“Lawyers are expensive”—a phrase commonly uttered whenever someone is told to hire a lawyer to assist with a matter. As lawyers, we have an obligation to try to quash that common misconception by making sure that we bill each of our clients a fee that is “reasonable under the circumstances.” Model Rules of Prof’l Conduct, R. 1.5 cmt. [1]; see also Bird, Marella, Boxer & Wolpert v. Sup. Ct., 130 Cal. Rptr. 2d 782, 791-92 (Cal. Ct. App. 2003) (noting that a lawyer owes a duty “to charge only fair, reasonable and conscionable fees” to his or her client); Lawyer Disciplinary Bd. v. Ball, 633 S.E.2d 241, 250 (W. Va. 2006) (noting that a lawyer owes a duty “not to charge excessive fees” in representing a client). The following is an attempt to elaborate on how to do just that in order to comply with Nevada Rule of Professional Conduct (RPC) 1.5(a).
To begin, a lawyer should exercise “billing judgment” in representing a client and should not bill for work that is “excessive, redundant, or otherwise unnecessary.” Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). This means that a lawyer should not:
See ABA Center for Prof’l Responsibility, Annotated Model Rules of Prof’l Conduct, at 77-82 (8th ed. 2015). A lawyer who engages in such improper billing practices may find himself or herself on the wrong side of the proverbial “v” in an action for breach of contract or breach of fiduciary duty. See, e.g., O’Connor v. Blodnick, Abramowitz & Blodnick, 744 N.Y.S.2d 205, 206 (N.Y. App. 2002); U.S. Ice Cream Corp. v. Bizar, 659 N.Y.S.2d 492, 493-94 (N.Y. App. 1997).
It is equally true that a lawyer does not avoid judicial (or State Bar) scrutiny merely by finding a wealthy client who agrees in writing to pay an unreasonable fee. See, e.g., In re Sinnott, 845 A.2d 373, 379 (Vt. 2004) (“[L]awyers . . . cannot charge unreasonable fees even if they are able to find clients who will pay whatever a lawyer’s contract demands.”); Attorney Grievance Comm’n v. Braskey, 836 A.2d 605, 625-26 (Md. 2003) (finding that a client’s willingness to pay an unreasonable fee is irrelevant and amounts to “fee gouging”); see also Microsoft Corp. v. United Computer Resources of New Jersey, Inc., 216 F. Supp. 2d 383, 386 (D. N.J. 2002) (“[H]aving a wealthy client does not justify a legal feeding frenzy resulting in the escalation of attorneys’ fees and costs.”). Rather, a fee agreement remains subject to review in any subsequent action between the lawyer and the client, see, e.g., McDonald Carano Wilson v. Bourassa Law Grp., 131 Nev., Adv. Op. 90, 362 P.3d 89, 91 (2015) (“[T]he district court must ensure that [a law firm’s fee] agreements are not unreasonable.”), and “will be set aside when its provisions are unreasonable as to the client.” Restatement (Third) Law Governing Lawyers § 34 cmt. b.
Even a flat fee agreement or an agreement indicating that a fee is deemed to be earned upon receipt remains subject to review for reasonableness; and a lawyer who is discharged or withdraws before completing the matter for which the lawyer was retained may be required to refund a portion of his or her fee. See, e.g., State Bar of Nev., Standing Comm. on Ethics & Prof’l Resp., Formal Op. No. 15 (1993); Supreme Court of Ohio, Bd. of Prof’l Conduct, Op. No. 2016-1.
A lawyer must also be cautious when trying to modify a fee agreement mid-stream. Except for “changes in the basis or rate of the fee” agreed to by the client at the outset of the representation, see Nevada RPC 1.5(b), a lawyer does not have free reign to unilaterally modify his or her fee agreement with a client during the course of the representation simply because the modification is communicated to the client. ABA Standing Comm. on Ethics & Prof’l Responsibility, Formal Op. No. 11-458. In fact, a presumption of undue influence attaches to a modified fee agreement. See, e.g., Drake v. Becker, 303 N.E.2d 212, 216 (Ill. App. 1973); Griffin v. Rainer, 186 S.E.2d 10, 12 (Va. 1972); cf. In re Jane Tiffany Living Trust 2001, 124 Nev. 74, 78, 177 P.3d 1060, 1062 (2008).
