Rule 1.15 Fees Explained: What Every Attorney Needs to Know

Rule 1.15 and client trust accounting regulations do not include a mandated section on attorney fees. Other standing rules are fundamental to the attorney-client relationship and are expected to be carried over when client trust accounting.

As a trusted source of financial information in Orange County, SmartBean® is committed to helping firms comply with all client trust accounting rules. We are here to remind clients and readers of the key points so they remain fresh in their minds!

First, let's explore the crucial aspects of fee agreements that every attorney should know to ensure compliance and foster strong client relationships.

Fee Agreements: Key Points for Attorneys

Before an attorney renders services to a client, the terms of service must be solidified by a written agreement between both parties. This is not just a formality but a crucial step that sets the foundation for a transparent and fair attorney-client relationship.

Section 6148 of the Business and Professions Code requires a written fee agreement to be signed if the requested service will require more than $1,000 in total expenses.

This should outline the services, fees applicable to the case, hourly and standard rates. This documentation would be an ideal opportunity to inform the client of the attorney's duties to any third parties involved in this case. 

Attorneys must give clients a bill no longer than 10 days after they request one. Additionally, a client is within their legal right to request a bill every 30 days, given the matter of representation is still in occurrence. If you fail to enter into a written agreement, the client can voice the agreement to pay the fee. If this happens, attorneys are allowed to collect a reasonable fee. However, if services are provided in an emergency situation, the rules of Section 6148 are not applicable. 

If a fee agreement is entered into on a contingency basis, it must comply with the provision for section 6147 of the Business and Professions Code. Both parties sign and retain a copy of the written document, which necessarily contains the contingency rate, instructions for disbursement, and other details. 

Fee Amounts: Guidelines and Best Practices

The Rule of Professional Conduct 1.5 governs the fees attorneys can charge for their services. According to Rule 1.5(a), a lawyer must not make an agreement for, charge, or collect an unconscionable or illegal fee.

Below are the 13 key factors that determine what may constitute an unconscionable fee:

1. Fraud or Overreaching: Whether the lawyer engaged in fraud or overreaching in negotiating or setting the fee.
2. Disclosure of Material Facts: Whether the lawyer failed to disclose material facts.
3. Proportional Value: The fee amount in proportion to the value of the services performed.
4. Relative Sophistication: The relative sophistication of the lawyer and the client.
5. Complexity and Skill: The novelty and difficulty of the questions involved and the skill required to perform the legal service properly.
6. Exclusive Employment: The likelihood, if apparent to the client, that accepting the particular employment will preclude other employment by the lawyer.
7. Amount and Results: The amount involved and the results obtained.
8. Time Constraints: The time limitations imposed by the client or the circumstances.
9. Professional Relationship: The nature and length of the professional relationship with the client.
10. Experience and Reputation: The experience, reputation, and ability of the lawyer or lawyers performing the services.
11. Fee Structure: Whether the fee is fixed or contingent.
12. Time and Labor: The time and labor required.
13. Informed Consent: Whether the client gave informed consent to the fee.

In addition, attorneys are prohibited from charging fees in family law matters.

Rule 1.5(d) also disallows non-refundable fees unless a "true retainer" arrangement is established with the client. A true retainer is a fee the client pays to ensure the attorney can provide services within a specified period.

It's essential to manage trust accounting fees meticulously to ensure your practice remains compliant with trust accounting regulations. Let’s explore the best practices for managing these fees effectively.

Managing Trust Accounting Fees for Compliance

Attorneys must adhere to specific trust account rules to maintain compliance and protect client funds. Rule 1.15 outlines the guidelines for managing various fees within a client trust account. 

Properly managing these fees ensures that your practice upholds legal and ethical standards.

Transitioning from compliance to specific fee types, let's explore the management of flat fees.

Flat Fees

Attorneys must effectively manage flat fees, which are fixed amounts covering the full payment for services provided. Typically, clients pay these fees upfront. According to Rule 1.15, attorneys must deposit flat fees into the client's trust account to maintain transparency and accountability. It is important for attorneys to understand this process and their obligations under it.

Besides flat fees, attorneys handle other fees associated with client trust accounts. These fees directly relate to the accounts where you deposit client funds and require meticulous management to ensure compliance.

Understanding flat fees sets the stage for managing specific types of trust account fees. Next, we'll explore the guidelines for IOLTA accounts.

Trust Accounting Fees for IOLTA Accounts

For IOLTA (Interest on Lawyers' Trust Accounts) accounts, attorneys cover account-related expenses incurred during business operations. These expenses include insufficient funds charges, check printing fees, deposit stamp costs, and collection charges. Attorneys bear these charges, not the clients whose money is in the account.

To cover these expenses, attorneys may keep a small amount of their own money in the IOLTA account—an amount "reasonably sufficient to cover bank charges," as stated in Rule 1.15(c). 

However, attorneys and firms should avoid commingling funds, except in this specific instance, to prevent client account debits.

Resolving Fee Disputes: Strategies and Solutions

Fee disputes between clients and attorneys can arise over funds paid or owed. To prevent such issues, always establish a fee agreement beforehand. When disputes do occur, they must be handled in accordance with the Business and Professions Code 6200, which also outlines the fee arbitration program that attorneys must participate in if clients request it.

Here are the four key steps for resolving fee disputes:

1. Initiate Fee Collection Action: If a fee dispute arises, the attorney must file a fee collection action against the client. The attorney must provide written notice to the client before or at the time of summoning. Failure to provide this written notice can result in the dismissal of the fee collection action.
2. Client's Right to Arbitration: Upon receiving the notice, the client has 30 days to request fee arbitration. If the client fails to request arbitration within this period, they waive their right to arbitration.
3. Conducting Fee Arbitration: Typically, the county bar association where the fee dispute occurs conducts the arbitration. If the county bar cannot accommodate, the State Bar will step in to conduct the arbitration.
4. Court Ruling and Payment: If the court rules in favor of the client and the attorney does not pay the awarded amount, the attorney may be rendered inactive until the payment is made

By following these steps, attorneys can ensure proper handling of fee disputes while maintaining compliance with the relevant regulations.

Conclusion

At SmartBean®, we specialize in helping Orange County law firms comply with client trust account rules and stay updated on fee requirements. Our knowledgeable team provides affordable bookkeeping services in Orange County tailored to the unique needs of local law firms, ensuring compliance and effective financial management.

For expert assistance on trust account bookkeeping and to ensure your firm meets all regulations, call SmartBean® for a free consultation today!