By Suzanne Lever
At its July 2008 meeting, the Ethics Committee approved a proposed opinion that authorizes a new form of fee payment made at the beginning of a representation. (See Proposed 2008 FEO 10.) The new fee payment is referred to as a “minimum fee.”
A minimum fee arrangement consists of a payment made at the beginning of a representation to reserve the services of a lawyer. The minimum fee is earned upon payment and is deposited in the firm operating account. The minimum fee differs from a retainer in that the lawyer agrees to provide legal services up to the value of the minimum fee. The minimum fee is subject to refund if it is clearly excessive as determined upon the termination of the client-lawyer relationship. However, unlike an advance payment, a refund is not owed simply because the representation ends prior to the performance of legal services up to the value of the minimum fee.
Family law lawyers have been seeking approval of such a fee arrangement for some time. They argue that the client benefits from receiving legal services up to the value of a retainer and that a minimum fee arrangement gives a client a forecast of the minimum amount the client can expect to pay. The lawyer benefits from the arrangement as well. A minimum fee compensates the lawyer for reserving time to represent the client and deters a party to a contested legal dispute from attempting to “conflict out” a lawyer by retaining the lawyer for a short period of time, and then discharging the lawyer without cause and requesting a refund.
Some mediators for the State Bar’s Fee Dispute Resolution Program anticipate problems with the new arrangement. For instance, when handling a fee dispute involving incomplete representation, mediators have previously relied on a quantum meruit valuation. However, when a client disputes a minimum fee, mediators will have to employ a different valuation method to determine whether an amount charged to reserve the lawyer’s services is clearly excessive. Also, the fact that the minimum fee will not be deposited in a trust account deprives the client of the protections afforded by Rule 1.15—the Rule of Professional Conduct on trust accounting. Finally, the use of a minimum fee arrangement could be viewed as a deterrent to the client’s exercise of the right to discharge a lawyer at any time with or without cause. See Rule 1.16.
If the proposed opinion is adopted, the challenge for lawyers electing to use a minimum fee arrangement will be to present the arrangement in such a way that clients are not confused or misled. The proposed opinion provides the following sample provision for a minimum fee agreement.
As a condition of the employment of Lawyer, Client agrees to pay $____ to Lawyer. This money is a minimum fee for the reservation of Lawyer’s services; to insure that Lawyer will not represent anyone else relative to Client’s legal matter without Client’s consent; and for legal work to be performed for Client.
Client understands and specifically agrees that:
Any interested person or group may submit a written comment or request to be heard on the proposed opinion. Any such request should be directed to the Ethics Committee prior to the next meeting in October 2008.
Suzanne Lever is assistant ethics counsel at the State Bar.
THE NORTH CAROLINA STATE BAR
217 E. Edenton Street • PO Box 25908 • Raleigh, NC 27611-5908 • 919.828.4620
Copyrightę North Carolina State Bar. All rights reserved.