Wisconsin Lawyer
Vol. 80, No. 6, June 2007
SCR 20:1.5 Fees (effective 7/1/07)
(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
(b)(1) 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.
(2) If the total cost of representation to the client, including attorney's fees, is more than $1000, the purpose and effect of any retainer or advance fee that is paid to the lawyer shall be communicated in writing.
(3) A lawyer shall promptly respond to a client's request for information concerning fees and expenses.
(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by par. (d) or other law. A contingent fee agreement shall be in a writing signed by the client, and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and if there is a recovery, showing the remittance to the client and the method of its determination.
(d) A lawyer shall not enter into an arrangement for, charge, or collect a contingent fee:
(1) in any action affecting the family, including but not limited to divorce, legal separation, annulment, determination of paternity, setting of support and maintenance, setting of custody and physical placement, property division, partition of marital property, termination of parental rights and adoption, provided that nothing herein shall prohibit a contingent fee for the collection of past due amounts of support or maintenance or property division.
(2) for representing a defendant in a criminal case or any proceeding that could result in deprivation of liberty.
(e) A division of a fee between lawyers who are not in the same firm may be made only if the total fee is reasonable and:
(1) the division is based on the services performed by each lawyer, and the client is advised of and does not object to the participation of all the lawyers involved and is informed if the fee will increase as a result of their involvement; or
(2) the lawyers formerly practiced together and the payment to one lawyer is pursuant to a separation or retirement agreement between them; or
(3) pursuant to the referral of a matter between the lawyers, each lawyer assumes the same ethical responsibility for the representation as if the lawyers were partners in the same firm, the client is informed of the terms of the referral arrangement, including the share each lawyer will receive and whether the overall fee will increase, and the client consents in a writing signed by the client.
Wisconsin Committee Comment
Paragraph (b) differs from the Model Rule in requiring that fee and expense information usually must be communicated to the client in writing, unless the total cost of representation will be $1000 or less. In instances when a lawyer has regularly represented a client, any changes in the basis or rate of the fee or expenses may be communicated in writing to the client by a proper reference on the periodic billing statement provided to the client within a reasonable time after the basis or rate of the fee or expenses has been changed. The communication to the client through the billing statement should clearly indicate that a change in the basis or rate of the fee or expenses has occurred along with an indication of the new basis or rate of the fee or expenses. A lawyer should advise the client at the time of commencement of representation of the likelihood of a periodic change in the basis or rate of the fee or expenses that will be charged to the client.
In addition, paragraph (b) differs from the Model Rule in requiring that the purpose and effect of any retainer or advance fee paid to the lawyer shall be communicated in writing and that a lawyer shall promptly respond to a client's request for information concerning fees and expenses. The lawyer should inform the client of the purpose and effect of any retainer or advance fee. Specifically, the lawyer should identify whether any portion, and if so what portion, of the fee is a retainer. A retainer is a fee that a lawyer charges the client not for specific services to be performed but to ensure the lawyer's availability whenever the client may need legal services. These fees become the property of the lawyer when received and may not be deposited into the lawyer's trust account. In addition, they are subject to SCR 20:1.15 and SCR 20:1.16. Retainers are to be distinguished from an "advanced fee" which is paid for future services and earned only as services are performed. Advanced fees are subject to SCR 20:1.5, SCR 20:1.15, and SCR 20:1.16. See also State Bar of Wis. Comm. on Prof'l Ethics, Formal Op. E-93-4 (1993).
Paragraph (d) preserves the more explicit statement of limitations on contingent fees that has been part of Wisconsin law since the original adoption of the Rules of Professional Conduct in the state.
Paragraph (e) differs from the Model Rule in several respects. The division of a fee "based on" rather than "in proportion to" the services performed clarifies that fee divisions need not consist of a percentage calculation. The rule also recognizes that lawyers who formerly practiced together may divide a fee pursuant to a separation or retirement agreement between them. In addition, the standards governing referral arrangements are made more explicit.
Dispute Over Fees. Arbitration provides an expeditious, inexpensive method for lawyers and clients to resolve disputes regarding fees. It also avoids litigation that might further exacerbate the relationship. If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the bar, the lawyer must comply with the procedure when it is mandatory, and, even when it is voluntary, the lawyer should conscientiously consider submitting to it. See also ABA Comment [9].
Fee Estimates. Compliance with the following guidelines is a desirable practice: (a) the lawyer providing to the client, no later than a reasonable time after commencing the representation, a written estimate of the fees that the lawyer will charge the client as a result of the representation; (b) if, at any time and from time to time during the course of the representation, the fee estimate originally provided becomes substantially inaccurate, the lawyer timely providing a revised written estimate or revised written estimates to the client; (c) the client accepting the representation following provision of the estimate or estimates; and (d) the lawyer charging fees reasonably consistent with the estimate or estimates given.
