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Chapter 3 Finding and Billing Clients

Part 2 Fees & Billing

George W. Conk
Adjunct Professor & Senior Fellow,
Stein Center for Law & Ethics
gconk@law.fordham.edu
Room 8-122

Ch. 3 fees and billing

New York Code of Professional Responsibility


PREAMBLE

The continued existence of a free


and democratic society depends
upon recognition of the concept
that justice is based upon the rule
of law grounded in respect for the
dignity of the individual and the
capacity of the individual through
reason for enlightened selfgovernment.
Ch. 3 fees and billing

ETHICAL CONSIDERATIONS EC 2-1

The need of members of the public


for legal services is met only if
they recognize their legal
problems, appreciate the
importance of seeking assistance,
and are able to obtain the services
of acceptable legal counsel.
Ch. 3 fees and billing

ETHICAL CONSIDERATIONS EC 2-1

The legal profession should


educate people to
recognize their problems
facilitate the process of intelligent
selection of lawyers and
assist in making legal services
fully available.

Ch. 3 fees and billing

New York Code of Professional Responsibility


PREAMBLE

Canon 2

A Lawyer Should Assist The Legal


Profession in Fulfilling Its Duty to
Make Legal Counsel Available

Ch. 3 fees and billing

Financing legal representation


of the indigent

Direct government funding


- Legal Services Corporation
- Public Defenders
Charity/non-profits
Pro bono
Assigned counsel
Interest on lawyers trust accounts
Ch. 3 fees and billing

Interest on Lawyers Trust Accounts

A taking?

Rule of thumb: if administrative


costs exceed gain `taking is
permissible

The current crisis in the Legal


Services programs
Ch. 3 fees and billing

M.R. 6.1 Voluntary Pro Bono


Publico Service

Every lawyer has a professional


responsibility to provide legal
services to those unable to pay.

A lawyer should aspire to render


at least (50) hours of pro bono
publico legal services per year.

Ch. 3 fees and billing

Rule 6.1 Voluntary Pro Bono


Publico Service

A lawyer should:
(a) provide a substantial majority of
the (50) hours of legal services
without fee or expectation of fee to:
(1) persons of limited means or
(2) charitable, religious, civic,
community, governmental and
educational organizations in matters
that are designed primarily to
address the needs of persons of
limited means; and
Ch. 3 fees and billing

Rule 6.1 (b) Additional Services

(1) delivery of legal services at no fee or


substantially reduced fee to individuals,
groups or organizations seeking to secure or
protect civil rights, civil liberties or public rights,
or charitable, religious, civic, community,
governmental and educational organizations in
matters in furtherance of their organizational
purposes, where the payment of standard legal
fees would significantly deplete the organization's
economic resources or would be otherwise
inappropriate

(2) delivery of legal services at a


substantially reduced fee to persons of
limited means; or
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10

Rule 6.1 Voluntary Pro Bono


Publico Service

(3) participation in activities for


improving the law, the legal
system or the legal profession.
In addition, a lawyer should
voluntarily contribute financial
support to organizations that
provide legal services to persons
of limited means.
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Rule 6.2 Accepting Appointments

A lawyer shall not seek to avoid


appointment by a tribunal to represent a
person except for good cause, such as:
(a) representing the client is likely to result
in violation of the Rules of Professional
Conduct or other law
(b) representing the client is likely to result
in an unreasonable financial burden on the
lawyer; or
(c) the client or the cause is so repugnant to
the lawyer as to be likely to impair the
client-lawyer relationship or the lawyer's
Ch. 3 fees and
billing client.
12
ability to represent
the

The assistance of
counsel
6th Amendment, Constitution
of the United States

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13

The right to counsel

The right to counsel may well be the


most basic constitutional right of all
New York has "consistently exercised
the highest degree of vigilance in
safeguarding the right of an accused
to have the assistance of an attorney
at every stage of the legal
proceedings against him [or her]
Dissent: Hurell-Harring v. NY (3rd
Dept. 2009)
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14

COMMISSION ON THE FUTURE OF


INDIGENT DEFENSE SERVICES

FINAL REPORT TO THE CHIEF JUDGE


of the State of New York (2006)
"[t]he amount of monies
currently allocated within the
State ofNew York for the
provision of constitutionallymandatedindigent defense is
grossly inadequate.
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15

Findings

(a) excessive caseloads


(b) inability to hire full-time
defenders
(c) lack of adequate support services
(d) lack of adequate training
(e) minimal client contact and
investigation

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Who can afford a


lawyer?
Gideon v. Wainwright
The civil Gideon movement

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17

Wages
Source: U.S. Department of Labor, Bureau of
Labor Statistics 2010

Maids and housekeeping workers

Median hourly wage

Median annual earnings

$10.17

$21,150

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Wages
Source: U.S. Department of Labor, Bureau of
Labor Statistics 2010

Food Prep and Serving Workers


National Mean hourly wage $10.21

Mean annual wage

Ch. 3 fees and billing

$ 21, 240

19

Wages
Source: U.S. Department of Labor, Bureau of
Labor Statistics 2010

Family & general practitioners


National Mean hourly wage $83.93
Mean annual wage
$ 173,860
Registered nurses
National mean hourly wage $ 32.56
Mean annual wages
$ 67,720
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The end of the Guild


Monopoly pricing
Free market and attorney
advertising

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The Lot of Lawyers


Overworked?
Overpaid?

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Self employment

About 27 percent of lawyers are selfemployed, either as partners in law firms


or in solo practices.

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Lawyers mean earnings


BLS 2010

Local Government Hourly: $44.34


Annual: $92,220
State Government Hourly: $39.51
Annual: $82,190
Federal Executive Branch Hourly:
$62.60 Annual: $130,210
Management of Companies Hourly
$76.12 Annual $158,340
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24

Some data on Lawyers income


US Dept of Labor 2010
http://www.bls.gov/oes/current/oes231011.htm#st

California Hourly $74.87

Annual $155,740

New York Hourly $72.36

Annual: $150,510

Florida Hourly $56.75 Annual $118,040

Texas Hourly $61.85 Annual $128,650


Ch. 3 fees and billing

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Some data on Lawyers income


US Dept of Labor 2013
http://www.bls.gov/oes/current/oes231011.htm#st

California Hourly $74.87

Annual $155,740

New York Hourly $73.79

Annual: $153,490

Florida Hourly $59.10 Annual $123,040

Texas Hourly $64.52 Annual $134,200


Ch. 3 fees and billing

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Some data on Lawyers income


US Dept of Labor h
ttp://www.bls.gov/oco/ocos053.htm

Median annual earnings - all wage-andsalaried lawyers


$102,470
75%/25%
$69,910 to $145,600
Median annual earnings in the industries
employing the largest numbers of
lawyers in May 2006 were:
Management of companies
$128,610
Federal Government: $119,240
Legal services:
$108,100
Local government:
$78,810
State government:
$75,840
Ch. 3 fees and billing

27

Some data on Lawyers income


US Dept of Labor h
ttp://www.bls.gov/oco/ocos053.htm

Median salaries of lawyers 9 months


after graduation, 2005
by Type of work
All graduates
$60,000
Private practice
$ 85,000
Business
$60,000
Government
$46,158
Academic/judicial clerkships
$45,000
Source: National Association of Law
28
Placement Ch. 3 fees and billing

Lawyers mean earnings


BLS 2010

Local Government Hourly: $44.34


Annual: $92,220
State Government Hourly: $39.51
Annual: $82,190
Federal Executive Branch Hourly:
$62.60 Annual: $130,210
Management of Companies Hourly
$76.12 Annual $158,340
Ch. 3 fees and billing

