November 12, 1992
Whether a lawyer's fee arrangement with a client is "reasonable" must be evaluated on a case-by-case basis. A lawyer has a continuing duty prior to billing the client and before collecting a fee from a client to reexamine the reasonableness of the fee in light of subsequent events in the representation.
A lawyer may not bill more than one client at full rates for the same time period, but must apportion the time so each client pays a fair share for time actually devoted to that client's matter.
References: MRPC 1.5(a); RI-6; MCR 8.122.
A lawyer has an office located 30 miles from the courthouse where the bulk of the lawyer's practice, limited to domestic relations matters, is conducted. The lawyer proposes to charge a "mixed fee," combining hourly and flat rates, pursuant to a written agreement, preliminary to which the client would be provided with a full explanation in advance of the lawyer undertaking the representation. The written agreement would provide:
that the client will be charged an hourly rate of $150 for case investigation, preparation and out of court work;
that the client will be charged a "minimum" of $400 for each court appearance on behalf of the client, up to three hours. After three hours, the regular $150 per hour rate will be charged.
The minimum rate for each court appearance is based upon a review of the lawyer's experience in prior cases, which on average have involved an aggregate of one and one half hours travel time between the office and the courthouse, plus an average of one hour waiting time, and one hour for the actual case presentation. The lawyer acknowledges that uncontested divorces take less time, while contested proceedings require more, but in general, each time the lawyer goes to the courthouse, at least three hours of the lawyer's time are expended.
The lawyer asks whether the fee arrangement is ethical, and, if it is generally appropriate, whether ethics rules otherwise require the lawyer to make any adjustment to the client's billing when, on a particular occasion, the lawyer has proceedings involving more than one client scheduled in court for the same day. For example, if three clients have uncontested divorces scheduled for the same day, each of which take a 15 minute presentation, may the lawyer charge each client the $400 minimum court appearance fee?
MRPC 1.5(a) states:
"(a) A lawyer shall not enter into an agreement for, charge or collect an illegal or clearly excessive fee. A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee. The factors to be considered in determining the reasonableness of a fee include the following:
"(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
"(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;
"(4) the amount involved and the results obtained;
"(5) the time limitations imposed by the client or circumstances;
"(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; and
"(8) whether the fee is fixed or contingent."
It is apparent that the reasonableness of a lawyer's fee is not strictly a matter of freedom of contract. Since the fee agreements in question are contemplated in conjunction with domestic relations matters pending in a Michigan court, any dispute between lawyer and client must ultimately be resolved by the appropriate circuit court, MCR 8.122.
Ethics opinion RI-6 directly addressed the propriety of combining an hourly fee with a contingency fee. The opinion noted:
"It is clear that as long as a fee is not illegal or 'clearly excessive' under MRPC 1.5, a lawyer may charge and a client may agree to pay on the basis of a flat fee, an hourly rate, a percentage basis, or some combination or 'mix' of these types of fees. CI-962; ABA i1317."
The syllabus states:
"A fee agreement in which a client agrees to pay a percentage of the net recovery or the lawyer's hourly rate, whichever is greater, is not improper if:
- Calculations of the fee under both standards result in a reasonable fee;
- The fee agreement is in writing;
- The client is kept advised of the calculation under the hourly rate as the matter progresses;
- The percentage calculation is at a rate lower than the maximum rate allowable if the lawyer had risked no fee; and
- The hourly rate or flat fee is lower than the normal rate charged by the lawyer for the matter.
"In a fee agreement which provides for an hourly rate or flat fee and a percentage of the net recovery, the same tests apply; however, in personal injury or wrongful death cases subject to MCR 8.121, where there is in fact a recovery, the total fee under such an agreement may not exceed 33-1/3% of the net recovery."
The reasoning behind paragraphs 4 and 5 of the syllabus was that in a pure percentage agreement a lawyer is willing to risk getting nothing if the lawyer is unsuccessful. When the lawyer's risk is lowered by a mixed fee arrangement that guarantees the lawyer a retainer, an hourly fee, or a flat fee, the maximum percentage calculation allowable should be reduced by some reasonable amount to reflect the lawyer's lesser risk. Those considerations are not applicable when the lawyer contemplates a "mixed fee" of hourly and flat rates, but the remainder of the guidance provided in RI-6 is applicable.
The Committee is not a fact-finding body and is not in a position to determine whether for this lawyer and this type of case a $150 hourly rate is reasonable, or whether a $400 flat rate is reasonable under MRPC 1.5(a). We note that under the lawyer's hourly rate, three hours of work would cost $450, i.e., more than the proposed flat rate for the average case. We also note that the three-hour average was allegedly determined objectively, using this lawyer's experience in handling cases of this type. We find nothing in these methods of computation that would violate MRPC 1.5(a).
We also note that the lawyer's flat rate is based upon travel, waiting time, and actual case preparation. MRPC 1.2 and 1.4 would require the lawyer to explain to the client that the lawyer proposes to charge for the time expended in transit. The client can then evaluate whether the client prefers to seek assistance from another lawyer.
The lawyer also asks whether a client would be due a refund from the flat fee in the event the actual time spent on the client's matter is less than the three-hour average. MRPC 1.5(a) prohibits a lawyer from "charging" or "collecting" an illegal or clearly excessive fee, when "after a review of the facts" a lawyer would be left with the firm conviction that the fee is in excess of a reasonable fee. The wording clearly indicates that although a fee may appear to be reasonable at the outset of the representation, a lawyer has a continuing duty before billing the client or attempting to collect the fee to review the facts and re-examine the reasonableness of the fee. This duty applies even if the client has been fully advised of the terms of the fee agreement before signing, and has nevertheless consented to the terms.
If the lawyer's original flat fee arrangement of $400 per court visit was reasonable when based upon an objective average of three hours per court visit, and the facts of the particular representation show that three hours were not spent in representing that client, then one underlying premise which made the original fee "reasonable" is no longer applicable, and the lawyer should reevaluate the reasonableness of the flat charge.
Since under no circumstances is it appropriate to charge the client for more than the time actually spent on that client's case, all that should be added here is that such charges as are otherwise proper for travel must be divided fairly between or among the clients on whose behalf the travel is undertaken. It is unreasonable per se to charge two or more clients for the same hour or hours of professional time of one lawyer. If the lawyer actually services more than one client during the court visit, such as when multiple hearings of different clients are scheduled on the same docket, the lawyer should pro rate the flat fee among the clients. Similarly, if during a plane flight to the site of a deposition on behalf of one client a lawyer performs work for another client, both clients may not be charged for the same time.