Rule 1.5(f)(1) Kansas Rules of Professional Conduct

Rule 1.5(f)(1) Kansas Rules of Professional Conduct The Meaning, Effect, and Consistency in Kansas, and Among the Different States

Table of Contents • Rule 1.5(f)(1) in Kansas • Other States’ Rules • OK • MI • NJ • NY • FL • MO • Miami County, Kansas Case, 2012 • Hypothetical Kansas Case • Engagement letter • How attorney set his fee • Attorneys supporting this fee • Other opinions, other states • Conclusion

Kansas’ Rule 1.5(f)(1) • (f) A lawyer shall not enter into an arrangement for, charge, or collect: • (1) Any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony, support, or property settlement

Oklahoma’s Rule 1.5(d)(1) • Same Language as Kansas’ 1.5(f)(1) • State of Oklahoma ex. rel. Oklahoma Bar Association v. Fagin, 848 P.2d 11 (1992). • Agreement between attorney and client: • “Your final fee shall be based on the results accomplished in your case, the degree of difficulty your case presents, the amount in controversy, and my hourly rate of $175.00, all of which are criteria used by the Oklahoma Courts in determining appropriate attorney fees in family law cases. It is impossible to tell in advance the amount of time or total cost your case will require.” • Court’s Opinion—Fee Agreement Violates Rule 1.5(d)(1) • “Any fee arrangement in which the attorney will receive an enhanced fee if his efforts produce a more favorable property division or alimony award to his client involves personal interest because the greater amount he obtains for his client, the greater he can charge as his fee.” • “[A]nytype of fee which has some aspect of a contingency involved is impermissible. Because respondent’s fee is based on an hourly rate, subject to enhancement if the results of her case are favorable, it is one the ‘amount of which is contingent upon the results obtained . . . .’”

New Jersey’s Rule 1.5(d)(1) • Same Language as Kansas Rule, except “in lieu thereof.” • Salerno v. Salerno, N.J. Super. 536, 538-540, 575 A.2d 532 (1990). • Agreement Between Attorney and Client: • Attorney’s final bill will be based on not only the hourly rate, but “(b) the result accomplished; (c) the amount in controversy; and (d) our experience and ability . . .” • Court’s Opinion: • The contingent fee was permitted for an “equitable distribution,” but found defective for various reasons related to the rule requirements for a contingent fee contract. • “The premium sought by plaintiff’s counsel is not a permissible charge to either plaintiff or defendant under the facts of this case.” • “It is also deficient in that counsel failed to state the exact formula to be applied to the ‘amount in controversy’ and the ‘result accomplished’ in the fee agreement. The lack of an exact percentage creates a guessing game for the client. The court rule and rules of professional conduct were intended to prevent uncertainty about fees and the surprise bill at the end of litigation, which historically led to many fee disagreements.”

New York’s Rule 1.5(d)(5)(i) • (d) “A lawyer shall not enter into an arrangement for, charge, or collect:… • (5) any fee in a domestic relations matter if: • (i) the payment or amount of the fee is contingent upon the securing of a divorce or of obtaining child custody or visitation or is in any way determined by reference to the amount of maintenance, support, equitable distribution, or property settlement;. . .” • Sheresky Aronson & Mayefsky, LLP v. Whitmore, 851 N.Y.S.2d 61 (2007). • Agreement Between Attorney and Client: • Premium Fee Clause: “We reserve the right to discuss with you at the conclusion of the matter your payment of a reasonable additional fee to us, in excess of the actual time and disbursements, for exceptional results achieved, time expended, responsiveness accorded, or complexity involved in your case. However no such fee will be charged to you without your consent.” • Court’s Opinion: • “The ‘additional fee based on exceptional results’ could be viewed as a contingent fee, which is clearly prohibited by DR 2-106(C)(2).” • DR 2-106(C)(2) is the related provision in the ABA’s Model Code of Professional Responsibility • This case was actually decided on the failure to include mandatory language in the fee agreement, not because it was a contingent fee

