Thoughtful Guidance From Skilled Attorneys

ATTORNEY FEES, GETTING PAID, AND AREAS TO CONSIDER

| Mar 9, 2017 | Firm News

As lawyers, we know
words matter.  Make sure you know what
they mean.
 (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: … .
Retainer:
Noting
that the word “retainer” may have an imprecise meaning, the Commission
describes the advance client payments as “deposits to secure the payment of
fees to be earned in the future at an agreed hourly rate.” Id. at 5–6.
Citing the obligation of a lawyer to refund the unearned portion of a fee under
Rule 1.16(d), the Commission argues that non-refundable retainers are per se
unenforceable because ‘[u]nless a lawyer is required to hold unearned fee
deposits in trust, the obligation imposed by Rule 1.16(d)2 is
meaningless in the very cases [where a lawyer has no available cash] where clients
need the most protection.’ Id. at 8 (footnote added).
In re Kendall, 804 N.E.2d 1152, 1155 (Ind. 2004)
First, when a lawyer receives a
payment for legal services to be rendered in the future, must the lawyer hold
the funds in a trust account until earned? Second, may the lawyer’s fee
contract specify that all or a portion of a preliminary (or advanced) fee is nonrefundable?
In re
Kendall
, 804 N.E.2d 1152, 1153 (Ind. 2004)
Flat Fee:
 Respondent contends her engagement fee
is paid by a client to induce the Law Firm to take a case and thus is earned on
receipt. The Law Firm’s fee agreements, however, also provide that the
engagement fee would be credited against either Respondent’s hourly fee or her
flat fee. Thus, if Respondent completed the work called for in the contracts,
the entire engagement fee would have been used to purchase the services
Respondent rendered. This is evidence that the engagement fees were intended to
buy the legal services she agreed to perform rather than simply her
availability at the outset.
In re O’Farrell, 942 N.E.2d 799, 805 (Ind. 2011)
You might ask what happens if you do
use the flat fee and the client terminates you before you can complete the
services.  The court answered this
question as follows:  Even without such
contract provisions, “[i]t is well settled that, where the complete performance
of an attorney’s services has been rendered impossible, or otherwise prevented,
by the client, the attorney may, as a rule, recover on a quantum meruit for the
services rendered by him [or her].” French v. Cunningham, 149 Ind. 632,
49 N.E. 797, 798 (1898).
In re O’Farrell, 942 N.E.2d 799, 807 (Ind. 2011)
            Many times, the attorney ends up
before the Disciplinary Commission as a result of a flat fee where the attorney
decided after starting the case that the flat fee arrangement was not
beneficial to the attorney.
The parties agree that Respondent
violated these Indiana Professional Conduct Rules prohibiting the following
misconduct:
1.5(a): Charging an unreasonable fee.
1.8(a): Entering into a business
transaction (modification of a fee agreement) with a client unless the client
is given reasonable opportunity to seek independent counsel and the client
consents in writing to the transaction.
Respondent’s violation of Rule 1.5(a)
is based solely on Respondent’s charging of a fee in excess of the original fee
agreement. The Commission does not contend that the total fee the client paid
to Respondent would have been unreasonable if Respondent had complied with Rule
1.8(a) in modifying the fee agreement.
In re Hammerle, 952 N.E.2d 751, 752 (Ind. 2011)
The law allowing the
awarding of attorney fees is something that is near and dear to my heart.  In fact, I have presented to the judges in
Marion County trying to convince them why is it is in the best interest of
judicial economy that they award fees and why they can do so.  I have written an article that sets out
various statutes and cases that support attorney fee awards.  To review that article go to  Attorney Fees in Indiana Courts.
Retaining
Liens:
Indiana
law has in the past recognized the validity of an attorney’s retaining lien.
In
State ex rel. Shannon v. Hendricks Circuit Court (1962), 243 Ind. 134,
183 N.E.2d 331, our supreme court determined an attorney’s retaining lien
exists as long as the attorney retains possession of the subject matter of the
lien. The court defined a retaining lien as “the right of the attorney to
retain possession of a client’s documents, money, or other property which comes
