February 24, 2025 • 17 mins
Welcome back to the Bar Exam Toolbox podcast! In this episode of our "Listen and Learn" series, we're focusing on a topic from professional responsibility - namely, lawyer fee agreements. These are governed by Rule 1.5 of both the ABA and the California Rules of Professional Conduct.
In this episode, we discuss:
- The general rules a lawyer must follow when entering into a fee agreement with their client
- Different types of fee agreements
- Prohibited contingency fee agreements
- A hypothetical scenario from a previous California bar exam
Resources:
- "Listen and Learn" series (https://barexamtoolbox.com/bar-exam-toolbox-podcast-archive-by-topic/bar-exam-toolbox-podcast-explaining-individual-mee-and-california-bar-essay-questions/#listen-learn)
- California Bar Examination – Essay Questions and Selected Answers, July 2005 (https://nwculaw.edu/pdf/bar/July%202005%20Essays%20and%20Sample%20Answers.pdf)
- Herrscher v. State Bar of California (1935) (https://caselaw.findlaw.com/court/ca-supreme-court/1779870.html)
Download the Transcript
(https://barexamtoolbox.com/episode-301-listen-and-learn-professional-responsibility-fee-agreements/)
If you enjoy the podcast, we'd love a nice review and/or rating on Apple Podcasts (https://itunes.apple.com/us/podcast/bar-exam-toolbox-podcast-pass-bar-exam-less-stress/id1370651486) or your favorite listening app. And feel free to reach out to us directly. You can always reach us via the contact form on the Bar Exam Toolbox website (https://barexamtoolbox.com/contact-us/). Finally, if you don't want to miss anything, you can sign up for podcast updates (https://barexamtoolbox.com/get-bar-exam-toolbox-podcast-updates/)!
Thanks for listening!
Alison & Lee
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Lee Burgess (00:02):
Welcome to the Bar Exam Toolbox podcast.
Today we're covering the topicof fee agreements, as part of
our "Listen and Learn" series.
Your Bar Exam Toolbox hosts are AlisonMonahan and Lee Burgess, that's me.
We're here to demystify the barexam experience, so you can study
effectively, stay sane, and hopefullypass and move on with your life.
We're the co-creators of the Law SchoolToolbox, the Bar Exam Toolbox, and the
(00:23):
career-related website CareerDicta.
Alison also runs TheGirl's Guide to Law School.
If you enjoy the show, please leavea review on your favorite listening
app, and check out our sister podcast,the Law School Toolbox podcast.
If you have any questions, don'thesitate to reach out to us.
You can reach us via the contactform on BarExamToolbox.com,
and we'd love to hear from you.
And with that, let's get started.
(00:50):
Professional responsibilityis a heavily tested topic.
You will take the MPRE, which is allabout professional responsibility.
And if you are in California, you willlikely see professional responsibility
on your written exam as well.
Today we will be talkingabout fee agreements.
So, let's first look at the general rulesthat a lawyer must follow when entering
(01:13):
into a fee agreement with their client.
Fees and fee agreements are governedby Rule 1.5 of both the ABA and the
California Rules of Professional Conduct.
There are also some statutoryrules relevant in California.
First, the fees charged by a lawyer cannotbe unreasonable under the ABA rules or
(01:34):
unconscionable under the California rules.
The factors determining whether a feeis reasonable, common to both ABA and
California rules are (01:41):
[1] the time and labor required; [2] the novelty and
difficulty of the questions involved; [3]the skill requisite to perform the legal
service properly; [4] the likelihood,if apparent to the client, that the
acceptance of the particular employmentwill preclude other employment by the
lawyer; [5] the amount involved and theresults obtained; [6] the nature and
(02:07):
length of the professional relationshipwith the client; [7] the experience,
reputation, and ability of the lawyer orlawyers performing the services; and [8]
whether the fee is fixed or contingent.
Under the ABA rules, the fee customarilycharged in the locality for similar
legal services and the time limitationsimposed by the client or by the
(02:30):
circumstances are also relevant factors indetermining whether a fee is reasonable.
