Bell/Gaerte: 3 things to know about fixed fees arrangements

July 31, 2013
Back to TopCommentsE-mailPrintBookmark and Share


gaerte Gaerte
bell Bell

By James J. Bell and K. Michael Gaerte

Recently, businesses have been seeking “alternative fee arrangements” from the law firms they hire. Many of these alternative fee arrangements involve the use of “fixed fees,” which is a fee “an attorney charges for all legal services in a particular matter, or for a particular discrete component of legal services” Matter of Kendall, 804 N.E.2d 1152 at 1157 (Ind. 2004). While a fixed fee has many advantages, including predictability, a fixed fee carries some disciplinary risks. Before you enter into a fixed-fee agreement, here are three things you need to know.

1. A reasonable fee can become unreasonable over the course of a representation

Rule 1.5(a) of the Indiana Rules of Professional Conduct states that a fee must be “reasonable.” This subjective term guides a lawyer’s fee. Often, a fee that seems “reasonable” at the beginning of the case can take less work than what the lawyer and the client originally anticipated. In such a circumstance, can the attorney receive a windfall? Not necessarily.

In the Matter of Gerard, 634 N.E.2d 51 (Ind. 1994), an attorney contracted with an elderly woman to recover assets thought by the client to be lost or stolen. The attorney agreed to receive one-third of the recovered amount. There was no evidence that the attorney knew that the collection of his client’s assets would be a simple task when he entered into the fee agreement. However, as it turned out, the attorney easily located approximately $450,000 worth of assets and kept approximately $160,000 as a fee. Id. at 52.

The Indiana Supreme Court held that the attorney should not have retained such a fee “beyond the point in time when it should have been apparent to him that it was in excess of a reasonable fee.” Id. 52. Specifically, the court concluded that the attorney:

“did not renegotiate his fee after realizing his client’s entitlement to the certificates was not seriously in doubt, but instead … accepted the inflated contingency fee. Such action is fraudulent. … Implicit in [the] retention of the excessive fee was the false representation that the service he provided to [the client] roughly corresponded with the amount of compensation.” Gerard, 634 N.E.2d at 53.

Based on this, when an attorney enters into a fixed fee, the attorney should continue to evaluate the fee relative to the amount of work involved during and after the case to determine whether the fee is reasonable.

2. Don’t change the fee in the middle of the case without consulting Rule 1.8(a)

What if the fixed fee turns out to be unfair to the attorney? Can the attorney change the fee in the middle of the case? Yes, provided the attorney follows the guidance in Rule 1.8(a) and its comment.

Rule 1.8(a) pertains to business transactions with a client and never specifically mentions the modification of a fee agreement. The language regarding fee modification is reserved for the comment, which states that 1.8(a) “applies when a lawyer seeks to renegotiate the terms of the fee arrangement with the client after representation begins in order to reach a new agreement that is more advantageous to the lawyer than the initial fee arrangement.” Comment to 1.8[1]. To be clear, Rule 1.8(a) “does not apply to ordinary initial fee arrangements between client and lawyer” because there is no established attorney-client relationship. Id. However, once a trusting relationship is established, the comment to 1.8(a) serves to curb the “possibility of overreaching” by sophisticated lawyers. Id.

An attorney who wishes to change a fee to one that is more advantageous to the lawyer must “advis[e] the client in writing of the desirability of seeking … the advice of independent legal counsel” and give the client “informed consent, in a writing signed by the client.” See Rule 1.8(a)(2) and (3) of the Indiana Rules of Professional Conduct. “Informed consent” is a term of art, and it is defined in Rule 1.0(e).

What if the attorney believes the new deal is not more “advantageous” to the lawyer? The attorney may want to follow 1.8(a) anyway. The practice of law is unpredictable. For example, cases that are certain to go to trial often settle on the courthouse steps. When the unexpected happens, it is difficult to look backward and assess whether a new fee was more advantageous to the attorney. If the attorney follows 1.8(a) before the unexpected happens, that attorney will not have to quibble about who got the better deal.