29

Some data on Lawyers income


US Dept of Labor 2005

Median annual earnings - all wage-andsalaried lawyers


$102,470
75%/25%
$69,910 to $145,600
Median annual earnings in the industries
employing the largest numbers of
lawyers in May 2006 were:
Management of companies
$128,610
Federal Government: $119,240
Legal services:
$108,100
Local government:
$78,810
State government:
$75,840
Ch. 3 fees and billing

30

Some data on Lawyers income


US Dept of Labor h
ttp://www.bls.gov/oco/ocos053.htm

Median salaries of lawyers 9 months


after graduation, 2005
by Type of work
All graduates
$60,000
Private practice
$ 85,000
Business
$60,000
Government
$46,158
Academic/judicial clerkships
$45,000
Source: National Association of Law
31
Placement Ch. 3 fees and billing

The American Rule

Free market pricing

Each party bears its own


costs

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Counsel fees as an element of


damages

Quiet title
Legal malpractice (NY v. NJ)
`First party claims on liability
insurance policy

Litigation misconduct

Contractual
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Court Awarded Fees state law


Chancery cases

Common Funds

Statutory fees

Statutory Discrimination
Cases

Sanctions
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Fee shifting statutes

* Civil rights 42 USC 1988 (prevailing


party)
* Patent infringement 35 USC 285
(exceptional cases)
Copyright 5 USC 505 (may to prevailing
party)

* ERISA 29 USC 1132: - by participant or

beneficiary discretionary
some degree of success on the
merits.
- in collection action mandatory
* EAJA 28 USC 2412 actions v. U.S. (non

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EAJA 28 U.S.C. 2412

Under the Equal Access to Justice


Act, a court in a civil action against
the United States shall award to a
prevailing party other than the
United States fees and other
expenses . . . incurred by that party
if the position of the United States
was not substantially justified.
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Fee shifting: 42 USC 1988


Proceedings in vindication of civil rights

(b) Attorney's fees. In any action


or proceeding to enforce a provision
of 42 USC 1981-1983, 1985, 1986,
title IX of Public Law 92-318, the
Religious Freedom Restoration Act of
1993, the Religious Land Use and
Institutionalized Persons Act of 2000,
title VI of the Civil Rights Act of 1964,
section 40302 of the Violence
Against Women Act of 1994,
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Fee shifting: 42 USC 1988


Proceedings in vindication of civil rights
the court, in its discretion, may allow
the prevailing party, other than the
United States, a reasonable
attorney's fee as part of the costs
(c) Expert fees. the court, in its
discretion, may include expert fees
as part of the attorney's fee.
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When fees are shifted

Lodestar

Risk enhancement

Fee shifting statutes

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OBannon v. NCAA

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OBannon v. NCAA
Nice work if you can get it?

Attorneys fees

$46,856,319.46

Clayton Act recoverable costs


$5,555,739.07

The lodestar: $985 - $250/hour

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Clayton Act fee shifting

15 U.S.C. 26 provides that [a]ny


person.. shall be entitled to sue for
injunctive relief against threatened
loss or damage by a violation of the
antitrust laws . . . . In any action
under this section in which the
plaintiff substantially prevails,
the court shall award the cost of
suit, including a reasonable
attorneys fee, to such plaintiff.
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Plaintiffs counsels motion for fees


OBannon v. NCAA

Reasonable fees and costs span


every item of service which, at
the time rendered, would have
been undertaken by a
reasonable and prudent lawyer
to advance or protect his clients
interest . . . .

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NCAA seeks steep cuts in plaintiffs counsel fees

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NCAA objects to fees for

work prior to September 1, 2012


when Ps theory of the case changed
work done solely to advance claims
upon which Ps did not substantially
prevail
claims that were essentially
abandoned
unnecessary, redundant or inefficient
work
unsupported by plaintiffs billing
records or
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R. 1.5 - A Reasonable Fee

(a) A lawyer shall not make an


agreement for, charge, or collect an
unreasonable fee or an unreasonable
amount for expenses. Factors to be
considered in determining the
reasonableness:
(1) the time and labor required,
the novelty and difficulty of the
questions involved, and the skill
requisite to perform the legal
service properly
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R. 1.5 - A Reasonable Fee

(2) the likelihood, if apparent to


the client, that the acceptance of
the particular employment will
preclude other employment by
the lawyer

(3) the fee customarily charged


in the locality for similar legal
services

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R. 1.5 - A Reasonable Fee

(4) the amount involved and the


results obtained;

(5) the time limitations imposed


by the client or by the
circumstances

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R. 1.5 - A Reasonable Fee

(6) the nature and length of the


professional relationship with
the client;

(7) the experience, reputation,


and ability of the lawyer or
lawyers performing the services

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R. 1.5 - A Reasonable Fee

(8) whether the fee is fixed


or contingent.

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The writing requirement


Fees

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R. 1. 5 Fees

(b) The 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

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R. 1. 5 Fees

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.
Changes in the basis or rate of the
fee or expenses shall also be
communicated to the client.
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53

Variations writing reqt

The ABA in 2002 rejected a


writing requirement
5 states require it for new clients
only
NY omits preferably
NY reqs writing where required
by rule or statute (e.g.
contingent fees, domestic
relations)
Which is the better rule?
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Remedial Devices re Fees

Reduce fees

Deny fees entirely

Arbitration/ADR

Award fees quantum meruit

Sanction attorneys

Referral to disciplinary
authorities

Criminal prosecution
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Q. 3-11 p. 248 taking the call, getting


to work subject to discipline?

A) Yes - Must disclose fee basis


before starting work
B) Yes -Must confirm fee in writing
C) No disclosed fee in reasonable
time
D) No need only disclose fee on
request

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Q.3-12; 3-13 p. 249 the 72 hour day

Q. 3-12 & 3-13 can I bill two


clients for the same hour?

Yes

No

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Q. 3-14, Q. 3-15, Q. 3-16 p. 250

Stock material
Disbursements
Outsourcing

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Does hourly billing encourage


inefficiency?

Richmond:
Hourly billing forces clients and their
counsel to think carefully about
strategy and the need to perform
particular tasks when budgeting a
project.
In contrast, flat-fees . . . are a
potential disincentive to zealous
advocacy [because they] encourage
attorneys to do as little work as
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Q. 3-17, p. 262 A piece of the action?

Is it permissible to enter an
agreement for 20% of the value of
royalties?

Does that violate the RPC 1.8 bar on


acquiring a proprietary interest in a
cause of action or the subject matter
of litigation?
Would 50% be OK? 80%?

