by Steve Revo , Esq .
Be Careful What You Bargain For : A Brief Review of Rule 1.5 ( a )
Rule 1.5 ( a ) of The Rules of Professional Conduct in Vermont begins with the simple declarative sentence :
“ A lawyer shall not make an agreement for , charge , or collect an unreasonable fee or an unreasonable amount for expenses .”
Even established practitioners may be largely unaware of the potential dangers contained in this simple language . This Rule has been interpreted subjectively in Vermont and elsewhere to allow clients , disciplinary boards and Courts to assess the reasonableness of fee agreements not only when they are executed , but also after the work is completed or the attorney is terminated . Attorneys may be sanctioned and required to refund fixed , advance or guaranteed minimum fees , regardless of language in a retainer agreement deeming such fees “ earned ” or “ non-refundable ,” if the fee is deemed unreasonable ( i . e ., excessive ) when examined in the light of subsequent events . This article , which is a survey of the leading published cases in Vermont , some of the relevant , reported cases in other jurisdictions , and related commentary , is intended to caution practitioners to be thoroughly familiar with Rule 1.5 ( a ) and its interpretation . It concludes with a few practical suggestions for further consideration when drafting a retainer agreement , in hopes that attorneys will avoid violating the Rule inadvertently .
I . “ Fixed ” or Flat Fee Agreements .
The leading Vermont case on point is In re Sinnott . 1 Respondent in Sinnott was a sole practitioner , whose practice ( according to the Court ) consisted almost exclusively of assisting clients to reduce the amount of their unsecured debt to various creditors like credit card companies . According to the published record , Respondent operated something of a debt reduction mill , entering into standard “ Legal Representation Agreements ” with his approximately 7,000 clients authorizing automatic monthly withdrawal from his clients ’ bank accounts ( in this case $ 300 ) for various “ monthly office ” fees , “ creditor reserve fund ” for debt reduction and “ monthly maintenance ” fee .
Respondent was hired to settle his client ’ s debt with American Express , but was terminated by the client after approximately 4 months of doing nothing and accomplishing nothing . The client complained to the Professional Responsibility Board (“ PRB ”). The PRB panel found that Respondent violated Rule 1.5 ( a ), stating that “ the key issue here is whether the attorney is providing services of value to the client for which the attorney is entitled to be paid or whether … the lawyer is charging the client for doing nothing .” 2 Respondent defended his fees as based upon a valid contract that the client had freely and knowingly signed , an argument completely rejected by the Court . The Court said a proper understanding of Rule 1.5 ( a ) meant that unlike some other professionals , lawyers “ cannot charge unreasonable fees even if they are able to find clients who will pay whatever a lawyer ’ s contract demands .” 3 It appears from the record that the Legal Representation Agreement was signed freely and knowingly , but this was not enough to save Respondent where “ at no time [ respondent ] performed any service of value ” to his client . 4
In the wake of Sinnott , the PRB issued Advisory Opinion No . 2005-4 , which extended the Sinnott Court ’ s analysis of Rule 1.5 to advance payments from clients , however characterized , notwithstanding a written retainer agreement that the fee was “ earned upon receipt .” The Advisory Opinion addresses the question of when is a “ minimum fee ,” “ lump-sum fee ,” “ flat fee ” or similar fee earned by the attorney . Citing Sinnott , the Board writes that “… a fee may be earned when the parties agree it is , but that in itself is not enough . Even where there is agreement that a fee is earned at a given point , that agreement must be reasonable and a client can look beyond the agreement to be sure value has been rendered under Rule 1.5 .” ( emphasis provided ). 5
Such an interpretation , clearly the majority view in Vermont and most jurisdictions , potentially opens an attorney ’ s fees up for review and adjustment by the client . Suppose a relatively new attorney works diligently on a commercial transaction , drafts beautifully and negotiates skillfully , but through no fault of her own , the transaction fails . This author sees no truly safe harbor in the published cases , 6 ( notwithstanding the eight factors referred to in Footnote 3 ) that a disappointed client could not successfully argue that no value has been provided based upon an unsuccessful outcome .
II . Contingency Fee Agreements .
In Re Fink is a more recent Vermont case addressing Rule 1.5 ( a ) in the context of contingency fee agreements . 7 In Fink , the PRB panel found respondent violated Rule 1.5 ( a ) by agreeing with his existing divorce client to assist the client with communications with the client ’ s personal injury lawyer . Respondent was supposed to receive for his services a fee of 12 % of the client ’ s gross recovery in the personal injury matter . 8 The client / PRB complainant had suffered a serious and permanent injury in a trampoline accident resulting in his being quadriplegic . There is no dispute in the published record that client ’ s condition and living situation ( not clarified ) made it difficult for the personal injury lawyer to communicate by phone or written communications , and that both complainant and the personal injury lawyer wanted Respondent to assist with communications in the personal injury case . After this agreement , the personal injury lawyer sent copies of documents relating to the personal injury case to Respondent , who reviewed them with the complainant . Respondent never entered any type of appearance in the personal injury case . Approximately 5 months after reaching the contingency fee agreement at issue , the client became unhappy with Respondent ’ s services in the divorce case , and terminated his services . Respondent did not indicate whether he would seek a fee in the personal injury matter . In the Court ’ s words , “ Fearing that Respondent would do so , complainant filed a complaint against Respondent .” Complainant ’ s personal injury case settled for $ 682,500 , so had respondent collected his 12 % contingency fee he would have been paid $ 81,900 for facilitating communications with the personal injury lawyer . Respondent ’ s fee would also have been incremental to that of the personal injury attorney ’ s one third contingency fee . The Fink Court upheld the findings of the PRB Hearing Panel that respondent violated Rule 1.5 ( a ). 9 Respondent was unable to estimate or provide evidence of the time he had spent in assisting communications .
What is noteworthy about Fink is that Respondent was found in violation of Rule 1.5 ( a ), notwithstanding that he made no attempt to charge or collect any fee . ( emphasis provided ). The Court found it irrelevant that Respondent did not actually bill complainant for the fee , citing , Lawyer Disciplinary Bd v . Ball , 633 S . E . 2d 241 , 248 ( W . Va . 2006 ) ( concluding that lawyer violated rules of professional conduct for agreeing to an excessive fee , even though he did www . vtbar . org THE VERMONT BAR JOURNAL • SUMMER 2017 39