ABA Comment Reasonableness of Fee and Expenses. [1] Paragraph (a) requires that lawyers charge fees that are reasonable under the circumstances. The factors specified in (1) through (8) are not exclusive. Nor will each factor be relevant in each instance. Paragraph (a) also requires that expenses for which the client will be charged must be reasonable. A lawyer may seek reimbursement for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges, either by charging a reasonable amount to which the client has agreed in advance or by charging an amount that reasonably reflects the cost incurred by the lawyer.
Basis or Rate of Fee. [2] When the lawyer has regularly represented a client, they ordinarily will have evolved an understanding concerning the basis or rate of the fee and the expenses for which the client will be responsible. In a new client-lawyer relationship, however, an understanding as to fees and expenses must be promptly established. Generally, it is desirable to furnish the client with at least a simple memorandum or copy of the lawyer's customary fee arrangements that states the general nature of the legal services to be provided, the basis, rate or total amount of the fee and whether and to what extent the client will be responsible for any costs, expenses or disbursements in the course of the representation. A written statement concerning the terms of the engagement reduces the possibility of misunderstanding.
[3] Contingent fees, like any other fees, are subject to the reasonableness standard of paragraph (a) of this Rule. In determining whether a particular contingent fee is reasonable, or whether it is reasonable to charge any form of contingent fee, a lawyer must consider the factors that are relevant under the circumstances. Applicable law may impose limitations on contingent fees, such as a ceiling on the percentage allowable, or may require a lawyer to offer clients an alternative basis for the fee. Applicable law also may apply to situations other than a contingent fee, for example, government regulations regarding fees in certain tax matters.
Terms of Payment. [4] A lawyer may require advance payment of a fee, but is obliged to return any unearned portion. See Rule 1.16(d). A lawyer may accept property in payment for services, such as an ownership interest in an enterprise, providing this does not involve acquisition of a proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 1.8(i). However, a fee paid in property instead of money may be subject to the requirements of Rule 1.8(a) because such fees often have the essential qualities of a business transaction with the client.
[5] An agreement may not be made whose terms might induce the lawyer improperly to curtail services for the client or perform them in a way contrary to the client's interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client. Otherwise, the client might have to bargain for further assistance in the midst of a proceeding or transaction. However, it is proper to define the extent of services in light of the client's ability to pay. A lawyer should not exploit a fee arrangement based primarily on hourly charges by using wasteful procedures.
Prohibited Contingent Fees. [6] Paragraph (d) prohibits a lawyer from charging a contingent fee in a domestic relations matter when payment is contingent upon the securing of a divorce or upon the amount of alimony or support or property settlement to be obtained. This provision does not preclude a contract for a contingent fee for legal representation in connection with the recovery of post-judgment balances due under support, alimony or other financial orders because such contracts do not implicate the same policy concerns.
Division of Fee. [7] A division of fee is a single billing to a client covering the fee of two or more lawyers who are not in the same firm. A division of fee facilitates association of more than one lawyer in a matter in which neither alone could serve the client as well, and most often is used when the fee is contingent and the division is between a referring lawyer and a trial specialist. Paragraph (e) permits the lawyers to divide a fee either on the basis of the proportion of services they render or if each lawyer assumes responsibility for the representation as a whole. In addition, the client must agree to the arrangement, including the share that each lawyer is to receive, and the agreement must be confirmed in writing. Contingent fee agreements must be in a writing signed by the client and must otherwise comply with paragraph (c) of this Rule. Joint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership. A lawyer should only refer a matter to a lawyer whom the referring lawyer reasonably believes is competent to handle the matter. See Rule 1.1.
[8] Paragraph (e) does not prohibit or regulate division of fees to be received in the future for work done when lawyers were previously associated in a law firm.
Disputes over Fees. [9] If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the bar, the lawyer must comply with the procedure when it is mandatory, and, even when it is voluntary, the lawyer should conscientiously consider submitting to it. Law may prescribe a procedure for determining a lawyer's fee, for example, in representation of an executor or administrator, a class or a person entitled to a reasonable fee as part of the measure of damages. The lawyer entitled to such a fee and a lawyer representing another party concerned with the fee should comply with the prescribed procedure.
