|Oregon State Bar Bulletin FEBRUARY/MARCH 2007|
Preventable or Inevitable?
By Sylvia E. Stevens
Fee disputes are a fact of life for the private lawyer and account for numerous complaints about lawyers. The bar’s Client Assistance Office reports that in 2006 it received approximately 130 inquiries that were specifically designated as frictions over fees. In addition, many complaints that are characterized by clients as issues of competence, diligence or malpractice actually stem from concerns about fees.
How to Avoid Fee Disputes
Many misunderstandings over fees could be avoided if there were a written fee agreement. In recognition of this fact, ABA Model RPC 1.5(b) requires that "(t)he scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate." Several states have expanded this mandate and require written fee agreements.1 Oregon does not require that fee agreements be reduced to writing other than in contingent fee cases involving bodily injury, death or property damage. ORS 20.340.
The importance of a clear written fee agreement to avoid fee disputes cannot be emphasized enough. A written agreement can serve as a springboard for an early and frank discussion about the expectations and obligations arising from the representation as well as the costs and fees necessary to accomplish the client’s goals. Recording this information may not only prevent misunderstandings about fees and costs, but also satisfy and clarify the lawyer’s duties under the rules of professional conduct.
For example, a lawyer may limit the scope of representation so long as the limitation is reasonable and the client gives informed consent. Oregon RPC 1.2(b). Securing a client’s signature on an agreement that clearly outlines the scope of representation makes future disagreement more likely to be resolved in the lawyer’s favor. In addition, RPC 1.4 requires a lawyer to keep a client reasonably informed about the status of the client’s case. Clearly outlining the lawyer’s communication practices (e.g., "Unless there is an emergency, I normally return phone calls on Tuesdays and Thursdays") and the timelines involved in the case (e.g., "It may take six months for a hearing to be set") may help alleviate clients’ concerns about periods of silence from their lawyers. Finally, the most obvious use of a fee agreement is to specify who the client is. By doing so, lawyers may avoid future conflict of interest problems.
The fee agreement may delineate not only the clients’ expectations, but those of the lawyer as well. A good fee contract should specify not only how much the lawyer will charge, but also how the client will be billed and the requirements for payment. In addition, it may set forth other client duties (e.g., remain in contact with the lawyer) and the grounds upon which a lawyer might withdraw. With such information clearly set forth in a contract, complaints about improper withdrawal under RPC 1.16 are less likely to result in disciplinary investigation, let alone sanction.
Fee disputes may also be avoided by understanding what fees may and may not be charged to the client. For example, a lawyer may not charge interest in excess of the statutory rate without a written fee agreement. In re Schroeder, 15 DB Rptr 212 (2001). Simply noting an interest rate on the invoice is not sufficient to satisfy this requirement, just as unilaterally modifying a fee agreement is impermissible. See, OSB Formal Op No 2005-97, and In re Skinner, 14 DB Rptr 38 (2000). Charging a "nonrefundable" fee and failing to complete the client’s legal matter is prohibited unless the lawyer refunds the unearned portion of the fee. See, OSB Formal Op. No. 2005-151; In re Gastineau, 317 Or 545 (1993); In re Sousa, 323 Or 137 (1996). Charging the same hours to multiple clients is also improper. OSB Formal Op No 2005-170. A lawyer may not charge for time spent responding to a billing dispute or for time spent responding to a bar complaint. See, In re Benett, 331 Or 270, 278 (2000), and In re Stauffer, 327 Or 44, 64 (1998). In fact, the Oregon Supreme Court has made clear that any fee charged for work that the lawyer performed but that was not for the benefit of the client constitutes a clearly excessive fee. In re Paulson, 335 Or 436, 440-441 (2003).
How to Resolve Fee Disputes
While working in the Client Assistance Office, I was surprised to see that some lawyers simply ignore clients’ concerns about bills. Talking with a client about these concerns may easily resolve a dispute. Of course, when a client simply refuses to pay a bill, lawyers have several options at their disposal to ensure compensation for their hard work. For example, lawyers may assert liens over client files and property. While allowed by ORS 87.430, asserting a lien over a client file can be fraught with potential trouble for the lawyer. See, OSB Formal Op No 2005-90. Even when lawyers follow the proper procedures in asserting the lien, clients are apt to complain; the Client Assistance Office saw 110 complaints in 2006 regarding this issue alone.
As an alternative, some lawyers pursue charging liens against the judgment or settlement proceeds or file suit against their clients in circuit courts. The charging lien in particular can be a powerful and effective tool to exact payment from the client. However, both of these options can be expensive and time-consuming.
The comments to ABA Model Rule 1.5 express a preference for resolving fee disputes through arbitration or mediation. Most jurisdictions have some type of sponsored fee dispute resolution program available. The ABA conducted a survey in 1999 and again in 2006 to find out more about these programs.2 The ABA 2006 Report on Fee Arbitration included responses from 35 state jurisdictions and 14 local or county bars. Only four of these have no fee dispute resolution program whatsoever. Of the remaining 45, 24 are voluntary programs and 20 are mandatory programs.
The Oregon State Bar initiated its voluntary fee arbitration program in 1976. In 2006 the OSB received 83 requests to participate in fee arbitration. When someone requests arbitration, the opposing parties are notified and asked to respond regarding whether or not they to agree to participate. Twenty people did not respond at all, and 22 declined to participate. These numbers are perplexing because fee arbitration is inexpensive ($50 for disputes of less than $5000; $75 for disputes involving $5000 or more), relatively quick (three to four months, on average), confidential and results in a binding award.
Although fee disputes may be inevitable, most can be either avoided altogether or resolved with relative ease by following a few simple steps. First, develop a clear written fee agreement. Pay particular attention to clarifying ambiguous language. Second, talk with your client about the terms of the agreement and make sure it is tailored to the particular case. Third, bill your client regularly; if a dispute develops, talk with your client. You may find that a simple resolution is close at hand. Finally, if you cannot resolve the dispute between yourselves, consider among the other alternatives, the OSB Fee Arbitration Program. You may find it to be a relatively easy, fast, and cost-effective means to finally get paid.
1. Arizona, Colorado, Connecticut, District of Columbia, New Jersey, New York, Pennsylvania and Rhode Island have adopted requirements for written fee agreements in certain circumstances other than contingent fee cases.
2. The results of the surveys can be found at http://www.abanet.org/cpr/clientpro/.
ABOUT THE AUTHOR
Sylvia Stevens is general counsel of the Oregon State Bar. She can be reached at (503) 620-0222 or (800) 452-8260, ext. 359, or by e-mail at firstname.lastname@example.org.
© 2007 Sylvia Stevens