And under the California rules,these additional factors are relevant
in determining whether a fee isunconscionable: [1] whether the lawyer
engaged in fraud or overreactingin negotiating or setting the fee;
[2] whether the lawyer has failedto disclose material facts; [3] the
(02:53):
amount of the fee in proportion tothe value of the service performed;
and [4] the relative sophisticationof the lawyer and the client.
Now that we have an understanding ofhow to evaluate the amount a lawyer
charges for their services, let'slook more closely at the rules a
lawyer must follow when entering intoa fee agreement with their client.
(03:13):
There are a few common types of feeagreements that we are going to cover
briefly today, but keep in mind thatthe ABA and California rules cover other
issues related to financial dealings withclients that we are not going to discuss
today, but that you may see on an exam.
So, how do lawyers typicallystructure their fee agreements?
(03:33):
A lawyer might charge a flat feefor a particular service, regardless
of how long the service takes toperform, especially where the work
performed is routine for the lawyer.
For example, a lawyer specializingin estate planning might charge a
flat amount to create a will andliving trust for their client.
Lawyers also may charge an hourly ratefor their services, which requires
(03:54):
the client to pay for the time thelawyer spends on the client's matter.
In this type of agreement, a lawyersets their hourly rate for their
services and rates for other expensesrelated to the representation,
and bills the client for thoseservices, usually on a monthly basis.
Lawyers also use retaineragreements, which vary in structure.
A retainer can be used to guaranteethat the lawyer will be available to
(04:17):
take a particular case, to guaranteethat the lawyer is on call to handle
the client's legal problems over aperiod of time, or the retainer may be
treated like a down payment on legalservices that the client will need.
And finally, lawyers often usecontingency fee agreements.
In a contingency fee agreement, alawyer will only collect a fee if
the outcome of the representationis favorable to the client.
(04:40):
Typically, the lawyer's fee is apercentage of the client's final recovery.
And if the client's case is notsuccessful, the lawyer does not
collect a fee, though the lawyer mayrequire the client to pay certain costs
incurred by the lawyer in the case.
The type of the fee agreement thatis appropriate for a particular
client is dictated by the subjectand type of representation.
(05:01):
Contingency fee agreementsare much more restricted than
other types of fee agreements.
Now let's talk about the basicrequirements of a fee agreement
between a lawyer and their client.
The ABA rules provide (05:12):
"The scope of the representation and the basis
or rate of the fee and expenses forwhich the client will be responsible,
shall be communicated to the client,preferably in writing, before or within
a reasonable time after commencing therepresentation, except when the lawyer
will charge a regularly representedclient on the same basis or rate. Any
(05:34):
changes in the basis or rate of thefee expenses shall also be communicated
to the client." This is Rule 1.5[b].
And for contingency fee agreements (05:43):
"A fee may be contingent on the outcome
of the matter for which the serviceis rendered, except in a matter in
which a contingent fee is prohibited.
A contingent fee agreement shall bein writing, signed by the client, and
shall state the method by which thefee is to be determined, including the
percentage or percentages that shallaccrue to the lawyer in the event of a
(06:07):
settlement, trial, or appeal; litigationand other expenses to be deducted
from the recovery; and whether suchexpenses are to be deducted before or
after the contingent fee is calculated.
The agreement must clearly notify theclient of any expenses for which the
client will be liable, whether or notthe client is the prevailing party.
(06:27):
Upon conclusion of a contingent feematter, the lawyer shall provide the
client with a written statement statingthe outcome of the matter and, if there
is recovery, showing the remittanceto the client and the method of its
determination." In California, thewriting requirements are found in
the Business and Professions Code.
For fee agreements that are notcontingency fee agreements, Section 6148
(06:50):
of the Business and Professions Codeprovides : "In any case in which it is
reasonably foreseeable that total expenseto a client, including attorney's fees,
will exceed $1,000, the contract forservices in the case shall be in writing.
At the time the contract is enteredinto, the attorney shall provide
a duplicate copy of the contractsigned by both the attorney and the
(07:12):
client, or the client's guardian orrepresentative, to the client or to the
client's guardian or representative.