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Rule 1.8 Conflict of Interest: Current


Clients: Specific Rules
(1) the transaction and terms on
which the lawyer acquires the
interest are fair and reasonable
to the client and are fully
disclosed and transmitted in
writing in a manner that can be
reasonably understood by the
client

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Rule 1.8 Conflict of Interest: Current


Clients: Specific Rules

(a) A lawyer shall not enter into


a business transaction with a
client or knowingly acquire an
ownership, possessory, security
or other pecuniary interest
adverse to a client unless
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Rule 1.8 Conflict of Interest: Current


Clients: Specific Rules

(2) the client is advised in


writing of the desirability of
seeking and is given a
reasonable opportunity to seek
the advice of independent legal
counsel on the transaction
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Rule 1.8 Conflict of Interest: Current


Clients: Specific Rules

(3) the client gives informed


consent, in a writing signed by
the client, to the essential terms
of the transaction and the
lawyer's role in the transaction,
including whether the lawyer is
representing the client in the
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MR.P.C. 1.8 Conflicts of interest

(i) A lawyer shall not acquire a


proprietary interest in the cause of
action or subject matter of litigation
the lawyer is conducting for a client,
except that the lawyer may:
(1) acquire a lien authorized by
law to secure the lawyer's fee or
expenses; and
(2) contract with a client for a
reasonable contingent fee in a
civil case.
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IT WAS THE BEST OF TIMES, IT WAS THE WORST OF


TIMES:
THE PRECARIOUS NATURE OF THE PLAINTIFFS
PRACTICE IN TEXAS
STEPHEN DANIELS AND JOANNE MARTIN
TEXAS LAW REVIEW 1781 (2002

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The precarious nature of the


plaintiffs practice in Texas

The one-shot nature of the


practice

Political risk

Contingent fees - shared

Division of labor within the trade

Heavy hitters and bread & butter


lawyers

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Division of labor within the trade

Bread & Butter 1 Auto 51.2%

BB 2

Heavy hitters 1

Auto 27% Med Mal 13%,

Products 9%

HH 2 Med Mal 20% Auto 15%,

Auto 40%

Comml 13%
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Median case value

B&B 1 $7,250

B&B 2 $25,000

HH 1

HH 2

$71,000
$750,000

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Plaintiffs lawyers net income Texas


2000 in quartiles by # of practitioners

B&B 1 - $100, 000 - $124,999

B&B 2 $100,000 - $124,999

HH 1 $125,000 - $149,999

HH2 $150,000 - $199,999

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Sources of business (Texas PI)

% who advertise
YP 70% +/- all four categories
Mail to other lawyers BB 1 2.9%, BB
2 6.5%, HH1 6.7%, HH 2 25.2%
#1 source of cases by quartile
BB 1Advertising (20%)
BB 2 Clients (34%)
HH 1 Lawyers (42.2%)
HH 2 Lawyers (55%)
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Q.3-18 Software v. High Tech Law


RPC 1.8 p. 268

A 2 % equity interest in the


client start up

Is it fair and reasonable

Notice of desirability of outside


counsel

Informed consent, in writing


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Changing in midstream (Q. 3-19, p. 278)


Restatement 18
(a) if the contract or modification
is made beyond a reasonable
time after the lawyer has begun
to represent the client in the
matter the client may avoid it
unless the lawyer shows that the
contract and the circumstances
of its formation were fair and
reasonable to the client
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Lawrence v. Miller (NY 2008) p. 265

$40 million for five months work!

Motion on the pleadings

Reasonable?

Unconscionable?

Enforceable?

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Lawrence v. Miller (NY 2008) p. 280


Given the courts' role in closely
scrutinizing contingent fee
agreements even if..an agreement
is not determined to be
unconscionable as of its inception
[C]ircumstances arising after
contract formation can render a
contingent fee agreement
unenforceable where the amount of
the fee, combined with the large
percentage of the recovery it
represents, seems disproportionate
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Ethical Consideration 2-17


Model Code of Prof. Resp.
Determination of a proper fee
requires consideration of the
interests of both client and lawyer.
A lawyer should not charge more
than a reasonable fee, for excessive
cost of legal service would deter
laymen from utilizing the legal
system in protection of their rights.
An excessive charge abuses the
professional relationship between
lawyer and client
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UCC SECTION 2-302. UNCONSCIONABLE


CONTRACT OR TERM

1) If the court as a matter of law finds


the contract or any term of the contract
to have been unconscionable at the time
it was made, the court may

- refuse to enforce the contract

- enforce the remainder of the contract


without the unconscionable term

- limit the application of any


unconscionable term
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California State Bar 4-200

(A) Amembershall not enter into


an agreement for, charge, or
collect an illegal or unconscionable
fee.
(B) Unconscionability of a fee shall
be determined on the basis of all
the facts and circumstances
existing at the time the agreement
is entered into except where the
parties contemplate that the fee
will be affected by later events.
Chapter 4 Counsel Fees

78

Q. 3-20 p. 284 Contingent fees


in criminal cases

Why not permit it?

If you keep me out of jail

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The criminal defense ban

In Commonwealth v. Facella, 679


N.E.2d 221, 226 (Mass. App. Ct.
1996) defendant was charged with
armed assault with intent to murder
the retainer agreement provided that
defense counsel Beatrice
would be paid an additional $ 15,000
if he negotiated a sentence of no
more than ten years. He did so.
Should such contracts be barred?
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Q. 3-21 p 286 Guaranteeing a note


Is the lawyer subject to

discipline?
(A) Yes, because Attorney is lending
her credit to Client.
(B) Yes, because Attorney is helping
to finance litigation.
(C) No, because the funds will be
used for trial preparation.
(D)No, because Attorney took the
case on a contingent fee basis.
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Q. 3-22 p. 287 the Barefoot


child

Are the corporal works of mercy


barred?

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Q. 3-23 Easing the burden p.


288

A) accept credit cards


B) arrange a bank loan for fee
payment
C) take publication rights
What about the First Amendment?
Arent royalties items in commerce?

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Dividing the money


Referral fees and division of
fees among law firms

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Q. 3-24 Dividing the fees p.288


Is the lawyer subject to discipline?
(A) Yes, unless Clients consent is in
writing.
(B) Yes, because Alpha will not try the
case.
(C) No, if the division of the fee
between Alpha and Beta is in
proportion to actual work done by
each.
(D)No, because the total fee does not
differ from that contracted for by Alpha
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Dividing fees among lawyers

Lawyers fees are not shared with


non-lawyers
Within a firm
Lawyers can freely share fees
Of counsel?
Outside a firm
Proportionate to work and expense
Assumption of joint legal
responsibility
With clients consent in writing
With a certified specialist (minority
rule)
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R. 1.5 (e) Division of fees

A division of a fee between


lawyers who are not in the same
firm may be made only if:
(1) the division is in proportion
to the services performed by
each lawyer or
each lawyer assumes joint
responsibility for the
representation
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R. 1.5 (e) Division of fees

(2) client agrees to the


arrangement, including the
share each lawyer will receive,
and the agreement is confirmed
in writing and
(3) the total fee is reasonable.

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New Jersey Rules of Court


Rule 1:39 (d) Certification of attorneys
Division of Fees. A certified
attorney may divide a fee for
legal services without regard to
services performed or
responsibility assumed by the
referring attorney
IF
the total fee does not exceed
reasonable compensation
BUT
Matrimonial law matters are
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ABA Formal Opinion 464 (2013)

Lawyers subject to the Model Rules


may work with other lawyers or law
firms practicing in jurisdictions with
rules that permit sharing legal fees
with nonlawyers [such as the U.K.]...
provided that there is no interference
with the lawyers independent
professional judgment.
Ch. 3 fees and billing

90

Q. 3-25 p. 89 Is it proper for the lawyer to


accept the aunts check?
(A) Yes, if Aunt does not attempt to
influence Attorneys conduct of the case.
(B) Yes, if Attorneys charges to Defendant
are reduced accordingly.
(C) No, because Aunt is attempting to
finance litigation to which she is not a
party.
(D)No, unless Attorney first informs
Defendant and obtains Defendants
consent to retain the payment.
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91

Q. 3-26 Safeguarding property of


others, p. 291

Is the attorney subject to discipline?


