1. Legal Ethics: Unit 7 FAIR FEES AND CLIENT TRUST ACCOUNTS

2. How does a relationship begin with a client?

3. The client finds the law firm (because in theory the law firm is not finding a client), the firm and client must come to an agreement about their relationship Typically, this relationship is called a “fee agreement” or a “representation agreement” or “the attorney/client agreement”

4. What should the agreement include?

5. The scope of the representation, what is expected of both the firm and the client, and the fees that will be charged

6. A fee agreement is the balance of what parts?

7. The cost of that client’s case (including overhead costs) and the amount of money that can be generated by the case

8. How are cases typically taken (regarding fee agreement)?

9. Either on an hourly rate basis or a contingency fee basis

10. Why can giving time estimates be dangerous?

11. It can lead to unreasonable expectations

12. How does trust go in both directions for the client and the attorney?

13. The lawyer trusts the client to tell the truth, cooperate in discovery, and pay the bills.

14. *The client trusts the lawyer to tell the truth, *Communicate with the client about the progress of the case, *Work diligently, *Have the skill and knowledge to handle the matter competently, and *Send fair and honest bills.

15. Why is the paralegal’s role in creating the relationship between lawyer and client an important support role?

16. The lawyer promises to keep the client current on the events of the representation This can be done more efficiently by the paralegal... and at a lower cost to the client (Presenting it that way will make the client more amenable to communicating with the paralegal)

17. What should the paralegal discuss at the beginning of the client relationship?

18. Discuss the paralegal’s hourly rate, just as the rate of each lawyer on the case, Explain your supporting role (many members of the public are (still) not familiar with the role of the paralegal), Give the client your card with your direct line and e-mail address, Encourage the client to communicate directly with you.

19. Are fee agreements with lawyers negotiable?

20. Yes even if the firm gives a cost (i.e. divorce $500). The more open communication there is between lawyer and client at the beginning of the representation, the less likely there will be disputes later about the bills. The legal fee must not only be fully explained to the client, but it must be objectively fair. [Rule 1.5 says that reasonable fees should be charged to the client in appropriate cases in which the clients are able to pay them. This has been interpreted to mean that fees must be “objectively reasonable.”]

21. Are paralegals (and other nonlawyers) permitted to “negotiate” fee agreements with clients on behalf of a lawyer?

22. No Does this include explaining a routine fee agreement to a client?

23. The paralegal may as long as you get instructions from the lawyer and are authorized to provide the information

24. What does it mean if the agreement is not “negotiated”?

25. The client agrees to the contract that is written and the client may properly sign the agreement without discussing it with a lawyer

26. If you explain to the client various elements of the contract, does this constitute “the unauthorized practice of law?”

27. Not as long as you have been given instruction in the various elements of the contract and told to explain them, then you are doing nothing more than repeating what the lawyer told you to say.

28. The prosecution of most personal injury cases is taken on what kind of fee agreement?

29. “Contingency fee basis” How does that work?

30. The law firm’s recovery of legal fees is contingent upon the outcome of the case. The law firm may advance the costs of the lawsuit as well as dedicate hours to it. At the end of the lawsuit, if the judgment (or settlement) is in favor of the plaintiff, the costs of the suit will be paid out of the judgment and the lawyer and client will each get a percentage of the money. Contingency fee agr eements vary.

31. How Is Competence Measured for the lawyer?

32. Why is a careful explanation of the fee agreement important?

33. Calculating the fees can make a big difference in the amount the client will ultimately get from the lawsuit. The more the client understood and agreed to, the more likely the contract will be affirmed.

34. Even if the fee agreement is completely and carefully explained to the client, what would happen if a fee is objectively unfair?

35. It will be set aside if the client contests it

36. What is considered in determining the fairness of the contract by the court?

37. The court will look at the following factors: 1.The sophistication of the client, 2.How well the contract was explained to the client by the law firm, and 3.How acceptable the fee agreement would seem to the average person

38. Why has the use of the expression “No Recovery, No Fee” in contingency fee cases has been questioned by some states as being misleading?

39. Because the client is obligated to pay litigation expenses and court costs regardless of whether any recovery is obtained

40. At the conclusion of a contingency fee case, the client is entitled to an accounting, what is meant by that?

41. A document that shows the amount that was awarded (or settled upon) and all of the amounts that were charged against the award (such as doctors bills or expert witness fees), how much will go to the law firm and how much will go to the client

42. Another method of billing is hourly billing. What ethical guidelines are provided by the NFPA?

43. NFPA EC 1.2(c): A paralegal shall ensure that all timekeeping and billing records prepared by the paralegal are thorough, accurate, honest, and complete. NFPA EC 1.2(d): A paralegal shall not knowingly engage in fraudulent billing practices. Such practices may include but are not limited to: inflation of hours billed to a client or employer; misrepresentation of the nature of tasks performed; and/or submission of fraudulent expense and disbursement documentation.

