Friday, November 17, 2006

Excessive Fee

by Mike Frisch

A recent post described a new Florida rule that permits a client to knowlingly waive a statutory limitation on contingent fees. The Indiana Supreme Court recently imposed discipline where the attorney attempted to circumvent Indiana's 15% limitation on patient compensation amounts in excess of $100,000. In Matter of Stephens, the attorney was concerned about the agreed contingent fee and offered the client the option of either an hourly rate or a non-refundable $10,000 payment in addition to the contingent fee. The client paid the $10,000 but discharged the lawyer about 18 months later and sought a refund. The lawyer refused but later did refund the retainer after disciplinary proceedings were initiated.

Two important points. First, a material change in an agreement regarding fees may be considered a business transaction with a client. Rule 1.8(a).  The transaction must be fair and the client must be advised to seek independent advice. Second, agreements to pay fees in excess of the statutory maximum may be considered per se unreasonable absent a rule like the Florida one. Rule 1.5(a).

A lawyer may be well advised to honor a fee agreement reached with the client even if it seems like a bad bargain when seen in the rear-view mirror.

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