The written contract shall containall of the following: [1] any basis of
compensation, including but not limitedto hourly rates, statutory fees or flat
fees, and other standard rates, fees,and charges applicable to the case;
(07:34):
[2] the general nature of the legalservices to be provided to the client;
[3] the respective responsibilities ofthe attorney and the client as to the
performance of the contract." This isCalifornia Business and Professions
Code Section 6148, subsection [a].
And for contingency fee cases, Section6147 of the Business and Professions code
provides (07:58):
"An attorney who contracts to represent a client on a contingency fee
basis, shall at the time the contract isentered into provide a duplicate copy of
the contract, signed by both the attorneyand the client, or the client's guardian
or representative, to the plaintiff or tothe client's guardian or representative.
The contract shall be in writing andshall include, but is not limited to
all of the following (08:20):
[1] a statement of the contingency fee rate that the client
and attorney have agreed upon; [2] astatement as to how disbursements and
costs incurred in connection with theprosecution or settlement of the claim
will affect the contingency fee and theclient's recovery; [3] a statement as
to what extent, if any, the client couldbe required to pay any compensation to
(08:43):
the attorney for related matters thatarise out of their relationship, not
covered by their contingency fee contract.
This may include any amounts collectedfor the plaintiff by the attorney;
and [4] finally, a statement thatthe fee is not set by law but is
negotiable between attorney andclient, unless the claim is subject to
(09:04):
some specific statutory requirementswe are not going to get into today.
This is from California Business andProfessions Code 6147, subsection [a].
So in summary, under the ABA andCalifornia rules, a contingency fee
agreement must be in writing, and itmust include information about how the
fee and any expenses will be calculatedand deducted from the final award.
(09:28):
For all other fee agreements,California requires the fee agreement
to be written if the total expensesto the client will be over $1,000.
And under the ABA rules, thelawyer is simply encouraged to
put the agreement in writing.
As I mentioned earlier, under boththe California and ABA rules, there
are circumstances in which a lawyeris prohibited from using a contingency
(09:51):
fee agreement based on the impact toimportant constitutional rights and
public policy in these types of cases.
Both the ABA and California rules prohibita lawyer from using a contingency fee
agreement for criminal cases or ina family law case where the payment
or amount of the fee is contingentupon securing a divorce, or on the
(10:12):
amount of child or spousal support, orproperty settlement in lieu thereof.
A contingency fee agreement may beused in a family law matter where the
subject or the representation is therecovery of post-judgment balances due
under support or other financial orders.
Now let's consider how these rulesmight show up on a future exam
(10:33):
by looking at how a fee agreementhas been dealt with in the past.
The following hypo is taken fromthe July 2005 California bar exam:
"Lou is a lawyer.
While he was having lunch witha friend, Frank, he learned
that Frank's sister, Sally, haddecided to dissolve her marriage.
At Frank's request, Lou telephonedSally, told her that Frank had asked him
(10:56):
to call and offered to represent her.
They set up an appointmentfor the next day.
During the appointment, Lou began thediscussion by talking about his fee.
Sally told Lou that she had no money,but admitted jointly owning with her
husband some art valued at $1 million.
Lou agreed to accept a payment of50% of any assets awarded to Sally
(11:17):
in exchange for representing her.
Lou and Sally memorializedthe agreement in writing."
For our purposes, we are onlylooking at the fee agreement issue
presented in this hypothetical.
Of course, when you take the bar examor any exam, you should address all
the issues you see in the question.
So, what do you thinkabout this fee arrangement?
Has Lou committed any ethicalviolations with respect to
(11:40):
the fee agreement with Sally?
The short answer is "yes", butlet's look at each aspect of
the fee arrangement separately.
Here, the fee arrangement betweenLou and Sally is a contingency fee
agreement, since he is planningto collect a percentage of
Sally's final award in the case.
This is Lou's first problem.
From our earlier discussion, we knowthat contingency fee arrangements
(12:02):
are not permissible under either theABA or California rules in family
law matters, where the payment iscontingent upon a property settlement.