(A) Yes, because the attorney had a
duty to promptly notify the client of
the receipt of the $1,000,000.
(B) Yes, because the attorney gave
unsolicited advice about nonlegal
matters.
(C) No, because the client did not
object to the withholding of the
notice and funds.
(D) No, because the attorney acted
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RPC 1.15 safekeeping property

(e) When in the course of


representation a lawyer is in
possession of property in which two
or more persons (one of whom may
be the lawyer) claim interests, the
property shall be kept separate by
the lawyer the dispute is resolved.
The lawyer shall promptly distribute
all portions of the property as to
which the interests are not in
dispute.
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Q. 3-27 p. 291 Borrowing money from trust

No harm no foul?
Is ratification by the client a
defense?
Relevant Rules
RPC 1.15 (a)
RPC 1.15 (c)

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RPC 1.15 safekeeping property

(a) A lawyer shall hold property of


clients or third persons that is in a
lawyer's possession in connection
with a representation separate
from the lawyer's own property.
Other property shall be identified as
such and appropriately
safeguarded.
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Q. 3-28, p. 292 What should the attorney do


with the $1,600?
(A) Take it
(B) Put the $600 in the fee account
and leave $1,000 in the clients trust
account until the attorney's fee for
the final appeal is determined.
(C) Transfer $600 to the fee account
and send the client a $1,000 check
on the clients' trust account.
(D) Send the client a $1,000 check
and leave $600 in trust
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Q. 3-29, p. 293 Where to put the


money?

Is the attorney subject to


discipline for putting the
estimated fees to be earned in
the attorney fee account?
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97

RPC 1.15 safekeeping property

(c) A lawyer shall deposit into a


client trust account legal fees
and expenses that have been
paid
in advance, to be withdrawn by
the lawyer only as fees are
earned or expenses incurred.

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98

RPC 1.15 safekeeping property

(d) Upon receiving funds or other


property in which a client or
third person has an interest, a
lawyer shall promptly notify the
client or third person.

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99

R. 1.5 Fees
Exception to Prohibited Contingent Fees

[6] ... - recovery of post-judgment


balances due under support,
alimony or other financial orders

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100

Q. 3-30 - p. 305

May the State demand as a


condition of settlement that
plaintiff give up fees to which it
may be entitled as a prevailing
party under 42 USC 1988?

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101

Evans v. Jeff D [1986] p. 291

Brennan dissenting
by awarding attorney's fees
Congress sought to attract
competent counsel to represent
victims of civil rights violations.
Congress' primary purpose was to
enable "private attorneys general" to
protect the public interest by
creating economic incentives for
lawyers to represent them.
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102

Contingent fees
Lawyers working on spec

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103

Contingent Fees RPC. 1.5

Generally permitted (except if


prohibited)

Must be written retention


agreement

Basis of calculation must be


stated

Litigation expenses deducted or


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104

Contingent Fees - generally


The norm for plaintiffs in PI
cases, workers compensation, SS
disability, subrogation claims,
debt collection
Closely regulated in PI cases by
statute and rule
Barred in
- criminal defense
- marriage dissolution & child
support cases

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105

Restatement LGL 35, cmt b

(p. 249)

Contingent-fee arrangements
perform three valuable functions.

1) enable persons who could not


otherwise afford counsel to
assert their rights, paying their
lawyers only if the assertion
succeeds
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106

Restatement LGL 35, cmt b

2) give lawyers an additional


incentive to seek their clients'
success and to encourage only
those clients with claims having
a substantial likelihood of
succeeding.

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107

Restatement LGL 35, cmt b

3) enable a client to share the


risk of losing with a lawyer, who
is usually better able to assess
the risk and to bear it by
undertaking similar
arrangements in other cases

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108

MRPC 1.5 (d) A lawyer shall not

Enter into an arrangement for,


charge or collect:
1) any fee in a domestic relations
matter, the payment of which is
contingent on divorce or the amount
of alimony or support or property
settlement in lieu thereof
2) a contingent fee for representing a
defendant in a criminal case
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109

MRPC 1.5 Contingent Fees


Permitted

(c) in a writing signed by the


client

shall state the method by which


the fee is to be determined,
including the percentage or
percentages that shall accrue to
the lawyer in the event of
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110

MRPC 1.5 Contingent Fees


Permitted

Expenses
whether such expenses are to be
deducted before or after the
contingent fee is calculated
In the event of loss
must clearly notify the client of any
expenses for which the client will
be liable if the client does not
prevail
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111

R. 1.5 Contingent Fees Permitted

Accounting
the lawyer shall provide the
client with a written statement
stating the outcome of the
matter and, if there is a
recovery, showing the
remittance to the client and the
method of its determination

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112

Contingent Fees - New York


NY CLS Jud 474

PI and wrongful death claim


contingent fees are set by each of
the four Judicial Departments
BUT
Medical malpractice fees are set
by 474
Infant and guardian fees set by
court
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113

SUPREME COURT RULES 3rd JUDICIAL DEPT.


ARTICLE 1. APPELLATE DIVISION
SUBARTICLE B. ATTORNEYS
NY CLS Sup Ct 806.13 (a) (2007)

The receipt, retention or sharing


of contingent compensation in
excess of the schedule of fees
shall constitute the exaction of
unreasonable and unconscionable
compensation
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114

SUPREME COURT RULES 3rd JUDICIAL DEPT.


ARTICLE 1. APPELLATE DIVISION
SUBARTICLE B. ATTORNEYS
NY CLS Sup Ct 806.13 (a) (2007)

SCHEDULE A
(1) 50 per cent on the first $ 1,000 of the sum
recovered,
(2) 40 per cent on the next $ 2,000 of the sum
recovered,
(3) 35 per cent on the next $ 22,000 of the
sum recovered,

(4) 25 per cent on any amount over $ 25,000


of the sum recovered
Ch. 3 fees and billing
115
Extraordinary result
may justify higher
fee

SCHEDULE B

A percentage not exceeding

33 1/3 % of the sum recovered

No additional compensation
because of extraordinary
circumstances may be sought

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116

How the fee is computed

Net sum recovered


after deducting
expenses and disbursements for
Filing fees
Depositions
Medical records
Expert witnesses
Investigative or other services
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117

(ii) if.. the attorney agrees to pay costs and


expenses of the action pursuant to Judiciary
Law section 488(2)(d),
on the gross sum recovered
before deducting expenses and
disbursements.

In computing

the fee, the costs as taxed,


including interest upon a
judgment, shall be deemed part
of the amount recovered.
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118

(ii) if.. the attorney agrees to pay costs


and expenses of the action pursuant to
Judiciary Law section 488(2)(d),

For the following or similar items


there shall be no deduction in
computing such percentages:
liens, assignments or claims in
favor of hospitals, for medical
care and treatment by doctors
and nurses, or of self-insurers or
insurance carriers.
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119

How the fee is computed

Taxed costs and interest upon a


judgment are part of the amount
recovered

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120

How the fee is calculated

No deduction for liens,


assignments or claims in favor of
hospitals, for medical care and
treatment by doctors and nurses,
or self-insurers or insurance
carriers.