into the hands of the attorney professionally, until a general balance due him
for professional services is paid.” Id. at 139, 183 N.E.2d at 333, quoting
7 C.J.S. Attorney & Client § 210, p. 1141.
Bennett v. NSR, Inc., 553 N.E.2d 881, 882 (Ind. Ct. App.
1990).
In the Bennett case, the issue before the court was whether
the retaining lien was subordinate to a subpoena.  The court also addressed the issue of whether
the lien was unethical.  To that the
court ruled:
Lastly,
NSR suggests that retaining liens as such are unethical and should be
disallowed when they cause hardship or inconvenience to the client. Not so
. Ind.Rules of Procedure, Professional
Conduct Rule 1.16(d)
(West 1990) explicitly allow attorneys to retain the papers
of clients to the extent permitted by law.3 Attorney’s retaining
liens originated in the common law and have long been recognized as proper. 7A
C.J.S. Attorney & Client 358 (1980).
Bennett v. NSR, Inc., 553 N.E.2d 881, 884 (Ind. Ct. App.
1990)
Lien
on a judgment:
Sec. 1. An attorney practicing law in a
court of record in Indiana may hold a lien for the attorney’s fees on a
judgment rendered in favor of a person employing the attorney to obtain the
judgment.
Ind. Code Ann. § 33-43-4-1
To obtain the lien, strict compliance
with the statute is necessary.
33-43-4-2 Entry of intention to hold lien
Sec. 2. (a) An attorney, not later than sixty (60) days after the
date the judgment
is rendered, must enter in writing upon the docket or
record in which the judgment is recorded, the attorney’s intention to hold a
lien on the judgment, along with the amount of the attorney’s claim.
(b) If an appeal is taken on a
judgment, the lien may be entered not later than sixty (60) days after the date
the opinion of the higher court is recorded in the office of the clerk of the
trial court or after the date of final judgment where the cause is reversed and
retried. [emphasis added]
Timing
is everything.
Remember the first rule above.  Words matter and after means after.
Pursuant
to Indiana Code section 33–43–4–2, an attorney fee lien is not valid if the
lien is filed before judgment is entered in the case. The trial court therefore
erred in granting Watts’ summary judgment motion and denying Clem’s. We reverse
and remand with instructions for the trial court to grant summary judgment in
favor of Clem.
When you file a lien your client cannot extinguish the lien
without payment.  In the case of Stroup v. Klump-O’Hannes, Husband was
awarded a one half undivided interest on the property wife received in the
divorce until she paid him $12,533.00.
Evidently Wife paid Husband and Husband filed a release of the lien.  Stroup (the attorney for husband) had
properly filed an attorney’s lien.  When
wife discovered this, she filed a complaint to remove the lien.  The court held, “An attorney’s lien for fees
cannot be discharged by the judgment creditor without the attorney’s authority.
See McCabe v. Britton, 79 Ind. 224, 230, 1881 WL 7306 (1881); Peterson
v. Struby,
25 Ind.App. 19, 56 N.E. 733 (1900), reh’g denied.
O’Hannes and Klump satisfied the judgment without informing Stroup or obtaining
his consent.”
Stroup v. Klump-O’Hannes, 749 N.E.2d 622, 625 (Ind. Ct. App.
2001)
The Lord gave and the Lord has taken
away.  Job 1:21
The statutory attorney fee lien is inapplicable when no
judgment is entered.
State Farm Mut. Auto. Ins. Co. v. Ken
Nunn Law Office
,
App.2012, 977 N.E.2d 971.
Husband’s attorney in marital dissolution action was not
entitled to lien on real property purchased by husband while the proceeding was
pending; the property was not a marital asset, and the attorney did not recover
it for the husband.
Johnston v. First Federal Savings Bank, App.2005, 822 N.E.2d 614, transfer
denied 831 N.E.2d 747.
Where the client compromised and settled
claim before judgment without his attorney’s consent, the attorney had no
enforceable lien on money paid to client. Olczak v. Marchelewicz, App.1934, 188 N.E. 790, 98 Ind.App.
244. (I could only find a westlaw link so link will not work unless you have
West)
A primer on what not
to do:
A recent case you should read in its
entirety is Matter of
Coleman
, No. 98S00-1301-DI-52, 2017 WL 345161 (Ind. Jan. 24, 2017).  The respondent took a criminal case evidently
claiming to be associated with Johnny Cochran’s firm of the O.J. Simpson
fame.  He took the case for a flat fee of