Appendix B: Sample Fee Agreement -
Advanced Hourly Fees Not Held in Trust Pursuant to SCR 20:1.15(b)(4m)
DISCLAIMER: The State Bar of Wisconsin makes no representations or warranties of any kind, express or implied, concerning the legal adequacy or enforceability of the accompanying sample or any part of it. These samples are intended for use only by lawyers admitted to practice in Wisconsin, who are expected to use their own independent legal and business judgment when evaluating the forms for their use.
This information should be used as a guide only. You alone are responsible for your contracts.
Representation and Fee Agreement
1. Anonymous Lawyer, S.C., Attorney at Law (hereinafter "Attorney"), is engaged to represent Anonymous Client (hereinafter "Client") in connection with [INSERT DESCRIPTION OF SCOPE OF REPRESENTATION]. Attorney may retain associate counsel, experts, accountants, or investigators to protect Client's interests. Fees charged by associate counsel, experts, or investigators retained by Attorney shall be treated as expenses to be paid by Client on demand by Attorney. Attorney will consult with client before retaining outside counsel, experts, or investigators.
2. Client agrees to pay Attorney hourly fees at the rate of $____.00 per hour (Attorney's current hourly rate). Attorney customarily increases hourly rates on an annual basis. Attorney will provide Client with written notice of any increase in Attorney's hourly rate 30 days prior to the increase.
3. It is understood that Attorney will bill Client for work that includes, but is not limited to, the following: office conferences, telephone conversations, court appearances, reading and writing correspondence, preparing and reviewing pleadings and documents, analyzing financial records and reports, and travel to and from court or other destinations associated with this representation.
4. Client agrees to pay on demand any actual costs or disbursements incurred or advanced on Client's behalf, such as travel, mileage, parking, photocopies, telephone calls, process service fees, court reporter fees, postage, witness and subpoena fees, filing and court fees, etc. Mileage will be charged at the rate authorized by the Internal Revenue Service (currently $ ____ per mile).
5. Client agrees to pay $_______.00 on execution of this Agreement as an advanced fee for legal services of Attorney, and $_______.00 as an initial advance against costs to be incurred in this matter. Advanced costs will be placed in Attorney's trust account and disbursed as costs are actually incurred. Advanced fees will not be placed in Attorney's trust account. Advanced fees will be placed in Attorney's business account and the advanced fee sum of $_____ will serve as advanced payments for ___ hours of legal services in this matter. After Attorney has provided ____ hours of legal services for Client, Attorney will provide client with a written accounting of such hours. Attorney is obligated to refund any unearned fees at the conclusion of the representation. Client hereby consents to Attorney placing advanced fees in Attorney's business account.
At the conclusion of the representation, Attorney will provide Client with a written accounting of all fees and costs incurred in the matter, or an accounting of fees and costs incurred from the date of last billing statement sent to Client, and a refund of any advanced fees that have not been earned or advanced costs that have not been used. If Client disputes Attorney's determination as to what amount, if any, must be refunded to Client, Client must provide Attorney with written notice of the dispute within 30 days from the date of the final accounting. If the dispute cannot be resolved within 30 days, Attorney will submit the dispute to binding fee arbitration through the State Bar of Wisconsin Fee Arbitration Program. The State Bar's Fee Arbitration Program may be contacted c/o State Bar of Wisconsin, P.O. Box 7158, Madison, WI 53707-7158, or by phone at (800) 728-7788. [Lawyers in Milwaukee County should provide contact information for the Milwaukee Bar Association fee arbitration program.] Client is not required by this agreement to participate in fee arbitration and may pursue a dispute of Attorney's fees in other appropriate forums. Further, if Attorney fails to refund unearned fees, abide by a fee arbitration award, or abide by a final decision of a court with respect to unearned fees, Client may file a claim with the Wisconsin Lawyers Fund for Client Protection to recover such amount. The Wisconsin Lawyers Fund for Client Protection may be contacted c/o State Bar of Wisconsin, P.O. Box 7158, Madison, WI 53707-7158, or by phone at (800) 728-7788.
Client is hereby notified that Attorney reserves the right to require additional fee and cost advances during the representation.
6. STATEMENTS FOR SERVICES, COSTS, AND DISBURSEMENTS ARE DUE AND PAYABLE WITHIN 20 DAYS OF RECEIPT OF STATEMENT FROM ATTORNEY. Client agrees to pay Attorney compensation as the case progresses. Failure to make payments as agreed may provide grounds for Attorney to withdraw from further representation of Client. Fees and costs that are not paid within 20 days will be subject to a 1% monthly (12% yearly) interest charge on any unpaid balances.
7. On conclusion of this legal matter and final billing of Client's account, payment must be made in full within 30 days of receipt of Attorney's Billing Statement.