Lou has made his fee contingent on thevalue of the assets that Sally is awarded
in her divorce, so this fee agreement is aviolation of Lou's ethical duties, and he
may be subject to discipline as a result.
(12:23):
It is important to know that at thetime this fact pattern was tested, the
ABA rules included this prohibition,but the California rules did not
include the explicit prohibitionagainst using a contingency fee
agreement in a family law matter.
When the California rules were updatedin 2018, this prohibition against
contingency fee agreements for familylaw matters was added to California Rule
(12:45):
1.5, which now mirrors the ABA rule.
Keep this in mind when you arereading the sample answers for this
question posted by the California Bar.
Okay, so we know the structure ofLou's fee agreement is impermissible,
but what about the amount of the fee?
Going back to our earlier discussion, weknow that a fee must be reasonable under
(13:05):
the ABA rules and not unconscionableunder the California rules.
Lou plans on collecting 50% of anyassets awarded to Sally in the divorce.
Since this fee arrangement is acontingency fee agreement, we obviously
can't predict exactly how much Lou'sfee would be in this case, but there
are a few facts that we can use tofigure out the appropriate amount of
(13:27):
Lou's fee and to determine whether ornot Lou's fee amount is permissible.
First, the percentage basis ofthis fee - 50% - is pretty high.
In cases where it actually ispermissible for a lawyer to use
a contingency fee agreement, thepercentage usually does not exceed
one third or 33% of the final award.
So just thinking about the fact that thisfee is 50%, it already looks like it is
(13:51):
an unreasonable or unconscionable fee.
We can also infer the minimum amountof the fee that Lou plans on collecting
from Sally based on the value ofthe art, which is Sally's only asset
that we have any information about.
Sally has a joint interestwith her husband in the art,
which is valued at $1 million.
The art will likely be partof the community assets, which
(14:12):
will be split between Sallyand her husband in the divorce.
At a minimum, then, the assets awardedto Sally in the divorce will be valued
at $500,000, and Lou's fee is 50% of thatamount, and that works out to $250,000.
Lou could also be seeingdollar signs despite Sally not
having any money of her own.
After all, if a couple owns art worth$1 million, they might also have other
(14:36):
valuable community property assets.
The assets awarded to Sally, andas a result, Lou's fee, might be
even higher if that is the case.
So, just breaking down the math onthis fee probably gives you a gut
feeling that a fee that could amountto $250,000 or more for a divorce
with only one significant asset isboth unreasonable and unconscionable.
(14:59):
On an exam though, you'llneed to explain why that is.
This fact pattern doesn'ttell us a lot about Sally's
case or Lou's normal practice.
So when analyzing the reasonableness ofthe fee, you'll need to think about the
services involved in a typical divorcecase, and whether you can infer anything
else about this case from the facts.
The facts give us nothing thatwould indicate that this case is
(15:20):
particularly involved or difficult.
We don't know anything about Sally'shusband or their other assets.
It seems like this divorce case couldbe as simple as allocating the art
or proceeds from the sale of theart between Sally and her husband.
We also know that Lou and Sally justmet, so there's nothing indicating
that a prior professional relationshipcould justify such a high fee.
(15:41):
Looking at the situation as a whole, itappears that Lou's fee is disproportionate
to the services he would be performing.
There are no facts to support Loucharging a fee that high, and the fee is
probably considerably higher than the feescharged by most other lawyers handling
a divorce like Sally's in the same area.
In California, the CaliforniaSupreme Court has also said that an
(16:05):
unconscionable fee is one that is soexorbitant and wholly disproportionate
to the services performed as toshock the conscience, which is
from Herrscher v. State Bar (1935).
Lou's fees certainly seemsto fit that description.
The last fee-related issuein this hypothetical relates
to the writing requirement.
(16:25):
The fact pattern tells us thatLou and Sally memorialized
the agreement in writing.
Finally, Lou did something right, sort of.
Since this was a contingency feeagreement, both ABA and California
rules required it to be in writing.
