ANNOTATIONSSource:
(b) and Comment amended April 20, 2000, effective July 1, 2000;
(d) amended and adopted April 18, 2001, effective July 1, 2001.
COMMENT
Basis or Rate of Fee
In a new client-lawyer relationship, the basis or rate of the
fee must be promptly communicated in writing to the client.
When the lawyer has regularly represented a client, they
ordinarily will have reached an understanding concerning
the basis or rate of the fee; but, when there has been a change
from their previous understanding, the basis or rate of the fee
should be promptly communicated in writing. All contingent fee
arrangements must be in writing, regardless of whether the
client-lawyer relationship is new or established. See C.R.C.P.,
Ch. 23.3, Rule 1. A written communication must disclose the
basis or rate of the lawyer's fees, but it need not take the
form of a formal engagement letter or agreement, and it need not
be signed by the client. Moreover, it is not necessary to recite all the
factors that underlie the basis of the fee, but only those that
are directly involved in its computation. It is sufficient, for
example, to state that the basic rate is an hourly charge or a
fixed amount or an estimated amount, to identify the factors
that may be taken into account in finally fixing the fee, or to
furnish the client with a simple memorandum or the lawyer's
customary fee schedule. When developments occur during the
representation that render an earlier disclosure
substantially inaccurate, a revised written disclosure
should be provided to the client.
A written statement concerning the fee reduces the
possibility of misunderstanding. Lawyers are well-advised to
use written disclosures even when they are not required.
Moreover, it is preferable, although not mandatory, to obtain
the client's signature acknowledging the basis or rate of the
fee.
In setting a fee, a lawyer should also consider the
inability of the client to pay a reasonable fee. Persons unable
to pay all or a portion of a reasonable fee should be able to
obtain necessary legal services, and lawyers should support and
participate in ethical activities designed to achieve that
objective.
Terms of Payment
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(j). However, a fee paid in property instead of
money may be subject to special scrutiny because it involves questions
concerning both the value of the services and the lawyer's special
knowledge of the value of the property.
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. When there is doubt
whether a contingent fee is consistent with the client's best interest,
the lawyer should offer the client alternative bases for the fee and
explain their implications. Chapter 23.3 of the Colorado Rules of Civil
Procedure governs contingent fee arrangements, and contingent fees
otherwise may be limited by applicable law.
Division of Fee
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 (d) permits the lawyers to divide a fee on the basis
of
the proportion of services they render and responsibility assumed by each.
The client must consent to the fee division in writing. The client must be
advised of and agree to the share of the fee that each lawyer is to receive.
Disputes over Fees
If a procedure has been established for resolution of fee
disputes, such as an arbitration or mediation procedure established by
the bar, 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
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.
COMMITTEE COMMENT
The fee splitting provisions of Model Rule 1.5(e), now 1.5(d),
have been revised to resemble more closely DR 2-107(A) and to tighten up
the client consent requirements.
ANNOTATION
Law reviews. For article, "Confirm Attorney Fees in Writing: Court
Changes Colo. RPC 1.4, 1.5", see 29 Colo. Law. 27 (June 2000).
Annotator's note.
Since Rule 1.5 is similar to
DR 2-103 and DR 2-106 as they
existed prior to the 1992 repeal and reenactment of the Code of
Professional Responsibility, relevant cases construing
those provisions have
been included in the annotations to this rule.
Supreme court is exclusive tribunal for regulation of the practice of law,
including reasonableness of fees, notwithstanding statutory provision allowing the
director of the division of workers' compensation to determine reasonableness of fees in a
workers' compensation case. In re Wimmershoff, 3 P.3d 417 (Colo. 2000).
Charging client for costs of defending grievance proceeding violates DR
2-106(A) where charges are not unfounded and there is no prior agreement to
pay such costs. People v. Brown, 840 P.2d 1085 (Colo. 1992).
Lawyer who billed client for the costs of defending a
grievance violated this rule. There was no agreement between the
attorney and the client to justify the billing, and the attorney's
claim that the billing stemmed from the attorney's independent duty
to protect the client was found by the grievance panel to be false.
Therefore, the billing based on such a theory is deceptive and
dishonest in violation of this rule. The appropriate sanction for
the lawyer's conduct is public censure. People v. Brown, 840 P.2d
1085 (Colo. 1992).
Attorney's professional misconduct involving the improper collection of
attorney's fees in six instances justified 45-day suspension.
People v. Peters, 849 P.2d 51 (Colo. 1993).
Lawyer's bills proper under this rule when lawyer billed
attorney and secretarial services separately. Newport Pac. Capital
Co. v. Waste, 878 P.2d 136 (Colo. App. 1994).
