether the attorney performed the services that were promised, but to whether the arrangements over fees were understood on the first visit.
Hopefully you will be able to adequately assess a client's needs and wishes, realistically gauge the amount of time and work a particular matter will require (or indicate why not), and tailor an agreement to a particular type of case or facts of a case.
Beard, Christopher L, and Goodwin, Richard C., Legal Representation and Fee Agreements for the Maryland Lawyer: Forms and Comments, (MICPEL: 1998).
Frederick, Alvin I., Hirshman, Melvin, and Weston, William I., "10 Rules of Ethics That the Ethical lawyer Must Know," (MICPEL 1995).
Hirshman, Melvin, "Aspects of Attorney's Fees: Engagement Fee, Non-Refundable Retainer, Limitations on the Ability of Counsel to Set a Fee," Maryland Bar Journal, p.17 (April 1984).