$4,000.  He had little experience in
criminal matters. He failed to appear for a hearing and he refused to return
the file when terminated.  After being
terminated he billed the client $9,000 and sued, including demanding 25%
interest.  The court also mentioned he
billed the client for the time involved in withdrawing from the case.
Always have
a written fee agreement:
While the Rules
of Professional Conduct do not require a written fee agreement on all cases, as
shown by the issues raised above you should always have a written fee
agreement.  Be careful to make sure you
detail what you are covering.  If you
have a certain litigation, set out what you are representing the person in and
what you are not.  DO NOT say you are
representing the person in the case of Smith v. Jones.  Does this include a jury trial, does it
include an appeal, if appeal does it include appeal to the Indiana Supreme
Court or the United States Supreme Court? Look at  IN ST RPC Rule 1.2 (c).  A lawyer may limit the scope and objectives of
the representation if the limitation is reasonable under the circumstances and
the client gives informed consent.  Make
sure you accomplish this.  Make sure you
spell out how you are billing for expenses.  Do you have a minimum time increment?
            The
Rules of Professional Conduct do require a written fee agreement in contingency
fee cases.
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
paragraph (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.
IN ST RPC Rule 1.5(c). [emphasis
added
]
Not all cases can be on a contingency.
(d) 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
dissolution or upon the amount of maintenance, support, or property settlement,
or obtaining custody of a child; or
(2) a contingent fee for representing a
defendant in a criminal case.
This provision does not preclude a
contract for a contingent fee for legal representation in a domestic relations
post-judgment collection action, provided the attorney clearly advises his or
her client in writing of the alternative measures available for the collection
of such debt and, in all other particulars, complies with Prof.Cond.R.
1.5(c).
IN ST RPC Rule 1.5(d). [emphasis added]
Safekeeping
of Client’s property. 
Failure to comply with this rule could
result in disbarment.  Matter
of Frosch
, 643 N.E.2d 902 (Ind. 1994).
In that case attorney commingled funds and used client’s funds for his
personal use.  You should also make sure
you keep separate accounts for client funds.
If a client pays you a filing fee, you should deposit that into your
trust account.  Make sure all expenses related
to the IOLTA account are withdrawn from the firm operating account.  Rule 1.15. Safekeeping Property   (b)    A lawyer may deposit his
or her own funds reasonably sufficient to maintain a nominal balance in a
client trust account.
Some banks
will waive fees if you maintain a minimum balance.  This provision appears to allow you to
commingle some of your funds to the extent necessary to avoid fees.
You should be
careful when dispersing funds as you might become liable to third parties.
Attorney who received settlement
proceeds for client’s personal injury case, upon which chiropractor who had
provided services to client held a doctor’s lien, was required to hold, in
trust, funds representing the disputed amount of chiropractor’s bills, rather
than unilaterally resolving client’s dispute with chiropractor by paying only
undisputed portion of bills and forwarding the balance of settlement proceeds
to client. Rules of Prof.Conduct, Rule 1.15(b).
In re Allen, 802 N.E.2d 922 (Ind. 2004)
Indiana
Statutes Allowing Attorney Fees and Why Courts Should Award Them.
I have previously written on the
statutes that allow courts to award attorney fees under the statutes and why
the courts should award fees.  Click here
for the article.
 The foregoing was a handout at an ICLEF seminar.  To see the entire seminar including PowerPoint presentations on other topics about fees. 
Prepared by Richard A. Mann of Mann Law, P.C. Attorneys
at Law, www.rmannlawoffice.com
Follow
us on Twitter:  https://twitter.com/RAMattorneys

 

This does not constitute legal advice nor
does it establish an attorney client relationship.  This is for general information purposes as
in most legal situations the facts and terms of an agreement between the
parties can affect the result.