ER 1.5 Fees

The Standard

A lawyer's fee and expenses must be reasonable. This obligation exists throughout the representation and requires lawyers to do a “look-back” as to reasonableness at the conclusion of the representation, for all types of fee arrangements. Factors to consider include:

            Time and labor required
            Requisite skill/ability of the lawyer to provide the services
            Time limitations and whether the representation precludes other employment
            Fees customarily charged in the community
            Amount in controversy and results obtained
            Nature and length of the attorney client relationship
            Risk assumed by the lawyer

The scope and the rate must be communicated to the client in writing. Changes must also be communicated to the client in writing, before billing at a higher rate.

Contingency agreements must be signed by the client and are not permissible in most family law matters and all criminal defense cases.

If the fee is designated nonrefundable/earned-on-receipt, the client must be advised in writing that they may discharge the lawyer at any time and may be entitled to a refund.  


Do I need a written fee agreement in pro bono matters? What if I’m court-appointed?

You need (and want) a written fee agreement in pro bono matters, except where you are providing short-term limited legal services for a nonprofit or court-sponsored program. See ER 6.5(c). Court-appointed lawyers are not ethically required to have written fee agreements. 

May the written fee agreement be an email, or does it have to be more formal?

An email will suffice except where a signed writing is required, such as contingency matters or where there is a fee share. But the best practice is to craft a thoughtful and robust fee contract that can be tailored to specific client matters, and to have all fee agreements signed by the client. Think of your fee agreement as a communication tool, to set expectations at the engagement level and revisit as needed.

Any special requirements for contingency fee matters?

Yes, there are several requirements in addition to a signed writing. Carefully review ER 1.5(c) to prepare a contingency fee agreement and seek guidance/review from Practice 2.0.

Do I need to keep time in contingency and flat-fee matters?

You should. Lawyers must engage in retrospective analysis as to the reasonableness of any fee for legal services and, in a fee dispute, bear the burden of proving the fee was reasonable. See Comments 3 and 7 to ER 1.5, Matter of Swartz, 141 Ariz. 266 (1984), In re Connelly, 203 Ariz. 413 (2002), and Geller v. Lesk, 230 Ariz. 624, 629 (App. 2012).

My contingency fee agreement provides for a 1/3 fee. I resolved the client’s matter very favorably and much faster than we anticipated. Do I have to reduce my fee?

Likely. At the end of a representation, a lawyer must review the work performed and analyze whether, under the ER 1.5(a) factors, it is appropriate to charge the full fee that the client agreed to. In determining whether the fee is reasonable, an attorney cannot rely on the propriety of the initial fee arrangement, but instead must look at all the circumstances that developed.  Even if the fee was reasonable when contracted for, it can later turn out to be excessive, and in that situation, the lawyer has a duty to reduce the fee. In re Swartz, 686 P.2d 1236 (1984). 

Must I have a separate fee agreement for each new matter I handle for a regular client?

No, not if you have evolved a clear understanding with the client as to the basis/rate of fees/expenses. Plan to revisit the understanding periodically, to avoid any ambiguity.

How do I describe the scope of representation in a fee agreement?

Be specific. Set out what you will and won’t do for the client. Does your representation in the client’s family law matter include child support or custody issues? What about post-decree matters? Does your representation in a criminal defense matter include a jury trial and/or the filing of an appeal or a petition for postconviction relief?

How should I cover costs/expenses in a fee agreement?

Clearly set out in your fee agreement any costs/expenses that will be assessed to the client and how those charges will be calculated. Avoid billing clients for overhead (such as clerical staff) or travel unless you have expressly provided for this in your fee agreement. Be cautious about percentage surcharges, which must approximate actual expenses/costs and which require written client consent. See State Bar of Ariz. Ethics Op. 94-10.

Is fee sharing permissible?

Yes, subject to the requirements of ER 1.5(e).

May I accept property as payment for my services?

Yes, assuming you are not acquiring a proprietary interest in the subject of the litigation, but fees paid in property are considered a business transaction, subject to the requirements of ER 1.8(a).

May I include minimum time charges in my fee agreement?

Billing practices that rely on estimation are not recommended. You must be able to substantiate reasonableness. The best practice is to just bill your actual time. Workarounds may result in unethical inflation of actual costs and time spent on tasks.

If I fly three hours for one client, and spend that time on legal work for another client, may I bill three hours to each client, for a total of six billable hours?

No because you did not earn six billable hours. A lawyer who has agreed to bill on the basis of time spent is obliged to pass the benefits of efficiency to the client. See ABA Formal Op. 93-379.

I want to increase my hourly rate. Must I notify current clients in advance?

Yes. Any change in the basis or rate of the fee or expenses must be communicated to the client in writing before the fees or expenses to be billed at the higher rate are actually incurred. 

Does the State Bar have sample fee agreement forms?

Yes! Visit Practice 2.0 for sample fee agreements and other templates for your practice.

What should I do if I have a dispute with my client over fees?

The best outcome is an informal resolution with your client. Talk to the client to see if the dispute can be settled. Failing that, the State Bar of Arizona has a free, fast, and binding arbitration procedure for the resolution of fee disputes.  

May I include in my fee agreement that I will charge interest on past due legal fees?

Yes, but the interest rate must be reasonable. See State Bar of Ariz. Ethics Op. 00-07.

I’ve taken over a contingency fee matter, for a client who fired prior counsel. Any lien by prior counsel is his problem, right?

Wrong. You must notify the client, in writing, that a portion of any contingency fee earned may be owed to prior counsel. Additionally, you must hold in trust any disputed funds, until a resolution. Finally, if you negotiate the percentage with prior counsel, on behalf of the client, you must obtain the client’s informed consent to the conflict caused by your dual role. See ABA Formal Op. 487.

What other fee agreement terms should I consider?

May vary by practice area:

Billing policies and practices
Fee arbitration
Disbursement of fees to lawyer from amounts recovered for the client by the lawyer
Client’s informed consent to any third-party payor
Consequences of third-party payor attempting to terminate representation
Disbursement of refund in third-party payor matters
Client obligation for lawyer’s fee irrespective of the possibility of an award of attorney’s fees
Disbursement of settlement checks, including trust-account delays and obligations to lienholders
File retention policy
Succession plan notification
Communication clause explaining how you will communicate with the client and vice-versa

Are there terms I may not add to my fee agreement?

Terms on malpractice claims and bar charges. See ER 1.8(h); State Bar of Ariz. Ethics Op. 91-23.

Terms allowing the lawyer to instigate criminal proceedings for client’s bad check. See State Bar of Ariz. Ethics Op. 93-11.

Terms allowing the lawyer to take a contingency fee as well as court-awarded fees. In re Struthers, 179 Ariz. 216, 877 P.2d 789 (1994).

Terms allowing the lawyer to take fees higher than a statute allows. In re Rubenstein, 178 Ariz. 550, 875 P.2d 783 (1994).

Terms waiving the client’s ability to discharge the debt for lawyer’s fees in bankruptcy. See In re Huang, 275 F.3d 1173 (9th Cir. 2002).

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