8. This agreement does not cover or apply to the filing of, prosecution of, or defense of an appeal, in which situation a new representation and fee agreement must be executed.
Dated this _____ day of ______________, 2007, at Hometown, Wisconsin.
ANONYMOUS LAWYER, S.C.
_________________ By: __________________________
Anonymous Client Anonymous Lawyer, Attorney-at-Law
Appendix C: Sample Fee Agreement –
Hourly Fees Held in Trust with Five-day Rule Alternative
Pursuant to SCR 20:1.15(g)
DISCLAIMER: The State Bar of Wisconsin makes no representations or warranties of any kind, express or implied, concerning the legal adequacy or enforceability of the accompanying sample or any part of it. These samples are intended for use only by lawyers admitted to practice in Wisconsin, who are expected to use their own independent legal and business judgment when evaluating the forms for their use.
This information should be used as a guide only. You alone are responsible for your contracts.
Representation and Fee Agreement
1. Anonymous Lawyer, S.C., Attorney at Law (hereinafter "Attorney"), is engaged to represent Anonymous Client (hereinafter "Client") in connection with [INSERT DESCRIPTION OF SCOPE OF RERESENTATION]. Attorney may retain associate counsel, experts, accountants, or investigators to protect Client's interests. Fees charged by associate counsel, experts, or investigators retained by Attorney shall be treated as expenses to be paid by Client on demand by Attorney. Attorney will consult with client before retaining outside counsel, experts or investigators.
2. Client agrees to pay Attorney hourly fees at the rate of $____.00 per hour (Attorney's current hourly rate). Attorney customarily increases hourly rates on an annual basis. Attorney will provide Client with written notice of any increase in Attorney's hourly rate 30 days prior to the increase.
3. It is understood that Attorney will bill Client for work that includes, but is not limited to, the following: office conferences, telephone conversations, court appearances, reading and writing correspondence, preparing and reviewing pleadings and documents, analyzing financial records and reports, and travel to and from court or other destinations associated with this representation.
4. Client agrees to pay on demand any actual costs or disbursements incurred or advanced on Client's behalf, such as travel, mileage, parking, photocopies, telephone calls, process service fees, court reporter fees, postage, witness and subpoena fees, filing and court fees, etc. Mileage will be charged at the rate authorized by the Internal Revenue Service (currently $ ____ per mile).
5. Client agrees to pay $_______.00 on execution of this Agreement as an advanced fee for legal services of Attorney, and $_______.00 as an initial advance against costs to be incurred in this matter.
On receipt, the advanced fees and costs will be deposited in Attorney's trust account. Costs will be disbursed from Attorney's trust account on behalf of Client as such costs are incurred. Pursuant to this agreement and Supreme Court Rule 20:1.15(g), Client authorizes Attorney to withdraw payment for fees that have been earned from Client's funds in Attorney's trust account on sending Client an itemized bill containing: 1) the amount owed; 2) the anticipated date of withdrawal; and 3) the balance of Client's funds in Attorney's trust account after that withdrawal.
If Client makes a specific and reasonable objection to the disbursement within 30 days after receiving an itemized bill, Attorney must return the disputed funds to the trust account until the dispute is resolved, unless Attorney believes that the objection is not reasonable and provides Client with a written explanation of Attorney's position. Client may dispute a fee after the 30 days have passed; however, Attorney is not required to return the disputed portion of the fee to the trust account unless Client disputes the fee within 30 days.
Client is hereby notified that Attorney reserves the right to require additional retainer fees and cost advances during the representation.
6. STATEMENTS FOR SERVICES, COSTS AND DISBURSEMENTS ARE DUE AND PAYABLE WITHIN 20 DAYS OF RECEIPT OF STATEMENT FROM ATTORNEY. Client agrees to pay Attorney compensation as the case progresses. Failure to make payments as agreed may provide grounds for Attorney to withdraw from further representation of Client. Fees and costs that are not paid within 20 days will be subject to a 1% monthly (12% yearly) interest charge on any unpaid balances.
7. On conclusion of this legal matter and final billing of Client's account, payment must be made in full within 30 days of receipt of Attorney's Billing Statement.
8. This agreement does not cover or apply to the filing of, prosecution of, or defense of an appeal, in which situation a new representation and fee agreement must be executed.
Dated this _____ day of ______________, 2007, at Hometown, Wisconsin.
ANONYMOUS LAWYER, S.C.
______________________ By: _____________________
Anonymous Client Anonymous Lawyer, Attorney-at-Law
Wisconsin Lawyer