The fact that Lou did memorialize thefee agreement in writing would also
satisfy the California requirement fornon-contingency fee agreements that a
(16:47):
fee agreement be in writing when thelawyer knows that the total expenses
to the client would exceed $1,000.
Either way, putting the agreement inwriting wouldn't help Lou avoid discipline
for entering into a contingency feeagreement here, or for charging an
unreasonable or unconscionable fee.
And that's all we have time for today.
(17:08):
We hope that you found this hypo to be ahelpful example of how to work through a
question that involves a fee agreement.
If you enjoyed this episode of theBar Exam Toolbox podcast, please
take a second to leave a review orrating on your favorite listening app.
We'd really appreciate it.
And be sure to subscribeso you don't miss anything.
If you have any questions or comments,please don't hesitate to reach out to
myself or Alison at lee@barexamtoolbox.comor alison@barexamtoolbox.com.
(17:32):
Or you can always contactus via our website contact
form at BarExamToolbox.com.
Thanks for listening, and we'll talk soon!
Welcome to the Bar Exam Toolbox podcast.
Today we're covering the topicof fee agreements, as part of
our "Listen and Learn" series.
Your Bar Exam Toolbox hosts are AlisonMonahan and Lee Burgess, that's me.
We're here to demystify the barexam experience, so you can study
effectively, stay sane, and hopefullypass and move on with your life.
We're the co-creators of the Law SchoolToolbox, the Bar Exam Toolbox, and the
(00:23):
career-related website CareerDicta.
Alison also runs TheGirl's Guide to Law School.
If you enjoy the show, please leavea review on your favorite listening
app, and check out our sister podcast,the Law School Toolbox podcast.
If you have any questions, don'thesitate to reach out to us.
You can reach us via the contactform on BarExamToolbox.com,
and we'd love to hear from you.
And with that, let's get started.
(00:50):
Professional responsibilityis a heavily tested topic.
You will take the MPRE, which is allabout professional responsibility.
And if you are in California, you willlikely see professional responsibility
on your written exam as well.
Today we will be talkingabout fee agreements.
So, let's first look at the general rulesthat a lawyer must follow when entering
(01:13):
into a fee agreement with their client.
Fees and fee agreements are governedby Rule 1.5 of both the ABA and the
California Rules of Professional Conduct.
There are also some statutoryrules relevant in California.
First, the fees charged by a lawyer cannotbe unreasonable under the ABA rules or
(01:34):
unconscionable under the California rules.
The factors determining whether a feeis reasonable, common to both ABA and
California rules are (01:41):
[1] the time and labor required; [2] the novelty and
difficulty of the questions involved; [3]the skill requisite to perform the legal
service properly; [4] the likelihood,if apparent to the client, that the
acceptance of the particular employmentwill preclude other employment by the
lawyer; [5] the amount involved and theresults obtained; [6] the nature and
(02:07):
length of the professional relationshipwith the client; [7] the experience,
reputation, and ability of the lawyer orlawyers performing the services; and [8]
whether the fee is fixed or contingent.
Under the ABA rules, the fee customarilycharged in the locality for similar
legal services and the time limitationsimposed by the client or by the
(02:30):
circumstances are also relevant factors indetermining whether a fee is reasonable.
And under the California rules,these additional factors are relevant
in determining whether a fee isunconscionable: [1] whether the lawyer
engaged in fraud or overreactingin negotiating or setting the fee;
[2] whether the lawyer has failedto disclose material facts; [3] the
(02:53):
amount of the fee in proportion tothe value of the service performed;
and [4] the relative sophisticationof the lawyer and the client.
Now that we have an understanding ofhow to evaluate the amount a lawyer
charges for their services, let'slook more closely at the rules a
lawyer must follow when entering intoa fee agreement with their client.
(03:13):
There are a few common types of feeagreements that we are going to cover
briefly today, but keep in mind thatthe ABA and California rules cover other
issues related to financial dealings withclients that we are not going to discuss
today, but that you may see on an exam.
So, how do lawyers typicallystructure their fee agreements?
(03:33):
A lawyer might charge a flat feefor a particular service, regardless
of how long the service takes toperform, especially where the work
performed is routine for the lawyer.