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121

How the fee is calculated

Common liens
Medicare
Medicaid (and other public
entitlement)
Assignments of benefits
Union-mgt benefit funds (ERISA)
Workers compensation

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122

NY CLS Jud 474-a Contingent fees in claims or


actions for medical, dental or podiatric malpractice

30 % of the first $ 250,000 of the sum


recovered;
25 % of the next $ 250,000 of the sum
recovered;
20 % of the next $ 500,000 of the sum
recovered;
15 % of the next $ 250,000 of the sum
recovered;
10 % of any amount over $ 1,250,000 of
the sum recovered.
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123

NY CLS Jud 474-a Extraordinary Circumstances

Trial judge has discretion to fix as


reasonable compensation an
amount greater than 474-a
- in extraordinary circumstances
- without regard to the claimant's
consent
BUT not in excess of that provided
by contract between attorney &
client
Are such reductions in med mal
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124

NY Rules of the Appellate Courts


691.20:
Retainer and Closing Statements
2nd Judicial Department

Written retainers, etc. reqd in:


personal injury
property damage
wrongful death
condemnation or change of grade
proceedings

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125

NY Rules of the Appellate Courts


691.20 Retainer and Closing Statements
2nd Judicial Department

(1) Every attorney who accepts a


retainer or enters into an agreement,
express or implied, for compensation
for services whereby his
compensation is to be contingent in
whole or in part upon successful
prosecution or settlement
Shall, within 30 days sign personally
and file with the Office of Court
Administration of the State of New
York a written statement of such
Ch. 3 fees and billing
126
retainer or agreement.

NY Rules of the Appellate Courts


691.20 Retainer and Closing Statements
2nd Judicial Department

(b) Closing statement; statement


where no recovery.
(1) A closing statement shall be filed in
connection with every claim in which
a retainer statement is required, as
follows: Every attorney upon receiving,
retaining or sharing any [such] sum
shall, within 15 days after such
receipt, retention or sharing, sign
personally and file with the Office of
Court Administration and serve upon
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127
the client a closing statement

NY Rules of the Appellate Courts


691.20 Retainer and Closing Statements
2nd Judicial Department

Retainer agreement, under which


attorney would receive [less than rules
permit] was not enforceable due to
failure to timely file. Connors v. Wildstein
(2 Dept. 2000)

Attorney was suspended from practice


of law for one year .. For failing to
prepare retainer statement for filing
with Office of Court Administration in
personal injury case and by failing to
Ch. 3 fees and billing
128
prepare closing
statement Matter
of

N.J. Court Rules, R. 1:21-7 Contingent fees

(c) In any [tort claim for damages] but


excluding statutorily based
discrimination and employment claims,
and the client is not a subrogee, an
attorney shall not contract for, charge,
or collect a contingent fee in excess of
the following limits
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129

N.J. Court Rules, R. 1:21-7 Contingent fees in


Personal Injury and Wrongful Death Cases

(1) 33 1/3% on the first $ 750,000 recovered;

(2) 30% on the next $ 750,000 recovered;

(3) 25% on the next $ 750,000 recovered;

(4) 20% on the next $ 750,000 recovered

Court will set fee if above $3million


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130

N.J. Court Rules, R. 1:21-7 Contingent fees

25% in case of minors and mentally


incapacitated persons if the case settles
without trial

includes services rendered on any


appeal or review proceeding or on any
retrial, but this shall not be deemed to
require an attorney to take an appeal
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131

N.J. Court Rules, R. 1:21-7 Contingent fees

(f) If at the conclusion of a matter an


attorney considers the fee permitted by
paragraph (c) to be inadequate, an
application on written notice to the
client may be made to the Assignment
Judge for the hearing and determining
of a reasonable fee in light of all the
circumstances.
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132

Federal Tort Claims Act


Statutory contingent fee
limits

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133

28 U.S.C. 2678. Attorney fees; penalty

No attorney shall charge, demand,


receive, or collect for services
rendered, fees in excess of 25% of
any judgment or [settlement]

or in excess of 20% of any award,


compromise, or settlement (at
administrative adjustment stage]
[28 USC 2672]
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134

28 U.S.C. 2678. Attorney fees; penalty

Any attorney who charges,


demands, receives, or collects for
services rendered in connection
with such claim any amount in
excess of that allowed under this
section, if recovery be had, shall
be fined not more than $ 2,000 or
imprisoned not more than one
year, or both.

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135

Setting a Reasonable Fee for the private attorney


general - Johnson v. Georgia Hwy Express (5th
Cir.-OLD 1974)

Title VII of the Civil Rights Act of


1964, 42 U.S.C.A. 2000e-5(k):

the Court, in its discretion, may


allow the prevailing party . . . a
reasonable attorney's fee as part of
the cost of the litigation.
Ch. 3 fees and billing

136

Setting a Reasonable Fee for the private attorney


general - Johnson v. Georgia Hwy Express (5th
Cir.-OLD 1974)

If [the plaintiff] obtains an


injunction, he does so not for
himself alone but also as a "private
attorney general," vindicating a
policy that Congress considered of
the highest priority.
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137

Setting a Reasonable Fee for the private attorney


general - Johnson v. Georgia Hwy Express (5th
Cir.-OLD 1974)

If successful plaintiffs were routinely


forced to bear their own attorneys' fees,
few aggrieved parties would be in a
position to advance the public interest
by invoking the injunctive powers of the
federal courts.

This Court..."to make sure that Title VII


works," has liberally applied the
attorney's fees provision
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138

The Johnson Factors

The Disciplinary rules/RPC 1.5


factors PLUS
(10) The "undesirability" of the
case.
Civil rights attorneys face hardships in
their communities because of their
desire to help the civil rights litigant.
This can have an economic impact on
his practice which can be considered by
the Court.
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139

What is a reasonable
fee?
Lodestar
Contingent fee enhancement

Ch. 3 fees and billing

140

Perdue v. Kenny A. ex rel. Winn, 130 S. Ct.


1662 (2010) p. 284 6 Rules

1) a reasonable fee is one that is


sufficient to induce a capable
attorney to undertake the
representation of a meritorious civil
rights case but that does not provide
a form of economic relief to improve
the financial lot of attorneys
2) there is a strong presumption
that the lodestar method yields a
sufficient fee.
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141

Perdue v. Kenny A. ex rel. Winn, 130 S. Ct.


1662 (2010) p. 284 6 Rules

3) the Court has never sustained an


enhancement of a lodestar amount
for performance, but has repeatedly
said that an enhancement may be
awarded in rare and exceptional
circumstances.
4) the lodestar includes most, if not
all, of the relevant factors
constituting a reasonable attorney's
fee.
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142

Perdue v. Kenny A. ex rel. Winn, 130 S. Ct.


1662 (2010) p. 284 6 Rules

5) the burden of proving that an


enhancement is necessary must be
borne by the fee applicant.
6) an applicant seeking an
enhancement must produce specific
evidence supporting the award, to
assure that the calculation is
objective and capable of being
reviewed on appeal.
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143

New York
Rule 1.5

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144

Fees for Legal Services


[22 NYCRR 1200.11]

R. 1.5 (a)

A lawyer shall not make an


agreement for, charge, or collect
an excessive or illegal fee or
expense.

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145

R. 1.5 (a) Fee for Legal Services


[22 NYCRR 1200.11]

A fee is excessive when, after a


review of the facts, a reasonable
lawyer would be left with a
definite and firm conviction that
the fee is excessive.

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146

Model Rule 1.5: Fees

(a) A lawyer shall not make an


agreement for, charge, or collect
an unreasonable fee or an
unreasonable amount for
expenses.

