Fee Agreements - Are They Necessary?
by Robert Harrison
Thursday, February 11, 2016
Just as a seatbelt provides protection to the passengers in a vehicle, so too do client fee agreements provide protection to attorneys. Fee agreements work to protect attorneys from an array of claims that could be asserted in the absence of such a document.
In California, and many other jurisdictions, when an attorney represents a client on a contingency basis, the fee agreement must be reduced to writing and signed by both the attorney and client. (Bus. & Prof. Code §6147(a).) At the time the agreement is entered into, the attorney needs to provide the client with a duplicate copy of the agreement. (Bus. & Prof. Code §6147(a).)
In non-contingency representations, where it is reasonably foreseeable that the total expense to the client, including attorney fees, will exceed $1,000, the attorney-client fee agreement must again be in writing. (Bus. & Prof. Code §6148.) The attorney must again provide a signed copy of the fee agreement to the client at the time the agreement is entered into. (Bus. & Prof. Code §6148(a).)
The written fee agreement needs to contain the basis of compensation including any hourly rates, statutory fees or flat fees, or other standard charges applicable to the representation. (Bus. & Prof. Code §6148(a)(1).) This agreement must also contain statements describing the general nature of the legal services to be provided and the respective responsibilities of the attorney and the client to the representation. (Bus. & Prof. Code §6148(a)(2), (a)(3).)
Consider the following case: Most states have corporate practice of medicine prohibitions which regulate lay ownership of healthcare businesses. I recently defended an attorney who was asked by a former client (who’s construction business he had incorporated) to assist in drafting an operating agreement for a medical spa that the former client and his wife were going to administer for a physician partner. The lawyer did not create a new fee agreement describing the scope of the services he would render and never had a written fee agreement with either the former client or the physician regarding this new engagement.
The spa business ultimately failed for a variety of reasons. Soon, the physician sued his former partners and the attorney. Part of the case against the lawyer was based on the lack of a fee agreement and the alleged failure to advise the doctor of his prior work on behalf of the non-physician.
While a defense jury verdict was obtained, the presence of an executed fee agreement would have completely neutered the position of the plaintiff’s standard of care expert who hitched his opinions to the Business and Professions Code sections referenced above.
The defendant lawyer had a number of explanations for why a fee agreement was never created but ultimately conceded that the rules technically required such writing under the circumstances. This would have also memorialized the limited scope of his retention and would have negated other claims made in the case based on the claim he had an ongoing attorney-client relationship with the physician.