ANALYSIS: Rule 1.5

NEW RULES OF PROFESSIONAL CONDUCT

Victor Hugo once commented, "Being good is easy, what is difficult is being just." In many ways, this is a problem that all professionals must face. As they become exceedingly better at their work, they can demand more for it, and consumers are increasingly willing to pay it. New Rule of Professional Conduct 1.5, the successor to current Rule 4-200, continues to remind us that that there are limitations in the amount and the ways in which lawyers may charge their clients, regardless of how good the work or the result.

First and foremost, the fee must be conscionable and legal. This seems like a simple concept. But there is not one or even a handful of factors or metrics that determines whether a lawyer may charge a client a certain sum. Indeed, California courts have long considered many factors in determining conscionability or reasonability of a fee. Embracing this, Rule 1.5 lists 13, or five more than the ABA Model Rule 1.5. Conscionability of the fee will consider (1) whether the lawyer engaged in fraud or overreaching during negotiations or setting the fee, (2) whether the lawyer failed to disclose material facts, (3) the proportion of the fee relative to the value of the services, (4) the relative sophistication of the lawyer and client, (5) the complexity of the representation, (6) whether working on the matter will preclude other engagements, if apparent to the client, (7) the amount at issue and the result obtained, (8) time limitations, (9) nature and length of the professional relationship, (10) the experience, reputation, and ability of the lawyer, (11) whether the fee is fixed or contingent, (12) the amount of work, and (13) whether the client gave informed consent. Rule 1.5 notes that this list is "without limitation," meaning that additional factors could also apply when conscionability is assessed. But Rule 1.5 does not adopt the Model Rule factor of what fee is customarily charged in the locality for similar legal services.

Second, although contingency fees may be appropriate in many types of representations, new Rule 1.5 provides that they are unconscionable in at least two cases. Contingent fees are never appropriate when representing a defendant in a criminal case. And they may not be used in many contexts of family matters. These include obtaining a dissolution or declaration of nullity of marriage, setting the amount of spousal or child support, or obtaining a property settlement in lieu of support. That said, comment [1] makes clear that a lawyer may still charge a contingency fee for assisting with the collection of support that was previously ordered.

Next, Rule 1.5 clarifies the instances under which a fee may be "earned on receipt" or "non-refundable," something that also triggers how the funds are to be handled. Attorneys may only designate fees in such a manner if the matter is a true retainer -- one where the client is paying only to secure the lawyer's availability and not as payment for any services performed--and the client agrees in writing that the client will not be entitled to refund of all or part of the fee. The instances of such engagements are rare. And this limitation will require many lawyers accustomed to charging flat fees -- something the rule also expressly provides is permissible -- to carefully describe in their engagement agreements how various portions of the fee will be deemed earned.

The specific manners in which fees are calculated may be changing for some practitioners. But the concept behind whether they are ethical and appropriate remain the same. New Rule 1.5 reinforces the concept that lawyers, who should be rewarded for the high level of knowledge and skill they provide to their clients, should also be just in negotiating those fees and how they are calculated.