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147

R. 1.5 (1) Factors to consider

time and labor required

novelty and difficulty of the


questions involved

skill needed to perform the legal


service properly

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148

R. 1.5 Factors to consider

(2) the likelihood, if apparent to


the client, that the acceptance of
the particular employment will
preclude other employment by the
lawyer

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149

R. 1.5 Factors to consider


(3) the fee customarily charged in
the locality for similar legal
services

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150

R. 1.5 Factors to consider


(4) the amount involved and the
results obtained

Ch. 3 fees and billing

151

R. 1.5 Factors to consider

(5) the time limitations imposed


by the client or by the
circumstances

(6) the nature and length of the


professional relationship with
the client

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152

R. 1.5 Factors to consider

(7) the experience, reputation,


and ability of the lawyers

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153

R. 1.5 Factors to consider

(8) is the fee fixed or contingent

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154

Not only fees, but attitudes shift


City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.

The "lodestar" is "the product of reasonable


hours times a reasonable rate"

District Court declared that Dague's "risk of not


prevailing was substantial" and that "absent an
opportunity for enhancement, [Dague] would
have faced substantial difficulty in obtaining
counsel of reasonable skill and competence in
this complicated field of law [Clean Water
Act]."
It concluded a 25% enhancement is
appropriate, but anything more would be a
3 fees and billing
155
windfall to the Ch.
attorneys."

Dague v. City of Burlington

We note at the outset that an


enhancement for contingency would
likely duplicate in substantial part
factors already subsumed in the
lodestar. The risk of loss in a
particular case (and, therefore, the
attorney's contingent risk) is the
product of two factors: (1) the legal
and factual merits of the claim, and
(2) the difficulty of establishing those
merits.
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156

Dague v. City of Burlington

The second factor, however, is


ordinarily reflected in the lodestar -either in the higher number of hours
expended to overcome the difficulty,
or in the higher hourly rate of the
attorney skilled and experienced
enough to do so.
Taking account of it again through
lodestar enhancement amounts to
double counting.
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157

Not only fees, but attitudes shift


City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.

We see a number of reasons for


concluding that no contingency
enhancement whatever is
compatible with the fee-shifting
statutes at issue.

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158

Not only fees, but attitudes shift


City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.

Just as the statutory language


limiting fees to prevailing parties
bars a prevailing plaintiff from
recovering fees relating to claims on
which he lost, so should it bar a
prevailing plaintiff from recovering
for the risk of loss.
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159

Not only fees, but attitudes shift


City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.

To award a contingency
enhancement under a fee-shifting
statute would in effect pay for the
attorney's time (or anticipated time)
in cases where his client does not
prevail.
Ch. 3 fees and billing

160

Not only fees, but attitudes shift


City of Burlington v. Dague, 112 S. Ct. 2638 (U.S. 1992)
JUSTICE SCALIA delivered the opinion of the Court.

An attorney operating on a
contingency-fee basis pools the
risks presented by his various
cases: cases that turn out to be
successful pay for the time he
gambled on those that did not.

Gambling? Or entrepreneurial riskCh. 3 fees and billing

161

Rendine v. Pantzer, 141 NJ 292 (2005)

We are unpersuaded by Justice


Scalia's suggestion in Dague,
supra, that awarding
contingency enhancement under
a fee-shifting statute "would in
effect pay for the attorney's time
(or anticipated time) in cases
where his client does not
prevail." ...
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162

Rendine v. Pantzer, 141 NJ 292 (2005)

In our view the case for


contingency enhancement has
nothing to do with the amount of
time lawyers invest in losing
cases.

It rests on the desire to enable


parties to compete for legal
services in the private market.
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163

Rendine v. Pantzer, 141 NJ 292 (2005)

A more practical approach is that


outlined in the Delaware Valley II
dissent. A court's job is to
determine
1) was the case was taken on a
contingent basis?
2) was the attorney able to
mitigate the risk of nonpayment in
any way?
3) were other economic risks were
aggravated by the contingency of
Ch. 3 fees and billing

164

Rendine v. Pantzer, 141 NJ 292 (2005)

It is the actual risks or burdens


that are borne by the lawyer or
lawyers that determine whether
an upward adjustment is called
for.'
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165

Rendine v. Pantzer, 141 NJ 292 (2005)

We conclude that contingency


enhancements in fee-shifting cases
ordinarily should range between 5%
and 50% of the lodestar fee,
the enhancement in typical
contingency cases should range
between 20% and 35 % of the
lodestar.

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166

Rendine v. Pantzer, 141 NJ 292 (2005)

Enhancements should never exceed


100%of the lodestar
Enhancement of that size will be
appropriate only in the rare and
exceptional case in which
- the risk of nonpayment has not been
mitigated at all,
i.e., where the "legal" risk constitutes
"an economic disincentive independent
of that created by the basic contingency
in payment *
[AND] the result achieved * * * is
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billing
significant and
ofandbroad
public167interest.

Aggregate Litigation
Managing the conflicts among
claimants and lawyers

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168

Principal types of aggregate claims


Class actions (FRCP 23)

- fairness hearings

Single action with multiple


claimants

Quasi class actions/Consolidated


case management

- state mass tort case


management

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169

R. 1.8 (g) Conflicts Aggregate


Litigation

A lawyer who represents two or


more clients shall not participate
in making an aggregate
settlement of the claims of or
against the clients, or in a
criminal case an aggregated
agreement as to guilty or nolo
contendere pleas, unless:
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170

Aggregate Litigation:
Class Actions
Fees drawn from a common
fund

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171

Florin v. Nationsbank of Ga., N.A.


(7th Cir. 1995) Class actions

attorneys' fees from a "common


fund

judge-made exception to the


"American Rule

Judicial discretion -

lodestar method

percentage of recovery method

or some combination of the two


Ch. 3 fees and billing

172

Florin v. Nationsbank of Ga., N.A. (7th Cir. 1995)


Class actions

Counsel for the class sought

Lodestar $ 1,863,838.75

Enhanced by risk multiplier (1.53)

= $ 2.85 million or 18.45 % of the fund

District court on remand.... allowed the


smallest possible multiplier of 1.01

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173

Florin v. Nationsbank of Ga., N.A.


(7th Cir. 1995) Class actions

We review the district court's award


of attorneys' fees deferentially
plaintiff class is unrepresented in
the issue of attorneys' fees
court must jealously guard the
interests of the class.
court must also be careful to sustain
the incentive for attorneys on an
"inescapably contingent" basis
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174

Florin v. Nationsbank of Ga., N.A.


(7th Cir. 1995) Class actions

The risk multiplier is an effort to


mimic market forces.

The district court in essence


found that the attorneys for the
class faced no risk in taking on the
case, that in the end, they were
assured of a paycheck. We
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175

Florin v. Nationsbank of Ga., N.A.


(7th Cir. 1995) Class actions

the benchmark in common fund


cases is 20 % - 30 %
Usual range 13 % - 20 % for
funds of $ 51-$ 75 million
6-10 % range for funds of $ 75-$
200 million
the multiplier of 1.53 leads to
attorneys' fees of $ 2.85 million about 18.5 % of the settlement
fund
Ch. 3 fees and billing

176

Florin v. Nationsbank of Ga., N.A.


(7th Cir. 1995) Class actions

the benchmark in common fund


cases is 20 % - 30 %
Usual range 13 % - 20 % for
funds of $ 51-$ 75 million
6-10 % range for funds of $ 75-$
200 million
the multiplier of 1.53 leads to
attorneys' fees of $ 2.85 million about 18.5 % of the settlement
fund
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177

Aggregate Tort Litigation


Private agreement or judicial
control?

