By Karen Sutherland

One type of agreement that should be near and dear to your heart is the fee agreement. I am not implying the primary focus of your work is or should be on your fees, but fee agreements can help you avoid conflicts with clients and, in some cases, are necessary under the Rules of Professional Conduct.

Benefits of a Written Fee Agreement
Besides being a way to clearly communicate how attorney’s fees will be calculated, fee agreements provide you with an opportunity to summarize all parties’ expectations and to get the clients to focus on what you can and cannot do for them. They can also outline the ground rules for your relationship--not just who pays for what (e.g. long distance phone calls, faxes, secretarial overtime, photocopies, etc.) but also who will do the work, how long it will take (or make it clear that you cannot predict how long it will take) and what the expected outcome will be (e.g., general representation of an entity, preparing a will, obtaining an injunction, securing a work visa, getting a divorce, etc.).

Drawbacks of a Written Fee Agreement
If your representation is only going to last an hour or two, then maybe a formal written fee agreement is overkill. However, you may want to consider sending a confirming letter or e-mail explaining briefly what you were asked to do and stating that you have completed your representation. This can be very helpful if the client could possibly be under the impression that you were going to do more work than what you actually did, or if you made a referral to someone else for the remainder of the client’s work, or of there are deadlines the client needs to meet.

For example, “Thank you for discussing your tax issues with me, which is the full scope of what you retained me to do. As we discussed, I referred you to X for your corporate formation issues, and you decided to have your CPA prepare your tax return. I have closed my file, and my bill is enclosed. I have enjoyed working with you, and wish you success with your new business.”

Also, consider that the fee agreement is probably the first example of your legal writing that the client sees, and if it is overly long, confusing or obtuse, the client may become concerned about the quality of your work and have second thoughts about hiring you.

Another drawback is that written fee agreements take time to write and time for the client to sign and return. Developing a form (or a couple of forms) to fit the various types of work you do can speed this process and make it simpler. It also helps if you have a legal assistant or accounting department that you can task with doing a rough draft based on your forms every time you open a new file for a new client.

Legal Requirements for Fee Agreements

Even though there are some drawbacks to written fee agreements, there are some situations where they are required and other situations where having one will make it easier to establish that your fees are reasonable.

RPC 1.5(b) states that when you have not regularly represented the client, or when the fee agreement is substantially different from what the parties have used previously, you need to communicate the basis or rate of the fee or factors involved in determining the charges and your billing practices. RPC 1.5(b) states that this information “shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation.” Also, the lawyer shall communicate the basis or rate of the fee in writing to the client upon the client’s request. Id. (emphasis added)

Additionally, two of the eight factors that are described in RPC 1.5(a) for determining if a fee is reasonable mention the fee agreement, and some of the other factors, such as time limitations, your experience, and the amount at stake, could be communicated to the client in the fee agreement if you wanted to do so. The eight factors are paraphrased below:

1. Time, labor, skill, novelty of the issues, and terms of the fee agreement;
2. The likelihood, if apparent to the client, that your accepting the work will preclude you from taking on other work;
3. The fee customarily charged in the locality;
4. The amount at stake and the results obtained;
5. Time limitations imposed by the client or the circumstances;
6. The nature and length of the professional relationship;
7. Your experience, reputation and ability; and
8. Whether the fee agreement or confirming writing demonstrates that the client received a reasonable and fair disclosure of the material elements of the fee agreement and of the lawyer’s billing practices.

RPC 1.5 also limits the types of matters for which a contingency fee can be charged and requires contingency fees to be in writing.

Improper Fee Agreements
You cannot charge a contingency fee in a domestic relations matter, with limited exceptions, or for representing a defendant in a criminal case under RPC 1.5(d). Also, there are limits on fee divisions between lawyers who are not in the same firm under RPC 1.5(e), and you cannot share fees with a nonlawyer, except in limited circumstances outlined in RPC 5.4(a) where the attorney has died, or where non-lawyer employees are included in a compensation or retirement plan. Thus, any fee agreement that includes any of these components would be improper, as would a fee agreement that gives your client a discount or kickback for referrals.

Conclusion
When attorneys come to me for advice on a conflict of interest issue that requires analyzing whether an individual is a current or former client, or there is an issue about when money in trust has been earned, or the attorney fires the client (or vice versa), or the attorney wants to know who has to pay for photocopies if the client wants a copy of the file, the first thing I ask is whether there is a written fee agreement.

It may not always be necessary to have a written fee agreement, but it can often help resolve these issues or reduce the likelihood that they will arise in the first place.