For example, a lawyer specializingin estate planning might charge a
flat amount to create a will andliving trust for their client.
Lawyers also may charge an hourly ratefor their services, which requires
(03:54):
the client to pay for the time thelawyer spends on the client's matter.
In this type of agreement, a lawyersets their hourly rate for their
services and rates for other expensesrelated to the representation,
and bills the client for thoseservices, usually on a monthly basis.
Lawyers also use retaineragreements, which vary in structure.
A retainer can be used to guaranteethat the lawyer will be available to
(04:17):
take a particular case, to guaranteethat the lawyer is on call to handle
the client's legal problems over aperiod of time, or the retainer may be
treated like a down payment on legalservices that the client will need.
And finally, lawyers often usecontingency fee agreements.
In a contingency fee agreement, alawyer will only collect a fee if
the outcome of the representationis favorable to the client.
(04:40):
Typically, the lawyer's fee is apercentage of the client's final recovery.
And if the client's case is notsuccessful, the lawyer does not
collect a fee, though the lawyer mayrequire the client to pay certain costs
incurred by the lawyer in the case.
The type of the fee agreement thatis appropriate for a particular
client is dictated by the subjectand type of representation.
(05:01):
Contingency fee agreementsare much more restricted than
other types of fee agreements.
Now let's talk about the basicrequirements of a fee agreement
between a lawyer and their client.
The ABA rules provide (05:12):
"The scope of the representation and the basis
or rate of the fee and expenses forwhich the client will be responsible,
shall be communicated to the client,preferably in writing, before or within
a reasonable time after commencing therepresentation, except when the lawyer
will charge a regularly representedclient on the same basis or rate. Any
(05:34):
changes in the basis or rate of thefee expenses shall also be communicated
to the client." This is Rule 1.5[b].
And for contingency fee agreements (05:43):
"A fee may be contingent on the outcome
of the matter for which the serviceis rendered, except in a matter in
which a contingent fee is prohibited.
A contingent fee agreement shall bein writing, signed by the client, and
shall state the method by which thefee is to be determined, including the
percentage or percentages that shallaccrue to the lawyer in the event of a
(06:07):
settlement, trial, or appeal; litigationand other expenses to be deducted
from the recovery; and whether suchexpenses are to be deducted before or
after the contingent fee is calculated.
The agreement must clearly notify theclient of any expenses for which the
client will be liable, whether or notthe client is the prevailing party.
(06:27):
Upon conclusion of a contingent feematter, the lawyer shall provide the
client with a written statement statingthe outcome of the matter and, if there
is recovery, showing the remittanceto the client and the method of its
determination." In California, thewriting requirements are found in
the Business and Professions Code.
For fee agreements that are notcontingency fee agreements, Section 6148
(06:50):
of the Business and Professions Codeprovides : "In any case in which it is
reasonably foreseeable that total expenseto a client, including attorney's fees,
will exceed $1,000, the contract forservices in the case shall be in writing.
At the time the contract is enteredinto, the attorney shall provide
a duplicate copy of the contractsigned by both the attorney and the
(07:12):
client, or the client's guardian orrepresentative, to the client or to the
client's guardian or representative.
The written contract shall containall of the following: [1] any basis of
compensation, including but not limitedto hourly rates, statutory fees or flat
fees, and other standard rates, fees,and charges applicable to the case;
(07:34):
[2] the general nature of the legalservices to be provided to the client;
[3] the respective responsibilities ofthe attorney and the client as to the
performance of the contract." This isCalifornia Business and Professions
Code Section 6148, subsection [a].
And for contingency fee cases, Section6147 of the Business and Professions code
provides (07:58):
"An attorney who contracts to represent a client on a contingency fee
basis, shall at the time the contract isentered into provide a duplicate copy of
the contract, signed by both the attorneyand the client, or the client's guardian
or representative, to the plaintiff or tothe client's guardian or representative.