3. Fixed fees are almost always refundable

What if the attorney-client relationship terminates before the end of the case? What does the attorney do for a refund? When the attorney bills hourly, the refund calculation is easy. Just calculate your hours and refund the unearned advanced fees. However, in a fixed-fee scenario, the calculation can be tricky.

If the attorney has agreed to take a client from point A to point B and the attorney has not yet arrived at point B, then the attorney likely owes a refund. A more complicated question is how much of a refund should the attorney give? The answer lies largely in the “reasonableness” analysis contained in Rule 1.5. The refund amount may also be determined by how close the representation was to coming to a conclusion.

Moving forward: Evaluation is key

Fixed fees have many advantages. However, cases are unpredictable, and it is difficult to predict what a “reasonable” fee will be at the outset of a representation. Throughout a representation, an attorney should continue to evaluate whether a fee is reasonable. If the fee turns out to be unreasonable, a refund or a modification of the fee may be appropriate. However, if the agreement is to be modified, the attorney should pay close attention to the requirements of Rule 1.8.•


James J. Bell and K. Michael Gaerte are attorneys with Bingham Greenebaum Doll LLP. They assist lawyers and judges with professional liability and legal ethics issues. They also practice in criminal defense and are regular speakers on criminal defense and ethics topics. They can be reached via email at or The opinions expressed are those of the authors.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
Subscribe to Indiana Lawyer
  1. If a class action suit or other manner of retribution is possible, count me in. I have email and voicemail from the man. He colluded with opposing counsel, I am certain. My case was damaged so severely it nearly lost me everything and I am still paying dearly.

  2. There's probably a lot of blame that can be cast around for Indiana Tech's abysmal bar passage rate this last February. The folks who decided that Indiana, a state with roughly 16,000 to 18,000 attorneys, needs a fifth law school need to question the motives that drove their support of this project. Others, who have been "strong supporters" of the law school, should likewise ask themselves why they believe this institution should be supported. Is it because it fills some real need in the state? Or is it, instead, nothing more than a resume builder for those who teach there part-time? And others who make excuses for the students' poor performance, especially those who offer nothing more than conspiracy theories to back up their claims--who are they helping? What evidence do they have to support their posturing? Ultimately, though, like most everything in life, whether one succeeds or fails is entirely within one's own hands. At least one student from Indiana Tech proved this when he/she took and passed the February bar. A second Indiana Tech student proved this when they took the bar in another state and passed. As for the remaining 9 who took the bar and didn't pass (apparently, one of the students successfully appealed his/her original score), it's now up to them (and nobody else) to ensure that they pass on their second attempt. These folks should feel no shame; many currently successful practicing attorneys failed the bar exam on their first try. These same attorneys picked themselves up, dusted themselves off, and got back to the rigorous study needed to ensure they would pass on their second go 'round. This is what the Indiana Tech students who didn't pass the first time need to do. Of course, none of this answers such questions as whether Indiana Tech should be accredited by the ABA, whether the school should keep its doors open, or, most importantly, whether it should have even opened its doors in the first place. Those who promoted the idea of a fifth law school in Indiana need to do a lot of soul-searching regarding their decisions. These same people should never be allowed, again, to have a say about the future of legal education in this state or anywhere else. Indiana already has four law schools. That's probably one more than it really needs. But it's more than enough.

  3. This man Steve Hubbard goes on any online post or forum he can find and tries to push his company. He said court reporters would be obsolete a few years ago, yet here we are. How does he have time to search out every single post about court reporters and even spy in private court reporting forums if his company is so successful???? Dude, get a life. And back to what this post was about, I agree that some national firms cause a huge problem.

  4. rensselaer imdiana is doing same thing to children from the judge to attorney and dfs staff they need to be investigated as well

  5. Sex offenders are victims twice, once when they are molested as kids, and again when they repeat the behavior, you never see money spent on helping them do you. That's why this circle continues