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Plain Talk About Legal Fees/Fee Agreements

There is only one specific ethical rule in Massachusetts that applies to the extent of fees that can be charged by your attorney:A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee.

  • Rule 1.5, Supreme Judicial Court Rule 3:07, Massachusetts Rules of Professional Conduct

What does this mean? When is a fee “clearly excessive”? Rule 1.5 goes on to set forth a variety of factors that can be used to evaluate whether a fee is clearly excessive, but to the average lay person those factors just add more complexity to an already confusing situation. So how do you avoid an “excessive fee” situation?

First, insist that your lawyer speak frankly with you about the potential scenarios in your case, and what the expected costs and fees might be. In transactional work (real estate closings, estate planning, setting up a corporation, etc.), it should be quite easy to set a fee, while in other matters (divorce, litigation, etc.) how much it will cost depends in large part on things that are out of your and your lawyer’s control, such as how hard the opposing side is going to fight. While legal costs and expenses of litigation are hard to pinpoint in advance, they can always be “ball-parked”.

Second, a reasonable range of the client’s possible litigation outcomes must be discussed, and then regularly reviewed in light of how the case is progressing. Ask your lawyer: what are the chances my case can resolve quickly? What are the chances it will go all the way to trial? Can I save money by getting the other side to agree to an alternative dispute resolution procedure, such as mediation or arbitration? Your case is about obtaining justice, but on the economic side you avoid problems by thinking of your case as a business: how much should I invest, and what return can I expect on my investment?

Whenever you hire a lawyer, MAKE ABSOLUTELY SURE YOU GET IT IN WRITING-NO EXCEPTIONS. Make sure that you get a clear and concise written statement (let’s call it a Fee Agreement, but it could also be called an engagement letter-the name doesn’t matter) of exactly what the scope of the lawyer’s efforts will be, and on exactly whose behalf he will work (you, your spouse, your child, beneficiary/trustee of a trust, etc.), and exactly what is expected of you in terms of payment. The Fee Agreement should set forth exactly what the billing rates will be, who is to be responsible for out of pocket costs, and that all chargeable out of pocket costs are defined. You don’t want to find out at billing time that you are expected to pay for the lawyer’s meals during breaks in the trial.

Most lawyers will provide you with proposed Fee Agreements that have many additional terms. If you dislike any of those terms, or do not fully understand them-seek help. Ask the lawyer to explain, and ask if he would decline to represent you if you insist on removing the term you dislike. My office helps people manage their attorney-client relationships, and for a very small fee we will review proposed Fee Agreements and help you understand them, and how to negotiate better terms.

It is appropriate, but not necessary, for the attorney to ask you for a retainer. A typical retainer is an advance payment that is held by the attorney in trust to secure future payment. If you pay a retainer, make sure future billings accurately account for the retainer payment. You are entitled to a refund of any unused portion of the retainer.

Contingent Fee Agreements are on a slightly different standing. A contingent fee is one where the attorney is paid a fee ONLY if he obtains a settlement or a paid judgment for you, in which case he receives a percentage of that amount. In Massachusetts, a Contingent Fee Agreement must be in writing, and signed by you and the attorney. In addition, the attorney must provide you with a signed copy of the Contingent Fee Agreement, and must keep for seven years a copy of it along with proof that he provided you with a copy.

No individual or business ever wants to be in an “excessive fee” situation with an attorney, and in truth no ethical attorney wants to be in that situation either. Like so many things in life, knowledge and communication are the keys to avoiding such problems. For lawyers, remembering that this is more a profession than a business is also a key. The large majority of Massachusetts lawyers are hard-working, honest, and charge fairly for their work, but sometimes lawyer malpractice or excessive fees arise.

There is much more to be said on this subject, and I am available to help people and businesses avoid excessive fee situations, and deal with excessive fees or lawyer malpractice when necessary.