Relief in the nature of mandamus may be appropriate when it is
alleged that a sheriff or chief of police has refused to accept
applications for concealed weapons permits from private
investigators who are not current or retired law enforcement
officers and the sheriff or police chief has thereby breached a
statutory duty to conduct a background check on each applicant.
Miller v. Collier, 878 P.2d 141 (Colo. App. 1994).
Public policy of protecting a client's right to control settlement will
be better served by not treating a clause in a representation agreement that
restricts the client's right to control settlement as severable from the
provision for calculating fees. Where representation agreement provided
alternate method of calculating the fees payable if the client unreasonably
refused to settle, court refused to enforce either provision and allowed only
reasonable value of services rendered by law firm. Jones v. Feiger, Collison
& Killmer, 903 P.2d 27 (Colo. App. 1994),
rev'd on other grounds, 926 P.2d 1244 (Colo. 1996).
Stipulated agreement and recommendation of public censure with certain conditions
and monitoring based upon conditional admission of misconduct were warranted for
attorney who required that his associates sign a covenant that allowed his firm to collect 75
to 100 percent of the total fee generated by a case in which his firm did less than all
the work. People v. Wilson, 953 P.2d 1292 (Colo. 1998).
Public censure and restitution were appropriate in case of attorney who
unilaterally charged client $1,000 in addition to previously agreed contingent fee. In re
Wimmershoff, 3 P.3d 417 (Colo. 2000).
Conduct violating this rule in conjunction with other disciplinary rules, where
mitigating factors were present, warrants public censure. People v. Davis, 950 P.2d 586
(Colo. 1998).
Conduct violating this rule sufficient to justify public censure.
In re Green, 11 P.3d 1078 (Colo. 2000).
Conduct violating this rule in conjunction with other
disciplinary rules is sufficient to justify suspension. People v. Crews,
901 P.2d 472 (Colo. 1995);
People v. Hohertz, 926 P.2d 560 (Colo. 1996);
People v. Sather, 936 P.2d 576 (Colo. 1997);
People v. Kotarek, 941 P.2d 925 (Colo. 1997);
People v. Johnson, 946 P.2d 469 (Colo. 1997).
Conduct violating this rule in conjunction with other
disciplinary rules is sufficient to justify disbarment.
People v. Jenks, 910 P.2d 688 (Colo. 1996);
People v. Jamrozek, 921 P.2d 725 (Colo. 1996);
People v. Sousa, 943 P.2d 448 (Colo. 1997);
People v. Clyne, 945 P.2d 1386 (Colo. 1997);
People v. Roybal, 949 P.2d 993 (Colo. 1997);
People v. Valley, 960 P.2d 141 (Colo. 1998).
Cases Decided Under Former DR 2-103.
Law reviews.
For article, "The Lawyer's Duty to Report Ethical Violations",
see 18 Colo. Law. 1915 (1989).
For formal opinion of the Colorado Bar Association Ethics Committee on
Collaboration with Non-Lawyers in the Preparation and Marketing of Estate
Planning Documents, see 19 Colo. Law. 1793 (1990).
Attorney's conduct in paying inmates for referrals to attorney for
the provision of legal services justifies 60-day suspension. People v.
Shipp, 793 P.2d 574 (Colo. 1990).
Attorney's conduct in allowing company selling living trust packages to
provide his name, exclusively, to customers upon sale, in conjunction with
other violations and aggravating factors justifies six-month suspension.
People v. Cassidy, 884 P.2d 309 (Colo. 1994).
Cases Decided Under Former DR 2-106.
Law reviews. For article, "Conflicts in Settlement of Personal Injury
Cases", see 11 Colo. Law. 399 (1982). For article, "Attorney's Fees", see
11 Colo. Law. 411 (1982). For article, "Providing Legal Services for the
Poor: A Dilemma and an Opportunity", see 11 Colo. Law. 666 (1982).
For article, "Reduced Malpractice and Augmented Competency: A Proposal",
see 12 Colo. Law. 1444 (1983).
For article, "Ethical Problem Areas for Probate Lawyers", see 19 Colo. Law.
1069 (1990). For formal opinion of the Colorado Bar Association Ethics
Committee on Collaboration with Non-Lawyers in the Preparation and Marketing of
Estate Planning Documents, see 19 Colo. Law. 1793 (1990). For formal opinion
of the Colorado Bar Association Ethics Committee on Recovery of Attorney Fee by
Lender Using In-House Counsel, see 20 Colo. Law. 697 (1991).