The contract shall be in writing andshall include, but is not limited to
all of the following (08:20):
[1] a statement of the contingency fee rate that the client
and attorney have agreed upon; [2] astatement as to how disbursements and
costs incurred in connection with theprosecution or settlement of the claim
will affect the contingency fee and theclient's recovery; [3] a statement as
to what extent, if any, the client couldbe required to pay any compensation to
(08:43):
the attorney for related matters thatarise out of their relationship, not
covered by their contingency fee contract.
This may include any amounts collectedfor the plaintiff by the attorney;
and [4] finally, a statement thatthe fee is not set by law but is
negotiable between attorney andclient, unless the claim is subject to
(09:04):
some specific statutory requirementswe are not going to get into today.
This is from California Business andProfessions Code 6147, subsection [a].
So in summary, under the ABA andCalifornia rules, a contingency fee
agreement must be in writing, and itmust include information about how the
fee and any expenses will be calculatedand deducted from the final award.
(09:28):
For all other fee agreements,California requires the fee agreement
to be written if the total expensesto the client will be over $1,000.
And under the ABA rules, thelawyer is simply encouraged to
put the agreement in writing.
As I mentioned earlier, under boththe California and ABA rules, there
are circumstances in which a lawyeris prohibited from using a contingency
(09:51):
fee agreement based on the impact toimportant constitutional rights and
public policy in these types of cases.
Both the ABA and California rules prohibita lawyer from using a contingency fee
agreement for criminal cases or ina family law case where the payment
or amount of the fee is contingentupon securing a divorce, or on the
(10:12):
amount of child or spousal support, orproperty settlement in lieu thereof.
A contingency fee agreement may beused in a family law matter where the
subject or the representation is therecovery of post-judgment balances due
under support or other financial orders.
Now let's consider how these rulesmight show up on a future exam
(10:33):
by looking at how a fee agreementhas been dealt with in the past.
The following hypo is taken fromthe July 2005 California bar exam:
"Lou is a lawyer.
While he was having lunch witha friend, Frank, he learned
that Frank's sister, Sally, haddecided to dissolve her marriage.
At Frank's request, Lou telephonedSally, told her that Frank had asked him
(10:56):
to call and offered to represent her.
They set up an appointmentfor the next day.
During the appointment, Lou began thediscussion by talking about his fee.
Sally told Lou that she had no money,but admitted jointly owning with her
husband some art valued at $1 million.
Lou agreed to accept a payment of50% of any assets awarded to Sally
(11:17):
in exchange for representing her.
Lou and Sally memorializedthe agreement in writing."
For our purposes, we are onlylooking at the fee agreement issue
presented in this hypothetical.
Of course, when you take the bar examor any exam, you should address all
the issues you see in the question.
So, what do you thinkabout this fee arrangement?
Has Lou committed any ethicalviolations with respect to
(11:40):
the fee agreement with Sally?
The short answer is "yes", butlet's look at each aspect of
the fee arrangement separately.
Here, the fee arrangement betweenLou and Sally is a contingency fee
agreement, since he is planningto collect a percentage of
Sally's final award in the case.
This is Lou's first problem.
From our earlier discussion, we knowthat contingency fee arrangements
(12:02):
are not permissible under either theABA or California rules in family
law matters, where the payment iscontingent upon a property settlement.
Lou has made his fee contingent on thevalue of the assets that Sally is awarded
in her divorce, so this fee agreement is aviolation of Lou's ethical duties, and he
may be subject to discipline as a result.
(12:23):
It is important to know that at thetime this fact pattern was tested, the
ABA rules included this prohibition,but the California rules did not
include the explicit prohibitionagainst using a contingency fee
agreement in a family law matter.
When the California rules were updatedin 2018, this prohibition against
contingency fee agreements for familylaw matters was added to California Rule
(12:45):
1.5, which now mirrors the ABA rule.
Keep this in mind when you arereading the sample answers for this
question posted by the California Bar.
Okay, so we know the structure ofLou's fee agreement is impermissible,
but what about the amount of the fee?
Going back to our earlier discussion, weknow that a fee must be reasonable under
(13:05):
the ABA rules and not unconscionableunder the California rules.
Lou plans on collecting 50% of anyassets awarded to Sally in the divorce.
