Chapter 7 - Fees and Client Funds

Many firms are utilizing an array of alternative methods of structuring fee arrangements, such as ...

- a percentage of the value of a transaction - a premium for achieving results that are especially beneficial - a fixed fee that reflects the value of the service without regard to the time involved - capping fees at a predetermined amount - discounted hourly rates for major clients - blended hourly rates - contingency fees in defense matters - hybrids of different billing methods

Contingency fee agreements must be ...

- in writing - signed by the client - ads must disclose that clients are liable for costs - subject to special judicial scrutiny for reasonableness

Written fee agreements or engagement letters should cover:

- the scope of the firm's services - the responsibilities of the client and the firm - details regarding the method of determining the fee - if hourly billing is used, the rates or ranges of rates of all potential billers, including paralegals, should be specified - the costs the client is obligated to pay and when they are paid - termination rights and responsibilities of both parties - method and time of fee payment - procedure for and frequency of billings, if applicable

After Missouri v. Jenkins, several states amended statutes and/or court rules to clarify that attorney's fee awards include paralegal fees at market rates. They are:

Alaska Arizonia California Florida New Jersey Illinois Indiana New York Oklahoma Ohio

Name examples of payments to paralegals that violate the fee splitting rules.

Any payments, bonuses, profit sharing, retirement, etc that involves an individual client. All additional monies paid to paralegals must be from overall profitability.

What is a client trust account?

Bank account set up by a lawyer in which funds are kept that belong to one or more clients.

What do the ethics rules require regarding client trust accounts?

Do not commingle funds

What are the duties of lawyers and paralegals regarding client funds?

Do not commingle funds.

The ABA formal ethics opinion that addresses billing abuses have highlighted which abuses?

Double billing Surcharges

T or F The contingency fee is well accepted in the U.S., England, and Canada.

False

Contingency fee

Fee depends on the successful outcome of a case and is based on a percentage of the recovery.

Fixed fee

Fee for legal services based on a set amount.

Advance fee

Fee paid for legal services in advance, which is refundable if not earned.

What are the exceptions to the prohibition against fee splitting with non-lawyers?

Fees may be paid to the estate of a deceased lawyer A lawyer may pay a fee to an approved lawyer referral service Pre-paid legal services whereby the fee is divided between the lawyer and the sponsor

The most common methods of billing ...

Fixed fees - Contingency fees - Hourly fees

What is IOLTA?

Interest on Lawyers Trust Accounts

ABA Model Guidelines, Guideline 8 provides that ...

Maintaining the Integrity of the Profession - Misconduct

What is the landmark case that involved compensation for paralegal time?

Missouri v. Jenkins

May paralegals become partners under the District of Columbia rules permitting non-lawyer partners?

No

Retainer

Nonrefundable fee paid at the commencement of agreed-on work to ensure the availability of the lawyer to handle specified matters.

Block billing

Stating several tasks with one hourly amount

Conversion of funds

The tortious deprivation of another's property without justification or authorization.

T or F Hourly fees are the most common method of billing in matters other than civil litigation on the plaintiff side.

True

T or F Most jurisdictions permit lawyers to accept payment of legal fees by credit card.

True

T or F "Fixed fee" is the same as "Flat fee".

True

The difference between commingling and conversion of funds is ...

commingling simply refers to mixing funds without intent to harm conversion is misappropriation of the client's funds for the attorney's use

In general, documentation supplied to a court when seeking fees should include:

credentials and experience of the paralegal detailed descriptions of the work performed info on firm and market practices and rates

The ethics rules covering fees prohibit fees that are:

illegal excessive unconscionable unreasonable

A fee is illegal if:

it exceeds the statutory limits the services were sought for an illegal purpose

What factors determine if a fee is unethically high?

1. The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly. 2. The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer. 3. The fee customarily charged in the locality for similar legal services. 4. The amount involved and the results obtained. 5. The time limitations imposed by the client or by the circumstances. 6. The nature and length of the professional relationship with the client. 7. The experience, reputation, and ability of the lawyer performing the service. 8. Whether the fee is fixed or contingent.

NFPA Model Code, Canon 1.2 Ethical Considerations ...

1. advise paralegals t prepare thorough, accurate, honest, and complete timekeeping and billing records 2. do not knowingly engage in fraudulent billing practices, such as inflating hours, misrepresenting the nature of the work, or submitting false expenses

ABA Model Rule 1.5(e) permits fee splitting if:

1. the division is in proportion to services or the client agrees in writing and the lawyers assume joint responsibility 2. the client agrees to the arrangement including the share that each receives and the agreement is confirmed in writing 3. the fee is reasonable

Nationwide, in 2012, hourly lawyer rates ranged from $________ an hour to $__________ an hour

130 1,500

When was the practice of collecting legal fees by credit card first approved by the ABA?

1974 - in its Formal Opinion 338

Federal law places a maximum contingency fee at

20 to 25 %

Paralegal rates range from about $_________ to $__________ an hour.

50 200

As of 2012, median rates for partners were about $__________ an hour and about $__________ for associates.

500 320

The ABA estimates that _____% of lawyers charge by the hour.

90

What is a client security fund?

A fund set aside to reimburse clients whose funds have been converted or misappropriated by lawyers.