A lawyer must treat any proposal to modify a fee agreement as doing business with a client, thereby requiring the lawyer to also comply with Nevada RPC 1.8(a), which includes making sure that the client reasonably understands the need for the modification and is given a reasonable opportunity to consult with separate counsel about the modification. See, e.g., Valley/50th Ave., LLC v. Stewart, 153 P.3d 186, 189 (Wash. 2007); In re Hefron, 771 N.E.2d 1157, 1162 (Ind. 2002). A lawyer who fails to strictly comply with Nevada RPC 1.8(a) upon entering into a modified fee agreement with a client risks having the agreement set aside by the client even if the modification is economically fair to the client. See, e.g., McMahon v. Eke-Nweke, 503 F. Supp. 2d 598, 606-07 (E.D.N.Y. 2007); BGJ Assocs., LLC v. Wilson, 7 Cal. Rptr. 3d 140, 146-47 (Cal. Ct. App. 2004). And agreeing to continue representing the client—without more—is insufficient to justify a proposed modification to the fee agreement given that the lawyer is already duty-bound to handle the matter through its completion. In re Kaufman, 93 Nev. 452, 456, 567 P.2d 957, 959-60 (1977) (stating that a lawyer may only withdraw for “good cause” from representing a client); see also Restatement (Third) Law Governing Lawyers § 32 cmt. c (noting the general rule “that a lawyer must persist despite unforeseen difficulties and carry through the representation to its intended conclusion”).
Gone are the days when a lawyer could bill a client at the conclusion of a matter for “services rendered.” Gisbrecht v. Barnhart, 535 U.S. 789, 801 (2002) (“By the early 1970s, the practice of hourly billing had become widespread.”). While a lawyer may still block bill for multiple tasks performed in a day, a lawyer should avoid combining too many tasks and refrain from using vague or undescriptive time entries (“attention to file,” “trial preparation,” etc.). See, e.g., In re Margaret Mary Adams 2006 Tr., No. 61710, 2015 WL 1423378, at *2 (Nev. Mar. 26, 2015). Similarly, a lawyer who anticipates billing long hours each day over an extended period of time should discuss the matter with the client in order to avoid the potential appearance of padding the bill. See, e.g., Lawyer Disciplinary Bd. v. Cooke, 799 S.E.2d 117, 121-25 (W. Va. 2017) (disciplining a lawyer for, among other wrongful acts, “extraordinary overbilling”); Toledo Bar Assn. v. Stahlbush, 933 N.E.2d 1091, 1093-95 (Ohio 2010) (disciplining a lawyer who falsely claimed to have worked “an average of almost ten hours a day, 365 days a year”).
Nevada RPC 1.5(a) contains a non-exhaustive list of factors “to be considered in determining the reasonableness of a fee.” The Nevada State Bar’s Ethics and Professional Responsibility Committee has identified additional factors to be considered, including a client’s level of sophistication; whether the client or the lawyer proposed the fee arrangement; and, in the context of a contingency fee, the amount of risk borne by the lawyer. See State Bar of Nev., Standing Comm. on Ethics & Prof’l Responsibility, Formal Op. No. 4 (1987). A lawyer should be mindful of these factors when proposing a fee for representing a client in a matter. No two matters are alike, and therefore, what may be reasonable to charge for representing a client in one matter may be unreasonable in another matter. For what it is worth, though, a lawyer’s profit margin is not among the factors to be considered, and at least one appellate court has said that it would unfairly penalize lawyers by making them reveal their profit margin when establishing the reasonableness of their fees. See Shaffer v. Sup. Ct., 39 Cal. Rptr. 2d 506, 511-13 (Cal. Ct. App. 1995).
Nevada RPC 1.5(a) is not limited to the reasonableness of a lawyer’s fee—the rule also states that a lawyer shall not “make an agreement for, charge, or collect . . . an unreasonable amount for expenses.” For example, absent client consent, a lawyer should not bill a client for staying in a five-star hotel or dining at a 3-star Michelin-rated restaurant. Cf. Entertainment Software Ass’n. v. Blagojevich, No. 05 C 4265, 2006 WL 3694851, at *10 (N.D. Ill. Aug. 9, 2006) (noting that a court will exclude an “unnecessarily luxurious” expense from a cost and fee award). In addition, a lawyer should not bill a client for “general office overhead,” such as the cost of obtaining malpractice insurance. Annotated Model Rules, at 75-76. Before incurring a large expense on a client’s behalf, a lawyer should discuss the matter with the client and, if possible, propose one or more alternatives.
As a final note, a lawyer who prefers to avoid a public airing of a dispute with a client regarding the reasonableness of his or her fee and expenses should consider including an arbitration provision in his or her fee agreement with the client. See ABA Standing Comm. on Ethics & Prof’l Responsibility, Formal Op. No. 02-425 (indicating that lawyers may ask their clients to agree to privately arbitrate disputes concerning fees and expenses). Nevada lawyers should be mindful of NRS 597.995 when including binding arbitration provisions in their fee agreements.
If you have any questions about this article, please call or email Joshua P. Gilmore at 702-562-8820 or JGilmore@BaileyKennedy.com. Additional resources can be found at www.baileykennedy.com/category/articles/
This article was originally published in COMMUNIQUÉ, the official publication of the Clark County Bar Association.