Where an attorney makes a uniform practice of imposing charges that
exceed the statutory
standards, such violates Canon 2. People v. Radinsky, 176 Colo.
357, 490 P.2d 951 (1971).
Attorney's charges for probate proceeding considered excessive on facts
of case. People ex rel. Goldberg v. Gordon, 199 Colo. 296, 607 P.2d
995 (1980).
Attorney who assessed excessive legal fees and attempted to retain
improperly charged fees, neglected clients' interests to their detriment,
and made misrepresentations as to services actually performed on
clients' cases was properly suspended for thirty days. Although attorney
previously found to have engaged in professional misconduct, attorney
suffered personal tragedy prior to misconduct and subsequently
improved by engaging in activities beneficial to legal and professional
community. People v. Brenner, 764 P.2d 1178 (Colo. 1988).
Where attorney enters into a fee arrangement basing his compensation
directly on royalties his client might receive from oil and gas wells, it
is clear that the arrangement
is not intended as compensation for legal services provided and therefore
constitutes conduct violating this rule sufficient to justify suspension.
People v. Nutt, 696 P.2d 242 (Colo. 1984).
Contingent fee agreement in a probate proceeding is not
unconscionable or unreasonable where it was openly made and supported by
adequate consideration. In re Estate of Reid, 680 P.2d 1305 (Colo. App. 1983).
Excessive fees are basis for indefinite suspension of attorney.
People v. Radinsky, 176 Colo. 357, 490 P.2d 951 (1971).
Contract held not to violate prohibition against maintenance.
Northland Ins. Co. v. Bashor, 177 Colo. 463, 494 P.2d 1292 (1972).
Evidence insufficient to establish excessive fee in violation of
paragraph (A). People v. Lanza, 660 P.2d 881 (Colo. 1983).
Suspended or disbarred attorney does not lose right to assert a claim for
fees earned prior to suspension or disbarment. Rutenbeck v. Grossenbach,
867 P.2d 36 (Colo. App. 1993).
Suspended attorney was entitled to collect one-third share of contingency
fee under an agreement to divide the fee with two other attorneys where the
agreement was based on a good faith division of services and
responsibility at the time it was entered into. Rutenbeck v. Grossenbach,
867 P.2d 36 (Colo. App. 1993).
Public censure warranted where attorney kept the first lump sum check
obtained in settlement as a lump sum payment of his contingency fee and
reimbursement of costs even though he knew the settlement might later be
reduced
by the social security disability award and the client's union award. People
v. Maceau, 910 P.2d 692 (Colo. 1996).
Suspension for one year and one day warranted where attorney billed
for time that was not actually devoted to work contemplated by contract and
for
time not actually performed. People v. Shields, 905 P.2d 608 (Colo. 1995).
Conduct violating this rule in conjunction with other
disciplinary rules is sufficient to justify suspension.
People v. Schmad, 793 P.2d 1162 (Colo. 1990);
People v. Sullivan, 802 P.2d 1091 (Colo. 1990);
People v. Dunsmoor, 807 P.2d 561 (Colo. 1991);
People v. Koeberle, 810 P.2d 1072 (Colo. 1991);
People v. Kardokus, 881 P.2d 1202 (Colo. 1994);
People v. Johnson, 881 P.2d 1205 (Colo. 1994);
People v. Banman, 901 P.2d 469 (Colo. 1995);
People v. Dickinson, 903 P.2d 1132 (Colo. 1995);
People v. Mills, 923 P.2d 116 (Colo. 1996).
Conduct violating this rule sufficient to justify suspension.
People v. Fleming, 716 P.2d 1090 (Colo. 1986).
Conduct violating this rule sufficient to justify disbarment.
People v. Dwyer, 652 P.2d 1074 (Colo. 1982);
People v. Golden, 654 P.2d 853 (Colo. 1982);
People v. Franks, 791 P.2d 1 (Colo. 1990);
In re Bilderback, 971 P.2d 1061 (Colo. 1999).
Applied in Hartman v. Freedman, 197 Colo. 275, 591 P.2d 1318 (1979);
People v. Meldahl, 200 Colo. 332, 615 P.2d 29 (1980);
People ex rel. Cortez v. Calvert, 200 Colo. 157, 617 P.2d 797 (1980);
Mau v. E.P.H. Corp., 638 P.2d 777 (Colo. 1981);
Heller v. First Nat'l Bank, 657 P.2d 992 (Colo. App. 1982);
People v. Franco, 698 P.2d 230 (Colo. 1985);
People v. Coca, 732 P.2d 640 (Colo. 1987).
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