Ch. 3 fees and billing

178

WTC Ground Zero cases

Judge Hellerstein refused to mark


cases settled when the lawyers for
City, contractors and plaintiffs
presented their agreement.
He ordered them to continue to trial,
etc.
He said that not enough money was
going to plaintiffs and too much was
going to lawyers.
Its a quasi class action, he said
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179

WTC Ground Zero cases

What should the lawyers do if they


think he is overreaching?

Did the Judge have the right to


approve or disapprove a private
settlement?

Almost all the money is federal funds


(WTC Captive) - does that make a
difference?
Ch. 3 fees and billing

180

WTC Ground Zero cases

Plaintiffs lawyers: $30 Million in costs


for 8 years, plus tens of millions for
staff, etc.

Defense took 1,200 deps, spent $200


M

Clients signed standard NY retainer


agreements providing 33 1/3%

contingency
* did Judge Hellerstein have the right
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181

R. 1.8 (g) Conflicts Aggregate Litigation


each client gives informed
consent, in a writing signed by
the client.
The lawyer's disclosure shall
include
the existence and nature of all
the claims or pleas involved and
the participation of each person
in the settlement
Does the WTC settlement honor
these principles?
Ch. 3 fees and billing

182

Quaere

* are the plaintiffs adequately


informed of the terms of the
aggregate settlement under RPC 1.8
(g)?

* do the opt outs have a realistic


chance?

* will 95% take the settlement?


Ch. 3 fees and billing

183

Apportioning fees among


lawyers in MDL litigation

Individually retained lawyers

Lead counsel

State vs. Federal litigation on


parallel tracks

Ch. 3 fees and billing

184

Zyprexa

Judge Jack B. Weinstein


467 F. Supp. 2d 256 (EDNY 2006)

Ch. 3 fees and billing

185

Federalism: the state court problem

State-Federal Comity
Conflicts of interest due to differing
fee structures
Equity
Litigation misconduct
- state court filings to evade MDL fee
limits and common benefit
assessments
- filings of non-meritorious new
claims
Ch. 3 fees and billing

186

Common benefit work by Plaitniffs


Steering committee 1

Discovery
Bellwether trials
Settlement negotiations
8000 cases settled
Claims processing and payment
procedures and implementation
Resolving Medicare and Medicaid
liens (agreement approved by all
states and federal government)
Ch. 3 fees and billing

187

Attorneys fee structure

Capping fees
20% of recovery in smaller, lumpsum claims
35% of recovery in all other claims
1% hold-back from the gross
settlement , plus interest on the
escrow fund for Plaintiff Steering
Committee I (PSC 1)
PSC II not set
Ch. 3 fees and billing

188

Common benefit fund purpose

Reimburse members of PSC I and


other attorneys for the time and
funds expended by them for the
common benefit of all settling
plaintiffs in

conduct of the litigation

implementation of the
settlement

Ch. 3 fees and billing

189

January 5, 2007 New York Times


Lilly Settles With 18,000 Over Zyprexa

At least 1,200 suits are still


pending, the company said.

The settlement covers cases filed


in state and federal courts by law
firms or groups of firms.

The federal suits have been


overseen by Judge Jack B.
Weinstein

Ch. 3 fees and billing

190

Sources of courts authority to


control fees

Inherent authority to sanction


officers of the court
FRCP Rule 11
MDL Complex Litigation Manual
28 USC 1927
22 NYCRR 130-1

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Manual for Complex Litigation 20.312


(4th ed. 2004) Federal Judicial Center

"MDL judges generally issue orders


directing that defendants who settle
MDL-related cases contribute a fixed
percentage of the settlement to a
general fund to pay national
counsel.

What authority does that give judge


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VI. Equity; Avoidance of Conflict of


Interest

It would be equitable to require state


plaintiffs' attorneys to pay their
proportionate share of the time and
costs incurred by PSC II in its work for
the common benefit of all plaintiffs,
state and federal. Cf. 28 U.S.C.
1407(a) (district court's ultimate goal
in multidistrict litigation is to
"promote the just and efficient
conduct of such actions").
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VI. Equity; Avoidance of Conflict of Interest

Such an arrangement would avoid


the troubling potential for attorney
conflict of interests that otherwise
would exist: Attorneys face distorted
incentives to file cases in state courts
without respect for the best interests
of their clients because the attorneys
can use PSC II's work without paying
for it out of their fees when in state
court, but would have to pay their
fair share if they were in federal
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VI. Equity; Avoidance of Conflict of


Interest

In state court, they may also claim


they can escape this court's
limitation on their own direct fees,
resulting in a smaller recovery for
their state clients but an increase in
their own fees. See In re

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Fund in court - NJ Rule 4:42-9

(2) Out of a fund in court. The court


in its discretion may make an
allowance out of such a fund, but no
allowance shall be made as to issues
triable of right by a jury.

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Fund in court - NJ Rule 4:42-9

(2)

A fiduciary may make payments on


account of fees for legal services
rendered out of a fund entrusted to
the fiduciary for administration,
subject to approval and allowance or
to disallowance by the court upon
settlement of the account.
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1927. Counsels liability for


excessive costs

Any attorney or other person


admitted to conduct cases in any
court of the United States or any
Territory thereof who so multiplies
the proceedings in any case
unreasonably and vexatiously may
be required by the court to satisfy
personally the excess costs,
expenses, and attorneys fees
reasonably incurred because of such
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FRCP Rule 11

Provides for sanctions for litigation


misconduct
- costs to adverse party including
attorneys fees

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Sanctions under New York Law

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AWARDS OF COSTS AND IMPOSITION OF FINANCIAL


SANCTIONS FOR FRIVOLOUS CONDUCT IN CIVIL
LITIGATION - 22 NYCRR 130-1.1

Costs and reasonable attorneys


fees may be awarded TO a party
injured by frivolous litigation
conduct of

Attorneys

Parties

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AWARDS OF COSTS AND IMPOSITION OF FINANCIAL


SANCTIONS FOR FRIVOLOUS CONDUCT IN CIVIL
LITIGATION - 22 NYCRR 130-1.1

Conduct is frivolous if:


(1) completely without merit in law
and cannot be supported by a
reasonable argument for an
extension, modification or reversal
of existing law;
(2) it is undertaken primarily to
delay or prolong the resolution of
the litigation, or to harass or
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202

AWARDS OF COSTS AND IMPOSITION OF FINANCIAL


SANCTIONS FOR FRIVOLOUS CONDUCT IN CIVIL
LITIGATION - 22 NYCRR 130-1.1

(3) it asserts material factual


statements that are false.
Frivolous conduct shall include the
making of a frivolous motion for
costs or sanctions under this
section.

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Who owns the fee


awarded?
Client?
Lawyer?

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Astrue, SS Commr v. Ratliff (8th


Cir. 2008)

Attorneys fees awarded under


the EAJA are awarded to the
prevailing parties attorneys,
rather than to the parties
themselves.

Argued in SCOTUS 2/22/2010


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Astrue v. Ratliff, 8th Cir.

The prevailing party is only


nominally the person who
receives the award

The real party in interest vis-vis attorneys fees awarded


under the statute are the
attorneys themselves.
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Astrue v. Ratliff, 8 Cir.


th

EAJA fee awards become the


property of the prevailing partys
attorney when assessed and may not
be used to offset the claimants debt
to the United States
Are there policy considerations
that support the 8th Circuit view?