Florida’s Rule 4-1.5(f)(3) • Rule has same language as Kansas Rule 1.5(f)(1) • King v. Young, Berkman, Berman & Karpf, P.A., 709 So. 2d 572 (1998). • Agreement between Attorney and Client: • “In the event this matter is settled, or the matter is concluded by the entry of a Final Judgment of Dissolution of Marriage (at the trial level), an additional and final fee will be determined as due us from you, taking into consideration the results achieved and the complexity of the matter. This ‘bonus’ feeshall be fair and reasonable.” • Firm had been paid by client $343,000 during the case • Firm sought a bonus of $750,000, when the case had concluded • After 3 day trial, the trial court awarded the attorneys a $525,000 bonus under above clause and the client appealed. • Appellate Court’s Opinion: • That the fee arrangement was an impermissible contingent fee based on results and held it was unenforceable. • “The fee agreement between the firm and King expressly made a portion of the fee to be charged by the firm contingent upon the results obtained. Thus, the provision is void and unenforceable.” • The attorneys, however, were permitted to keep the $343,000 they had already billed and collected.

Missouri’s Rule 4-1.5(d)(1) • Similar language as the Kansas Rule: Because of the human relationships involved and the unique character of the proceedings, contingent fee arrangements in domestic relations cases are rarely justified. Rule 4, Canon 2, EC 2-20. • Shanks v. Kilgore, 589 S.W.2d 318, 319-21 (Mo. App. 1979). • Agreement Between Attorney and Client • Attorney was to be paid 20% of each installment of the settlement—around $60,000 on a $300,000 settlement • Agreement made a day prior to settlement • Trial court found no contingent fee existed • Appellate Court’s Opinion • “The timing of the fee arrangement was unusual and the fact that the basis for its computation was considered established, eliminated the element of uncertainty in the amount to be exacted, but liability for the fee remained contingent and had not become fixed.” • “The arrangement violated the prohibition against a contingent fee contract in a case such as this . . . .” • No analysis of time spent on case by claimant, lawyer

Michigan • MRPC 1.5(d) states: • “A lawyer shall not enter into an arrangement for, charge, or collect a contingent fee in a domestic relations matter or in a criminal matter.”

An Illegal Fee is Unenforceable in Kansas! • In Re Marriage of Johnston, 275 P.3d 931 (Kan. App. 2012) unpublished • Alberg had a fee agreement which stated, “you will be responsible for attorney’s fees at the rate of $175 per hour or I will receive fees consisting of 1/3 of any and all proceeds of any kind or nature received or recovered from Respondent • After the 2009 divorce trial, Johnston fired Alberg • Alberg filed an attorney’s lien claiming $180,000 • At a trial on the attorney’s lien claim, the former client testified that she thought Alberg was to get 1/3 of any recovery • The District Court extinguished the lien, and found that, because of the contingent nature of the fee arrangement, Alberg had no fee that he could recover, at all. Alberg appealed.

Johnston, supra • On appeal, Judge Leben affirmed the District Court, factually and legally, and found that, because Alberg entered into a fee agreement which is barred by public policy, he could not recover a fee at all • Though Alberg never specifically sought to recover a fee under unjust enrichment, Judge Leben found that he could not have, if he had tried, because such a recovery is not permitted where the underlying contract is void as a matter of public policy • See Florida case above for same result

Kansas Case: Contingent Fee? Assume that the engagement letter is as follows: Attorney will charge an hourly rate to client. In addition, at the end of case, attorney may, with client approval, determine the ultimate fee, which will be based on the following factors, among others: a. The time and labor required, the novelty and difficulty of the task, and the skill required; b. The likelihood that this case will preclude attorney from taking other cases; c. The fee customarily charged for similar legal services; d. The amount involved and the results obtained; and e. Attorney’s experience, reputation and ability

