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Guest Post: Attorneys’ Fees–The New Rule 1.5

This article is for informational purposes only. It is not intended to be used in place of professional or legal advice in any way. Lawyers, law students, judges, and other legal professionals in Massachusetts can find more on scheduling a Free & Confidential consultation with a law practice advisor here.

We are very pleased (mostly because we don’t now have to research the topic ourselves) to have the below guest blog post, reproduced with the permission of its author, James S. Bolan, Esq., of Brecher, Wyner, Simons, Fox & Bolan, and covering recent changes to the Massachusetts Rules of Professional Conduct, Rule 1.5, respecting Fees. Jim, co-author of MCLE’s “Ethical Lawyering in Massachusetts”, has long-standing experience and much expertise in issues of professional responsibility and legal ethics. If you appreciate his take on ethics matters, as represented through this blog posting, consider joining us for our 12 EST March 18, 2011 LOMAP Marketing Group webinar, during which Jim will discuss ethics issues related to attorney advertising.

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On March 15, 2011, a revised Supreme Judicial Court Rule 1.5 will become effective. The revised rule will affect all lawyers’ fees. (What will become the former Rule 1.5 can be found here, while it lasts.) The changes address issues raised in Malonis v. Harrington, 442 Mass. 692 (2004); Saggese v. Kelley, 455 Mass. 434 (2005); Liss v. Studeny, 450 Mass. 473 (2008); and, In the Matter of the Discipline of an Attorney, 451 Mass. 131 (2008). In Malonis, the Court held that an attorney handling a case on contingency and who had been discharged was entitled to be paid under a quantum meruit theory and that his fee ought to come from the successor counsel’s contingent fee, not the plaintiff’s recovery. In Saggese, the Court clarified that the client must be notified of and consent in writing to a division of fees, where the case is being referred out, at or before the time the client enters into the fee agreement. In Liss, the contingent fee agreement (CFA) explicitly said that the client would not be liable to pay “except from amounts collected”, and the agreement did not state that the client would owe an attorney’s fee even if the case was unsuccessful. Therefore, “as a general rule”, there can be no quantum meruit recovery in a contingent fee case “where the contingency has not occurred”. And, in Matter of the Discipline of an Attorney, while the Court found that the attorney’s conduct (the failure to explain to the client the terms of the CFA; Rule 1.5 did not bar a lawyers from negotiating a term in a CFA providing that, on discharge by the client, the attorney would be entitled to recover the greater of the reasonable value of his services or one-third of any settlement offer made up to that point) did not warrant discipline, it did refer to its Standing Advisory Committee on the Rules of Professional Conduct certain issues regarding CFAs.

The changes to Rule 1.5, then, include, in sum, the following: Rule 1.5(a) now prohibits “collecting an unreasonable amount for expenses”. Plus, but for regular clients, the scope of the representation and the basis, or rate, of expenses must be communicated first. Rule 1.5(c) requires that, if the attorney is terminated or if the client makes the request, and the contingency has not yet arisen, the lawyer must provide a written itemization of services and expenses within 20 days, unless there will be no claim if terminated. Rule 1.5(c)(4) requires that the CFA must disclose that a fee may still be paid even if other than via contingency after a recovery. Rule 1.5(c)(6) requires that the CFA show how expenses will be calculated, paid or reimbursed. Rule 1.5(c)(7) requires the CFA to state the basis on which fees and expenses will be sought if counsel is terminated before the contingency arises. Rule 1.5(c)(8) indicates that, if a lawyer is successor counsel before a case concludes, the CFA must state who will pay prior counsel’s fees and expenses. Rule 1.5(e) requires the client’s written consent to a referral fee division at or before the time that the client enters into the CFA. New forms are appended to the new rule, although a lawyer may use an alternate form if it is consistent with the new Rule 1.5. Forms that differ dramatically from the approved Forms A and B must be explained to the client, and a lawyer must obtain the client’s consent in writing.

The revised Rule 1.5, and appended forms, can be found here. (A direct link to the PDF is accessible here.)

CATEGORIES: Client Relations | Law Firm Management | Risk Management

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