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IBA: Eliminate Surprises; Use Caution and Care When Changing Fee Agreements

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Bell James Bell

By James J. Bell

It’s a typical case and the potential client and you have agreed to a flat fee of $10,000 for the entire representation. However, as the case trudges through the system, the case requires more work than expected. You should get paid for the extra work, right?

You awkwardly approach the client, explain the situation and ask for an additional $5,000. There is a pause and then a smile creeps across your client’s face. “Of course you can have an additional $5000!” the client exclaims. After all, the client loves you. He agrees that the case has become a bear, that you are doing an outstanding job and that you have earned even more than the requested $5,000. In fact, he is willing to give you $6,000.

The client dives for his checkbook and hastily writes you a check. You memorialize the entire transaction in writing, it is signed by your client and the additional $6,000 is yours. Just to make sure there are no hard feelings, the client even gives you a hug. Everyone is happy. So there is no way you just violated the Rules of Professional Conduct, is there?

Unfortunately, you have violated the Rules if you failed to advise the client to seek the advice of independent legal counsel before agreeing to the new fee agreement and if you did not otherwise fulfill the requirements of Rule 1.8(a) pertaining to “business transactions” with your client. Some lawyers may be surprised to learn that changing a fee in the middle of a case is considered a “business transaction” by our Supreme Court and Disciplinary Commission. However, because you are about to endure this entire article, you will not be one of those “surprised lawyers.”

The first “surprising” aspect of Rule 1.8(a) is that it never specifically mentions anything about the modification of a fee agreement. That language is reserved for the Comment. Furthermore, the language pertaining to modifications of a fee agreement does not appear in the Comment to the Model Rules of Professional Conduct and therefore, it is unlikely you were taught this topic in law school or tested on this subject on the MPRE. Aren’t surprises wonderful?

The language of Comment 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.

So if you still want to change the fee to one that is more advantageous to you, then you must follow 1.8(a) to the letter. This includes “advising the client in writing of the desirability of seeking… the advice of independent legal counsel” and giving 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).

Must your client actually get advice from another lawyer? No. The client just has to be advised in writing that it is a good idea to do so. If you are really doing a good job for your client and have truly earned the additional fee, there is no reason to fear that independent counsel will inadvertently interfere with your relationship with your client.

What if the new deal is not more “advantageous” to the lawyer? My advice is to follow 1.8(a) anyway. The practice of law is unpredictable. Cases that are certain to go to trial often settle on the courthouse steps. Difficult transactions can turn out to be simpler than anticipated. When the unexpected happens, it is difficult to look backwards and assess whether a new fee was more “advantageous” to the lawyer. If you follow 1.8(a) before the unexpected happens, you will not have to quibble about who got the better deal.

Unfortunately, if you care about your clients and your reputation, there are many ways to have sleepless nights while engaging in the practice of law. Avoiding the surprises and pitfalls of 1.8(a) is one way to avoid a few of those sleepless nights.•

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  1. I like the concept. Seems like a good idea and really inexpensive to manage.

  2. I don't agree that this is an extreme case. There are more of these people than you realize - people that are vindictive and/or with psychological issues have clogged the system with baseless suits that are costly to the defendant and to taxpayers. Restricting repeat offenders from further abusing the system is not akin to restricting their freedon, but to protecting their victims, and the court system, from allowing them unfettered access. From the Supreme Court opinion "he has burdened the opposing party and the courts of this state at every level with massive, confusing, disorganized, defective, repetitive, and often meritless filings."

  3. So, if you cry wolf one too many times courts may "restrict" your ability to pursue legal action? Also, why is document production equated with wealth? Anyone can "produce probably tens of thousands of pages of filings" if they have a public library card. I understand this is an extreme case, but our Supreme Court really got this one wrong.

  4. He called our nation a nation of cowards because we didn't want to talk about race. That was a cheap shot coming from the top cop. The man who decides who gets the federal government indicts. Wow. Not a gentleman if that is the measure. More importantly, this insult delivered as we all understand, to white people-- without him or anybody needing to explain that is precisely what he meant-- but this is an insult to timid white persons who fear the government and don't want to say anything about race for fear of being accused a racist. With all the legal heat that can come down on somebody if they say something which can be construed by a prosecutor like Mr Holder as racist, is it any wonder white people-- that's who he meant obviously-- is there any surprise that white people don't want to talk about race? And as lawyers we have even less freedom lest our remarks be considered violations of the rules. Mr Holder also demonstrated his bias by publically visiting with the family of the young man who was killed by a police offering in the line of duty, which was a very strong indicator of bias agains the offer who is under investigation, and was a failure to lead properly by letting his investigators do their job without him predetermining the proper outcome. He also has potentially biased the jury pool. All in all this worsens race relations by feeding into the perception shared by whites as well as blacks that justice will not be impartial. I will say this much, I do not blame Obama for all of HOlder's missteps. Obama has done a lot of things to stay above the fray and try and be a leader for all Americans. Maybe he should have reigned Holder in some but Obama's got his hands full with other problelms. Oh did I mention HOlder is a bank crony who will probably get a job in a silkstocking law firm working for millions of bucks a year defending bankers whom he didn't have the integrity or courage to hold to account for their acts of fraud on the United States, other financial institutions, and the people. His tenure will be regarded by history as a failure of leadership at one of the most important jobs in our nation. Finally and most importantly besides him insulting the public and letting off the big financial cheats, he has been at the forefront of over-prosecuting the secrecy laws to punish whistleblowers and chill free speech. What has Holder done to vindicate the rights of privacy of the American public against the illegal snooping of the NSA? He could have charged NSA personnel with violations of law for their warrantless wiretapping which has been done millions of times and instead he did not persecute a single soul. That is a defalcation of historical proportions and it signals to the public that the government DOJ under him was not willing to do a damn thing to protect the public against the rapid growth of the illegal surveillance state. Who else could have done this? Nobody. And for that omission Obama deserves the blame too. Here were are sliding into a police state and Eric Holder made it go all the faster.

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