44. How does hourly billing differ from value billing?

45. This is an agreement where the client will be charged a flat rate for certain tasks In some places, the term value billing refers to the contract under which the law firm gets paid a small amount for the work done (as in a reduced hourly rate) and a bonus for a good result. In other words, the client is willing to pay more when he wins. Some people also refer to this kind of arrangement as bonus billing

46. Explain fixed fee billing:

47. The client is charged one flat rate for the representation regardless of how long it takes or how much work is involved. Representations that are mass produced, i.e. relief from stay in bankruptcy or consumer collection matters, fixed fee billing is very popular. It allows the client to budget legal fees from the beginning of the representation; it encourages efficiency; it encourages delegation of work to employees who are more suited to the tasks; and it provides training for new staff members in an atmosphere where “hours billed” is not the primary focus.

48. How Is Competence Measured for the lawyer?

49. A variation of the typical hourly billing system is blended rate billing. What occurs during this billing arrangement?

50. The client agrees to pay one hourly rate, a blended rate for all billing employees (instead of separate charges for attorney, paralegal, etc). This encourages the firm to utilize the lower-rate billers and to use the expensive partners sparingly.

51. What Should Be in the Fee Agreement?

52. 1. Identify the client(s); 2. Identify the lawyer primarily responsible for handling the file; 3. Describe the nature and the scope of the representation; 4. Set out the objectives of the representation; 5. Tell the client what you expect from the client; 6. Set out the basis for calculating the fee; 7. Make clear the responsibility for paying costs and give some examples of standard costs; Continued

53. 8. Describe the method, manner, and frequency of billing, including how any retainer money held in trust will be used; 9. Make a disclaimer about results; 10. Set forth the process for dealing with unpaid bills (are you going to arbitrate disputes?); 11. Tell the client what happens if the firm needs to terminate the representation; 12. Make a disclosure about professional liability insurance ; and 13. Make a clear statement about what will happen to the files at the conclusion of the case

54. What Should Not Be in the Fee Agreement?

55. It is improper to: Ask the client for a gift, Sign away the literary rights to the client’s case, or Limit the lawyer’s liability for professional negligence or malpractice.

56. How Is Competence Measured for the lawyer?

57. Law firms will often require a retainer from the client. What are the different retainers?

58.  The classic retainer,  An advance payment retainer, and  A security retainer

59. How do they differ?

60. The classic retainer: Ensures the firm’s availability over time - the client is paying for is the reservation, not necessarily any work. It is considered earned upon receipt, whether or not services are actually provided. The type of retainer that is earned upon receipt regardless of services actually rendered is sometimes called a nonrefundable retainer

61. An advance payment retainer: Is a present payment compensating the lawyer for services to be performed in the future; it is considered earned upon receipt and may be a “flat fee” (in other words, it may be paid without expectation that the lawyer will ask for more compensation once the retainer is exhausted). A security retainer: Secures payment for future services; it remains the property of the client until applied to charges for services actually rendered, and any unused portion is refundable to the client.

62. When most people talk about a “retainer,” which are they talking about?

63. The security retainer

64. What is a client trust account?

65. It is a separate bank account set up to hold any money the firm receives on behalf of a client or third party. Lawyers tend to use the terms “attorney trust account” or “lawyer trust account”.

66. Client trust accounts must be interest- bearing accounts. That means it has to be an account that accrues interest. Where does that interest go?

67. In the typical client trust account, the interest is accrued and put into a fund called IOLTA or Interest On Lawyer Trust Account. The bank collects all of the interest from all of its IOLTAs and sends the money to the state bar of each state (or an organization designated by the state bar for that purpose). The State Bar uses the IOLTA money to fund the free legal service providers throughout the state. The interest on these client trust accounts, then, is what makes free legal services possible. Some states have exceptions to the requirement.

68. If the client has given the firm money as a retainer, the money goes into the client trust account until it is earned. At the end of each month, then, the client is sent a bill or invoice for that month’s work. If hearing no objection from the client, what is done with the money?

69. It becomes earned by the law firm and must be transferred out of the client trust account immediately. No law firm money should be kept in the client trust account. What if it is?

70. It’s called “commingling”. Law firm money and lawyer money must be segregated from client money.

71. What is the law firm’s obligation if the client refuses to a pay the bill?

72. The law firm has a continuing obligation to represent the client but this can devolve into litigation between lawyer and client over money and the lawyer’s continuing obligation to represent the client.

73. According to Rule 1.5(e), when can a division of a fee between lawyers who are not in the same firm be made?

74. (1)The division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation; (2) The client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; (3) The total fee is reasonable.

75. What is a referral fee?

76. A fee paid for doing nothing other than bringing the client to the lawyer.

77. What is the term used if a lawyer pays someone else for bringing the lawyer a case?

78. Champerty— The purchasing of a claim or a client

79. How does common law retaining lien differ from charging lien?

80. Common law retaining lien: The attorney assert a lien attaching all papers, books, money, and other property of the client the attorney has in his possession in order to secure payment of legal fees.

81. Charging lien: Secures the legal fees by attaching a lien to a future judgment or settlement in the case