Friday, August 30, 2013

Excessive Fee Charges Not Proven

The North Dakota Supreme Court has ordered a suspension of 60 days of an attorney who failed to put a contingent fee agreement in writing, failed to notify the client of receipt of funds and failed to properly handle the funds.

The court rejected as unproven excessive fee and dishonesty charges:

This case presents a classic example of a contractual fee dispute between attorney and client. The parties agree they entered into a 10 percent contingent fee agreement, but subsequent developments have created a legitimate dispute over what the 10 percent was intended to cover. [Attorney] Lee contends the parties had agreed the 10 percent applied to all "monetary benefit" which [client] Wilkinson received due to Lee's representation, which Lee interprets to include the monetary benefit Wilkinson received by being relieved of liability on the $1.4 million judgment. Wilkinson and Disciplinary Counsel contend the 10 percent contingent fee only applied to those items expressly recognized in the underlying settlement agreement, i.e. the $140,000 bonus payment and the overriding royalty interest, and Lee's retention of more than $14,000 from the $140,000 settlement payment constituted charging an unreasonable fee under Rule 1.5(a).

The purpose of the prohibition in Rule 1.5(a) against charging an unreasonable fee is to protect clients and the public from excessive fees which exceed the bounds of reasonableness in light of the amount and quality of the work performed, the results obtained, and the fees customarily charged in the locality for similar legal services. The rule was not intended to be used to resolve routine contractual fee disputes between an attorney and client. When there is a legitimate, good faith dispute between an attorney and client over the agreed-upon fee to be charged, there are other avenues that may be better suited than disciplinary proceedings to resolve the civil contractual dispute between the parties. See N.D.R. Prof. Conduct 1.5, Comment 9 (suggesting submission to arbitration when there is a fee dispute). The disciplinary process is reserved for those situations where an attorney has charged an excessive fee beyond the scope of reasonableness in light of the usual and customary fees charged in the locality by similar attorneys for similar work. An attorney is not automatically subject to discipline under Rule 1.5(a) whenever a client claims the fee charged was more than what was agreed to.

(Mike Frisch)

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