Dec. 21, 2022 – When there is – unintentionally – no written fee agreement with a client, must a lawyer forfeit their fee?

Question

I agreed to represent a client on a relatively straightforward small claims matter. I quoted a $2,500 flat fee to the client, but because I was so busy with the press of matters, I never produced a written fee agreement for the client to sign.

I completed the matter and believed that I did a good job for the client, but now the client refuses to pay, claiming that I was “unethical” because I did not have a fee agreement, even though the client does not dispute the amount of the fee.

Does the fact that I may have violated a disciplinary rule requiring a written fee agreement mean that I am not entitled to get paid?

Answer

SCR 20:1.5(b)(1) states:

The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate as in the past. If it is reasonably foreseeable that the total cost of representation to the client, including attorney's fees, will be $1000 or less, the communication may be oral or in writing. Any changes in the basis or rate of the fee or expenses shall also be communicated in writing to the client.

While the rule does not require a written “fee agreement,” it does require that the specified information be conveyed to the client in writing when the cost of the matter exceeds $1,000, and the lawyer here clearly violated SCR 20:1.5(b).

Nothing in that rule, however, states that a violation means the lawyer forfeits the right to compensation in the matter, and there is no evidence that the stated fee is unreasonable in violation of SCR 20:1.5(a). In fact, there is nothing in the entirety of SCR 20:1.5 and the ABA Comments that addresses this issue.

Some guidance can be found in the Restatement (Third) of the Law Governing Lawyers Sec. 37, comment g, states in relevant part:

That a fee contract violates some legal requirement does not necessarily render it unenforceable. The requirement might be one not meant to protect clients or one for which refusal to enforce is an inappropriate sanction. For example, when a lawyer violates a lawyer-code requirement that a fee contract be in writing but the client does not dispute the amount owed under it, that violation alone should not make the contract unenforceable. When only certain parts of a contract between client and lawyer contravene the law, moreover, the lawful parts remain enforceable, except where the lawyer should forfeit the whole fee (see § 37) (emphasis added).

Violations of disciplinary rules requiring that fees be reasonable [SCR 20:1.5(a)] and earned [SCR 20:1.16(d)] may force a lawyer to either forego collection or refund a fee because the black letter of those rules so requires, but SCR 20:1.5(b) only requires that the fee arrangement be documented in most circumstances.

Therefore, if a fee is reasonable and earned, the lawyer may still have a lawful claim for fees even if the documentation requirements of disciplinary rules is not followed. Therefore, it may be the case that even though the lawyer may be disciplined, they may still be able to collect a fee.¹

Note that in this situation, there is no dispute as to the amount of fees and the lawyer did orally inform the client (a situation in which there is no agreement as to fees whatsoever is a slightly different situation that will be addressed in a future column).

Also, contingent fees have heightened documentation requirements, including the client’s signature – see SCR 20:1.5(c). As a result, some courts find that a lawyer’s violation of the documentation requirement in connection with a contingent fee does result in fee forfeiture² in addition to discipline.

Of course, it is a best practice and a protection for both the lawyer and the client to have any the terms of any engagement memorialized in writing (even when there is no fee), but failure to do so does not automatically result in fee forfeiture.

Endnotes

¹ This assumes of course that the lawyer would be willing to expend the time and resources necessary to collect.

² See e.g., United States v. 36.06 Acres of Land, 70 F. Supp.2d 1272 (D.N.M. 1999); In re Kucek Dev. Corp., 113 Bankr. (E.D. Cal. 1990); see also FIGA v. R.V.M.P. Corp., 681 F. Supp. 806(S.D. Fla. 1988) Starkey, Kelly, Blaney & White v. Estate of Nicolaysen, 796 A.2d 238. Some courts have, however, found an oral contingent fee agreement to be enforceable despite the violation of the disciplinary rule. See e.g., Gresh v. Conemaugh Health Sys., Inc., 133 A.2d 63 (Pa. Super. Ct. 2015). There does not appear to any Wisconsin cases addressing this issue.