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Astrue v. Ratliff Supreme Court


(2010)

Section 204(d) of the Equal Access to


Justice Act (EAJA), 28 U. S. C.
2412(d), provides: a court shall
award to a prevailing party . . . fees
and other expenses . . . in any civil
action . . . brought by or against the
United States . . . unless the court
finds that the position of the United
States was substantially justified.
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208

Astrue v. Ratliff Supreme Court


(2010) The fee belongs to the client

We hold that a 2412(d) fees


award is payable to the litigant
and is therefore subject to a
Government offset to satisfy a
pre-existing debt that the
litigant owes the United States.
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209

Rendine v. Pantzer, 141 NJ 292 (2005)

The Fee Belongs to the Client


Rendine v. Pantzer
Terms per retainer agreement:
50% of Baumgart and associate's then current rate
Plus 25% of recovery net of expenses
(or fees awarded by court)

Adjusted gross recovery (subject to fees)$935,000.00

Fees per retainer agreement


Rate: $68.75/hour (blended)
646.65 hours @68.75) $44,457.19
25% of net recovery $233,750.00
Total fee due to attorneys for plaintiffs per agreement
$278,207.19
Payable by plaintiffs 100%

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Rendine v. Pantzer, 141 NJ 292 (2005)

Effect of fee shift by trial court


Lodestar hourly sought - and accepted by trial court
$176.81
100% enhancement of lodestar rate per trial court
$176.81
Enhanced hourly rate per trial court $353.62
Payable by Pantzer
$228,668.37
Counsel fees payable by plaintiffs $49,538.81

Effect of N.J. Supreme Court ruling


1/3 enhancement of lodestar hourly rate per Supreme
Court $235.75
646.65 hours @ 1/3 enhanced rate
Shifted fee set by N.J. Supreme Court
Payable by Pantzer
$152,445.58
Net payable by plaintiffs (after offset of Pantzer share)
$125,761.61
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211

Quantum meruit

Non-contractual basis for recovery of


fees

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212

Quantum Meruit -Non-contractual basis of fees

Quantum meruit is the wellestablished principle that the law


implies a promise to pay for services
performed under circumstances
disclosing that they were not
gratuitously rendered.

Strong v. Beydoun, 2008 Cal. App. LEXIS


1445 (Cal. App. 4th Dist. Sept. 19, 2008)
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Quantum Meruit -Non-contractual basis of fees

[A] party need not prove the


existence of a contract, but it
must show the circumstances
were such that the services
were rendered under some
understanding or expectation of
both parties that compensation
therefor was to be made.
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214

Quantum Meruit -Non-contractual basis of fees

Strong agreed with Sujanen to work on


a case and to divide counsel fees in an
agreed percentage

Sujanen promised to but did not obtain


client approval of fee division.

Sujanen fired Strong and collected all


fees including Strongs $75,000 share

Clients knew Strong was working on the


case.

Strong sued the clients when Sujanen


refused to pay her.
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215

Quantum Meruit -Non-contractual basis of fees

A) Strong should get nothing from


Sujanen
B) Strong should recover from the
clients who knew she wasnt working
for free
C) Strong should get nothing from
clients who did not hire her
D) Strong and Sujanen should both
be referred to the ethics committee
for entering an illegal contract
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216

Quantum Meruit -Non-contractual basis of fees

Allowing an attorney to recover


the reasonable value of his or
her services from a client is
premised on the services being
requested by the client.

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217

Quantum Meruit -Non-contractual basis of fees

Held:

Agreement unenforceable against


clients who did not consent to it

No quantum meruit recovery against


clients because no services were
performed at their request

Only remedy is against attorney Sujanen

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218

Attorneys fees as a sanction

Award of reasonable attorneys


fees to a party harmed by
litigation misconduct

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219

FRCP 11

b) Representations to the Court.


By presenting to the court a
pleading, written motion, or
other paper whether by
signing, filing, submitting, or
later advocating it an attorney
or unrepresented party certifies
that to the best of the person's
knowledge, information, and
belief, formed after an inquiry
reasonable under the
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220

FRCP 11

(1) it is not being presented for


any improper purpose, such as
to harass, cause unnecessary
delay, or needlessly increase the
cost of litigation

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221

FRCP 11

(2) the claims, defenses, and


other legal contentions are
warranted by existing law or by
a nonfrivolous argument for
extending, modifying, or
reversing existing law or for
establishing new law
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222

FRCP 11

(3) the factual contentions have


evidentiary support or, if
specifically so identified, will
likely have evidentiary support
after a reasonable opportunity
for further investigation or
discovery; and
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223

FRCP 11

(4) the denials of factual


contentions are warranted on
the evidence or, if specifically so
identified, are reasonably based
on belief or a lack of information.

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224

FRCP 11 (c) (1)Sanctions

If, after notice and a reasonable


opportunity to respond, the
court determines that Rule 11(b)
has been violated, the court may
impose an appropriate sanction
on any attorney, law firm, or
party that violated the rule or is
responsible for the violation.
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225

FRCP 11 (c) (1)Sanctions

Absent exceptional
circumstances, a law firm must
be held jointly responsible for a
violation committed by its
partner, associate, or employee.

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226

FRCP 11

(4) Nature of a Sanction.


A sanction imposed under this
rule must be limited to what
suffices to deter repetition of the
conduct or comparable conduct
by others similarly situated.

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FRCP 11

The sanction may include


nonmonetary directives
an order to pay a penalty into
court
an order directing payment to
the movant of part or all of the
reasonable attorney's fees and
other expenses directly resulting
from the violation.
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Rule 11 FRCP - sanctions

As to Any paper a lawyer signs or


advocates for the attorney certifies
factual contentions have (or will
have) evidentiary support
denials of factual contentions are
warranted on the evidence or are
reasonably based on belief or a lack
of information

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229

28 USC 1927. Counsels liability for


excessive costs

Any attorney ..who so multiplies


the proceedings in any case
unreasonably and vexatiously
may be required by the court to
satisfy personally the excess
costs, expenses, and attorneys
fees reasonably incurred
because of such conduct.

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230

Truthfulness and candor

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231

R. 7.1 Communications

A lawyer shall not make a false


or misleading communication
about the lawyer or the lawyer's
services.

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R. 7.1 Communications

A false or misleading
communication
contains a material
misrepresentation of fact or law
omits a fact necessary to make
the statement considered as a
whole not materially misleading.

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Fee Arbitration - NY

R.1.5
(f) Where applicable, a lawyer shall
resolve fee disputes
by arbitration
at the election of the client
via a court-approved program
[22 NYCRR 1230.1]

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Resolving disputes with clients

Litigation
Fee arbitration/mediation
http://www.courts.state.ny.us/admin/feedispute/in
dex.shtml

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235

Special Provisions in Domestic


Relations Cases

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NY Domestic Relations cases


REQUIREMENTS
R. 1.5 (5)

no fees contingent upon


divorce
child custody or visitation
amount of maintenance, support,
equitable distribution, or
property settlement

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NY Domestic Relations cases


Statement of rights and responsibilities
R. 1.5 (5) (e)

Lawyer shall provide a prospective


client statement of client's rights and
responsibilities
at the initial conference and
prior to the signing of a written
retainer agreement

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NY Domestic Relations cases


Writing Requirement
R. 1.5 (5)
Written retainer agreement
signed by lawyer and client
stating in plain language the nature
of the relationship and
details of the fee arrangement

Minimum non-refundable fee is


permitted
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NEW YORK CODES, RULES AND


REGULATIONS

Supreme Court Procedures for


Attorneys in Domestic Relations
Matters
22 NYCRR 1400.1
New York State Unified Court System
Matrimonial Matters Index page
http://www.courts.state.ny.us/ip/matr
imonial-matters/faqs.shtml
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