4. Fees
Many divorce clients have never before hired an attorney and are vulnerable because of fear and insecurity. Matrimonial lawyers and their clients may not have the long-standing relationship out of which business lawyers and their clients often evolve an understanding about fees.
It is not unusual for a party to a divorce to lack sufficient funds to pay an attorney. This lack of resources, various strictures against contingent fee contracts, the unwillingness of some courts to redress the economic imbalance between the parties with fee awards, and the tendency of overwrought clients to misunderstand the fee agreement or to blame their attorneys for undesirable results, can make payment extremely difficult.
These factors help to explain why the records of fee dispute committees indicate that the number of disputes arising from family law cases is several times greater than those from any other category. Thus, financial arrangements with clients should be clearly explained, agreed upon and documented.
4.1 Fee agreements should be in writing.[45]
Comment
At the outset the matrimonial lawyer should tell the client the basis on which fees will be charged[46] and when and how the attorney expects to be paid.[47] In some jurisdictions, fee agreements must be in writing.[48] Written fee agreements should delineate the obligations of the attorney and the client. Agreements should specify the scope of the representation. Fee agreements should be presented in a manner that allows the client an opportunity to consider the terms, consult another attorney before signing and obtain answers to any questions to fully understand the agreement before entering into it. The written fee agreement should be entered into when the representation is initiated or as soon as possible thereafter.
Examples of Scope Provisions:
a. Our representation will include advising, counseling, drafting, negotiating, investigating, analyzing and handling this family law matter to a final resolution, whether by negotiated settlement or, if necessary, by trial and adjudication by a court. Depending on the specifics of your case, its resolution may include: custody, visitation, and support of your children; classification of assets as "marital" or "non-marital;" the valuation and division of marital property; the determination of maintenance for you or for your spouse; and determining whether the attorney's fees and costs incurred may be shifted from you to your spouse, or vice versa.
b. Our representation will be limited to settlement or trial of the issue of ________. We have not agreed to undertake any appeal of any order entered.
c. Our representation will be limited to assisting in settlement through negotiation and mediation. If attempts at settlement are unsuccessful and litigation is instituted, our representation will cease. You agree to then retain trial counsel to represent you thereafter.
4.2 An attorney should provide periodic statements of fees and costs.
Comment
When the fee arrangement is based on an hourly rate or similar arrangement, this information can be part of the necessary communications concerning the case addressed in 2.3 and Comment. The statement should be sufficiently detailed to apprise the client of the time and charges incurred.[49] In addition, the matrimonial lawyer should comply with fee regulations in the lawyer’s jurisdiction that may be more detailed or restrictive in requiring information about fees and costs.
4.3 All transactions in which an attorney obtains security for fees should be properly documented.[50]
Comment
All security agreements should be arms-length transactions. When taking mortgages on real property from a client, the client should be independently represented. If an attorney takes personal property as security, it must be appraised, photographed and identified by a qualified appraiser to establish concretely its precise identity and value. The attorney should then secure it in a safe place (usually a safe deposit box) where there is no danger that it can be removed, substituted or lost.[51]
4.4 An attorney’s fee should be reasonable, based on appropriate factors, including those listed in RPC 1.5(a).
Comment
Lawyers should charge reasonable fees for services performed pursuant to a valid fee agreement. Although the starting point in determining a reasonable fee is often the lawyer’s hourly rate multiplied by the hours spent on the case, a number of other factors may be relevant in determining an appropriate fee in a particular representation. RPC 1.5(a) lists many of those factors.
Clients, as consumers, should be able to negotiate fee agreements that best suit their needs and circumstances. In addition to fees based solely on hourly rate, a fee agreement may provide for a contingent fee, or one based on “value,” a specified result, or some combination of factors. No single factor is appropriate in all family law cases since both clients and the nature of the representations vary greatly. Therefore, it is important at the outset for the attorney to explain the factors to be used in determining the fee, provide the fee agreement in writing (see 4.1), and, particularly when factors in addition to the attorney’s hourly rate will be considered, afford the client an opportunity to obtain independent advice about the proposed fee arrangement.
Some jurisdictions have prohibited fees in domestic relations cases that were in any way based on the results obtained in the case, holding that such fees constituted contingent fees. Courts in other jurisdictions have held that the fact that an hourly fee is enhanced on the basis of results obtained does not necessarily make it a contingent fee.[52] This Goal would permit “results” fees. Under RPC 1.5(a), the factors to be considered in determining the reasonableness of a fee include “the amount involved and the results obtained.” A fee that is based on an hourly rate, but may be enhanced by a specified result is not the same as a traditional contingent fee, which provides that the attorney will receive a specified percentage of any recovery. If the client loses, the attorney receives no fee at all.