Conclusion of Case When case concludes: Attorney bumps fee by about 3 times based upon the below Rule 1.5 factors: a. The experience, reputation and ability of the lawyer performing the services; b. The value of settlement received by client; c. The novelty and difficulty of the questions involved;

Factors used (cont.) c. This employment precluding other employment by attorney; • Customarily charged fees in this locality; • The amount involved and the results obtained; f. Attorney states: Whether the fee is fixed or contingent; no contingent fee is permitted, and this is not a contingent fee, nor is it a fixed fee;

Other Attorneys Feel This Fee Claim Is Valid • One attorney feels that the fee agreement, and the above fee, complied with Rule 1.5 • That it is not, in any way, a contingency fee contract • A contingency fee, by definition, is dependent upon winning a case, and no fee is paid in the absence of an award

Another attorney stated theabove fee claim is appropriate • A second attorney felt that this was not a contingent fee contract and that it complied with Rule 1.5 • This is a “flexible fee agreement” in which the total amount owed was to be determined at the end of the case • This attorney is a former judge

Another attorney feltthis fee claim is valid • This attorney stated: • It is standard in cases of this nature to enter into a fee agreement where the fee will be determined at the end for the case, and not billed monthly • This attorney’s practice was limited to family law

A fourth attorney feelsthis fee claim is valid • Another attorney feels that the fee agreement here was clearly not an hourly fee agreement; instead, it is a fee agreement “expressly predicated on the multiple factors contained in Kansas rule 1.5, with a ‘base’ hourly rate of only $____ an hour.” • This attorney primarily worked in domestic relations law • This attorney has 40+ years of experience and opined that this was an area of specialized practice: “representing extremely wealthy people”

Other State’s Opinions • Eckell v. Wilson, 597 A.2d 696 (Pa. Super. 1991) • A case which is largely about demurrer practice • Client paid attorneys about $28,500 in fees during case; $121,500 in added fees claimed at end • Fee agreement similar to that in case above • Trial court found fee to be contingent in nature, and, therefore void per Code of Prof. Resp.

Eckell, supra • Appellate court found no contingent fee, after defining a contingent fee • Code of Prof. Resp. Pa. disapproves of contingent fee arrangements in domestic relations actions • Cites Marriage of Malec, 205 Ill. App.3d 278, 562 N.E.2d 1014 and Head v. Head, 66 Md. App. 655, 505 A.2d 868 to support the finding

Eckell, supra • That “an agreement which fixes a final fee based on the value of services rendered through the representation is a proper method of fixing a fee and is not a contingent fee in its commonly used meaning. In this situation, the fee is not truly contingent on the outcome of the case, because the attorneys are paid regardless of the outcome of the litigation.”

The above hypothetical fee was found to violate 1.5(f)(1) No, you cannot charge the above fee in Kansas.

What are permitted forms of discipline? • Rule 203(a): Misconduct shall be grounds for: • Disbarment by the Supreme Court; or • Suspension by the Supreme Court; or • Censure by the Supreme Court, which may, or may not, be published in the Kansas Reports, as ordered by the Court; or’ • Informal Admonition by the Kansas Board of Discipline of Attorneys or the Disciplinary Administrator; or • Any other form of discipline…which the Court deems appropriate

Rule 203: Possible Disciplines; Informal Admonition • Informal admonition is imposed by the Disciplinary Administrator’s Office, at the direction of the Review Committee of the Kansas Board for Discipline of Attorneys. See Supreme Court Rule 203(a)(4) and Rule 204(b) (review committee reviews and approves recommendations by the Disciplinary Administrator for informal admonitions). An informal admonition is not published, but like unpublished censure it is public discipline. Under Supreme Court Rule 222(e)(1), if someone contacts the Disciplinary Administrator’s Office and asks if an attorney has ever been disciplined, we are required to “disclose the nature of the case and the disposition of the proceeding, including the rules violated.”

Rule 1.5(f)(1) Kansas Rules of Professional Conduct