Since this fee arrangement is acontingency fee agreement, we obviously
can't predict exactly how much Lou'sfee would be in this case, but there
are a few facts that we can use tofigure out the appropriate amount of
(13:27):
Lou's fee and to determine whether ornot Lou's fee amount is permissible.
First, the percentage basis ofthis fee - 50% - is pretty high.
In cases where it actually ispermissible for a lawyer to use
a contingency fee agreement, thepercentage usually does not exceed
one third or 33% of the final award.
So just thinking about the fact that thisfee is 50%, it already looks like it is
(13:51):
an unreasonable or unconscionable fee.
We can also infer the minimum amountof the fee that Lou plans on collecting
from Sally based on the value ofthe art, which is Sally's only asset
that we have any information about.
Sally has a joint interestwith her husband in the art,
which is valued at $1 million.
The art will likely be partof the community assets, which
(14:12):
will be split between Sallyand her husband in the divorce.
At a minimum, then, the assets awardedto Sally in the divorce will be valued
at $500,000, and Lou's fee is 50% of thatamount, and that works out to $250,000.
Lou could also be seeingdollar signs despite Sally not
having any money of her own.
After all, if a couple owns art worth$1 million, they might also have other
(14:36):
valuable community property assets.
The assets awarded to Sally, andas a result, Lou's fee, might be
even higher if that is the case.
So, just breaking down the math onthis fee probably gives you a gut
feeling that a fee that could amountto $250,000 or more for a divorce
with only one significant asset isboth unreasonable and unconscionable.
(14:59):
On an exam though, you'llneed to explain why that is.
This fact pattern doesn'ttell us a lot about Sally's
case or Lou's normal practice.
So when analyzing the reasonableness ofthe fee, you'll need to think about the
services involved in a typical divorcecase, and whether you can infer anything
else about this case from the facts.
The facts give us nothing thatwould indicate that this case is
(15:20):
particularly involved or difficult.
We don't know anything about Sally'shusband or their other assets.
It seems like this divorce case couldbe as simple as allocating the art
or proceeds from the sale of theart between Sally and her husband.
We also know that Lou and Sally justmet, so there's nothing indicating
that a prior professional relationshipcould justify such a high fee.
(15:41):
Looking at the situation as a whole, itappears that Lou's fee is disproportionate
to the services he would be performing.
There are no facts to support Loucharging a fee that high, and the fee is
probably considerably higher than the feescharged by most other lawyers handling
a divorce like Sally's in the same area.
In California, the CaliforniaSupreme Court has also said that an
(16:05):
unconscionable fee is one that is soexorbitant and wholly disproportionate
to the services performed as toshock the conscience, which is
from Herrscher v. State Bar (1935).
Lou's fees certainly seemsto fit that description.
The last fee-related issuein this hypothetical relates
to the writing requirement.
(16:25):
The fact pattern tells us thatLou and Sally memorialized
the agreement in writing.
Finally, Lou did something right, sort of.
Since this was a contingency feeagreement, both ABA and California
rules required it to be in writing.
The fact that Lou did memorialize thefee agreement in writing would also
satisfy the California requirement fornon-contingency fee agreements that a
(16:47):
fee agreement be in writing when thelawyer knows that the total expenses
to the client would exceed $1,000.
Either way, putting the agreement inwriting wouldn't help Lou avoid discipline
for entering into a contingency feeagreement here, or for charging an
unreasonable or unconscionable fee.
And that's all we have time for today.
(17:08):
We hope that you found this hypo to be ahelpful example of how to work through a
question that involves a fee agreement.
If you enjoyed this episode of theBar Exam Toolbox podcast, please
take a second to leave a review orrating on your favorite listening app.
We'd really appreciate it.
And be sure to subscribeso you don't miss anything.
If you have any questions or comments,please don't hesitate to reach out to
myself or Alison at lee@barexamtoolbox.comor alison@barexamtoolbox.com.
(17:32):
Or you can always contactus via our website contact
form at BarExamToolbox.com.
Thanks for listening, and we'll talk soon!
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