A fee based on the attorney’s usual hourly rate, but enhanced by achieving a specified result, may be justified in a given case by any combination of the following circumstances: the complexity of the case; the shortness of the time between the attorney’s retention and impending proceedings; the difficult, aggressive nature of the opposing party and counsel; a particular attorney’s unique ability to settle a case quickly and avoid lengthy and acrimonious trial proceedings; and a substantial risk that the representation will be unsuccessful due to unfavorable factual or legal context. A fee based in part on results obtained is permissible under this Goal so long as the specified “result” does not include obtaining a divorce, custody or visitation provisions, or the amount of alimony or child support awarded (see 4.5), and if the fee is: (1) reasonable under the circumstances; (2) in addition to the attorney’s usual hourly rate; (3) based on factors clearly stated in writing and provided to the client at the outset of the agreement; and (4) agreed to in writing by the client at the outset of the representation after full consultation and an opportunity to seek independent legal advice.
4.5 An attorney should not charge a fee the payment or amount of which is contingent upon: (i) obtaining a divorce; (ii) custody or visitation provisions; or (iii) the amount of alimony or child support awarded. An attorney may charge a contingent fee for all other matters, provided that:
(a) the client is informed of the right to have the fee based on an hourly rate; and
(b) the client is afforded an opportunity to seek independent legal advice concerning the desirability of the contingent fee arrangement.
Comment
This Goal continues the absolute prohibition of fees contingent upon securing a divorce or a specified amount of alimony or child support, and makes clear that the prohibition includes custody or visitation proceedings. In other matters relating to a divorce, however, the policy bases for the prohibition do not apply. Therefore, this Goal provides that an attorney should be able to enter into a contingent fee agreement with an informed client who reasonably believes such an arrangement is in the client’s best interests.
Although attorneys and informed clients are generally able to determine that a contingent fee arrangement is more beneficial to the client than one based, for example, on an hourly rate, there has long been a total ban on contingent fees in domestic relations cases. The primary basis for the prohibition in divorce cases is that the arrangement would “put strong economic pressure on the lawyer to assure that reconciliation did not occur.”[53] In addition, the rationale that contingent fee arrangements are necessary in other civil cases to enable indigent litigants to obtain counsel is believed not to be applicable in divorce cases.[54] The spouse in possession of marital assets will usually have little difficulty in obtaining representation, while the other spouse is assumed to be protected by the court’s authority to compel the spouse with the greater assets to pay attorney’s fees.[55]
A third basis for the ban on contingent fees is that it may “disrupt the pattern of wealth distribution that the court intended in making the award,” unless the existence of the contingent fee is made known to the court in advance.[56] And, to the extent that the contingent fee applies to the amount of a property settlement and not to support or alimony, the attorney may be tempted to advocate more for the former, even if not in the best interests of the client and any children.[57]
At the same time, however, the complete ban on contingent fees at all stages of domestic relations cases,[58] particularly when interpreted strictly,[59] and coupled with decisions holding that fees based in any way on the results obtained in the case are prohibited contingent fees,[60] is unsupported by the above policies. Such a ban also undermines the freedom of attorneys and informed clients to enter into fee arrangements that best suit the nature of particular cases and the interests of both.
A contingent fee arrangement might be preferable to an hourly rate for some divorce clients. For example, although courts may have the power to compel the spouse with the greatest assets to pay attorney’s fees, they often do not do so. Therefore, if the client is unlikely to pay the attorney’s fee unless the client receives a substantial award, the client’s ability to obtain quality legal representation may be dependent upon the availability of a contingent fee agreement.
In addition, the amount of effort involved in a difficult case might result in an hourly fee that the client could only afford if he or she won. And yet, it is in just such a case that the client would need an experienced attorney, who would be unlikely to undertake a risky case, solely on the basis of the attorney’s hourly rate. At the same time, the client might be reluctant to commit to the attorney’s hourly rate in a complex and costly case, without a way of assuring there will be adequate funds from which to pay the fee.
Due to the prohibition on contingent fees (and cases holding a “results” fee to constitute a contingent fee), a lawyer may feel compelled to enter into an hourly fee arrangement with a client who subsequently loses the case after a substantial effort. The result in the case and the client’s inability to pay may cause the lawyer to feel compelled ethically to reduce the fee. Such a result would seem to be both ethical and desirable. It would also be indistinguishable as a matter of policy from a contingent fee agreed to at the outset of the attorney-client relationship.
For these reasons, this Goal limits the prohibition of contingent fees to those aspects of divorce cases supported by the historic policy bases. In other matters, informed clients should have the same ability to choose a contingent fee arrangement as clients in other civil matters. Jurisdictions that completely ban all contingent fees should be urged to adopt a rule similar to this Goal.
4.6 An attorney may withdraw from a case when the client fails to honor the fee agreement.
Comment
The fee agreement should set forth the circumstances under which the matrimonial lawyer will be permitted to withdraw for non-payment. Before withdrawing, the attorney must take reasonable steps to avoid foreseeable prejudice to the rights of the client, allowing time for employment of other counsel, and delivering to the client papers and property to which the client is entitled.[61] However, the attorney should not seek to withdraw from a case on the eve of trial unless there was a clear prior understanding that withdrawal would result from non-payment.[62]
4.7 An attorney may properly take all steps necessary to effect collection, including mediation, arbitration or suit, from a client who fails to honor the fee agreement.[63]
Comment
Lawyers are entitled to be paid reasonable fees for services performed pursuant to a valid fee agreement. Alternatives to litigation should be used unless they are unlikely to be effective.