Ethics Opinion 238

Written Fee Agreements

* [NOTE: See how Opinion 238 has been substantively affected by the amendments to the D.C. Rules of Professional Conduct that became effective on February 1, 2007]

When a written fee agreement is required, the agreement must adequately inform the client of the basis or rate of the fee. In addition, fixed fee agreements must cover all reasonably foreseeable services necessary to provide competent representation.

Applicable Rules

• Rule 1.1 (Competent Representation)
• Rule 1.4(a) (Communication Between Attorney and Client)
• Rule 1.5(b) (Written Fee Agreement Requirement for New Clients)

Inquiry

The inquiring attorney handles cases on what he describes as a “flat fee” basis for enumerated services. The retainer agreement at issue, which involves an immigration representation, states that the client is “entitled” to one “office visit, telephone conference, or other consultation with staff members.” It further states that “additional office visits and/or telephone consultations not specifically mentioned” will be charged at specified hourly rates. A dispute has arisen between the inquirer and a client regarding the appropriate charges for additional consultations.

While the retainer agreement states that only one consultation is included in the “flat fee,” the inquirer’s letter to the Committee states that he will not make an additional charge if “we contact the client to perform those services [specified in the retainer agreement] or if the client contacts us when we would need that contact in an effort to perform the specific services for which we are retained.” A third version of the operative rule appears in a letter from the inquirer to a second attorney who became involved in the fee dispute. This letter states that there is no charge when a client calls to get updated status information from a paralegal, nor is there a charge for a consultation when “milestones” in a case are reached.

Discussion

Fixed fee agreements serve the important purpose of making legal services available to persons who might otherwise not be able to afford an attorney. However, such agreements cannot be used to circumvent basic principles governing the relationships between attorneys and clients. This inquiry presents two issues, both of first impression. The first addresses the requirement, new in the Rules of Professional Conduct, that fee agreements must be reduced to writing. The second is whether, when a fixed fee agreement is entered into, there are certain services which must be covered by the fixed fee and not subject to additional charges.

1. When a Written Fee Agreement Is Required, the Agreement Must Inform the Client of the Basis or Rate of the Fee
For clients “not regularly represented” by the lawyer, Rule 1.5(b) requires the lawyer to communicate to them, in writing the “basis or rate of the fee.” The comments to Rule 1.5(b) explain that the requirement has been introduced in order to establish “an understanding as to the fee,” Comment [1] and to reduce “the possibility of misunderstanding.” Comment [2]. The Rule recognizes that “[i]t is not necessary to recite all the factors that underlie the basis of the fee, but only those that are directly involved in its computation.” Comment [1]. The comments specifically recognize that fixed fee schedules may meet the requirement of the Rule, so long as the schedule “adequately informs the client of the charges to be imposed.” Comment [3].

The facts presented by this inquiry amply demonstrate the importance of this Rule. In this case, it is simply not possible to discern how charges are assessed for consultations beyond the one consultation enumerated in the fee agreement. Indeed, it appears that the assessment of such fees is purely at the attorney’s discretion. This has led to a breakdown of the attorney-client relationship, the introduction of a second attorney into the dispute, and a letter of inquiry to this Committee. While there is a written retainer agreement, it is more than apparent that such writing does not adequately explain the “basis or rate” of the fee. It is the Committee’s view that the fee agreement at issue does not comport with the requirements of Rule 1.5.

2. Fixed Fee Agreements Must Cover, as Part of the Fixed Fee, Those Reasonably Foreseeable Services That Are Necessary to Provide Competent Representation

The second question involves the extent to which services covered by a fixed fee may be limited. As with the agreement that is the subject of this inquiry, it is apparently common for fixed fee agreements to include certain services in the fixed fee and then to provide for further services at an additional hourly rate. It is the view of the Committee that the fixed fee must include those reasonably foreseeable services that are necessary to provide competent representation. See Rule 1.1(a) (“A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”)

A fixed fee agreement is attractive precisely because it offers a predictable and affordable fee, typically for a routine legal matter. As Comment [3] to Rule 1.5 states, “[s]uch services as routine real estate transactions, uncontested divorces, or preparation of simple wills, for example, may be suitable for description in . . . a fixed fee schedule.” If necessary services are billed at hourly rates in addition to the fixed fee, clients may not be able to afford such services or may choose to forego necessary legal services in order to achieve savings. Moreover, lawyers may not provide additional necessary services based on a concern that their clients may not be able to pay for them.

Comment [5] to Rule 1.5 explains that it is improper to enter into a fee agreement that might lead to the curtailment of necessary legal services. It states, in pertinent part:

An agreement may not be made whose terms might induce the lawyer improperly to curtail services for the client or perform them in a way contrary to the client’s interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client. Otherwise, the client might have to bargain for further assistance in the midst of a proceeding or transaction. However, it is proper to define the extent of services in light of the client’s ability to pay.

A fixed fee agreement that does not provide for foreseeably necessary services runs afoul of this principle.

The Committee does not intend to suggest by this opinion that a lawyer is required to consult with a client at the client’s whim or to provide services that are not reasonably necessary to the competent provision of the agreed-upon representation. See Rule 1.2(c) regarding permissible limitations on the scope of representation. However, the lawyer does have the responsibility, in drafting a fixed fee agreement, to anticipate those services that will be reasonably necessary to competently carry out the agreed-upon representation. Complications and unforeseeable events will occur in certain representations, and a lawyer is not precluded from making additional charges in such circumstances. The test is whether such events are reasonably foreseeable at the outset of the representation. If so, attendant legal services must be covered by the fixed fee.

We recognize that this opinion may result in increases in fixed fees charged for the provision of certain legal services. However, this result is preferable to the enticement of clients with an unreasonably low fee schedule and leaving them in mid-representation with unanticipated—and possibly unaffordable—legal fees.

Regarding the pending inquiry, the Committee is not a finder of facts and is not in a position to render an opinion as to whether limiting a client to a single consultation during the course of the particular representation is reasonable. We do note that the requirement in Rule 1.4(a) that “[a] lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information,” suggests that such a limitation may not be reasonable. Indeed, the lawyer’s obligation in this regard is underscored in Comment [2] to Rule 1.4 which states that, “[a] client is entitled to whatever information the client wishes about all aspects of the subject matters of the representation unless the client expressly consents not to have certain information passed on.” Moreover, “the lawyer must initiate and maintain the consultative and decision-making process if the client does not do so and must ensure that the ongoing process is thorough and complete.” Id.

Of course, a lawyer is not limited to a single model for the required consultation and may, in appropriate circumstances, rely on paralegal or other staff members to communicate with the client rather than devote more costly attorney time. This may be particularly true in connection with those routine legal matters that are likely to be the subject of fixed fee agreements. See comment [4] to Rule 1.4 (“[w]here many routine matters are involved, a system of limited or occasional reporting may be arranged with the client.”)

In sum, a written fee agreement, when required, must adequately inform the client of the basis or rate of the fee to be charged. In addition, fixed fee agreements must include, as part of the fixed fee, those reasonably foreseeable services that are necessary to provide competent representation.

Inquiry No. 91-9-36
Adopted: June 15, 1993