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PLEASE NOTE:
THIS ARTICLE IS BASED ON THE MINNESOTA RULES OF PROFESSIONAL RESPONSIBILTY
I.Retainer and Fee Issues
A.Fee Splitting. Under Rule 1.5(e), lawyers who do not practice in the same firm can only share fees for a matter, such a contingent fee in a personal injury action, if they meet very specific criteria:
1.The lawyers divide the fee in proportion to the work they perform. In other words they keep track of their hours and each take a portion of the contingent fee based on the hours they worked, OR
2.Each lawyer assumes joint responsibility for the representation (in other words, each lawyer agrees to be liable for any malpractice committed by the lawyer who handles the case; a “responsible” lawyer may also need to act as a supervising lawyer within the meaning of Rule 5.1, MRPC).
a)The choice between work and liability underlying a fee-sharing agreement has a long history in Minnesota. Anderson v. Grimes, 183 Minn. 472, 476, 237 N.W. 9, 10 (1931).
b)Regarding the meaning of “responsibility” for the case, see ABA Informal Ethics Op. 85-1514 (1985); Wisconsin Formal Ethics Op. E-00-01 (2000) (referring lawyer need not actually make tactical decisions or provide legal services but at minimum must maintain “active concern” for the competent handling of the matter to completion).
3.In addition to meeting the “work vs. responsibility” choice outlined above, the client must agree in writing to the lawyers’ arrangement, including how the lawyers will divide the fee. The writing requirement is new as of the October 2005 amendments to the rules.
4.The total fee paid to both lawyers must be reasonable.
Failure to follow the provisions of Rule 1.5(e) will render the fee-sharing agreement unenforceable. Christensen v. Eggen, 577 N.W.2d 221 (Minn. 1998).
B.Retainer Agreements. Only some types of fee agreements must be in writing:
1.Advance payments for nonrefundable fees, regardless of whether the money will go into the lawyer’s trust account. Rule 1.5(b).
2.Contingent fee agreements, which must say:
a)How the fee will be determined, including percentages; and
b)What expenses will be charged and whether they will be deducted before or after the contingent portion is calculated.
c)In addition, at the end of the matter, the client must receive a written statement of how the client’s portion of the recovery was determined. Rule 1.5(c).
3.Agreements to pay referral fees to a lawyer in a different law firm. See discussion of fee splitting, above.
4.A lawyer may not charge a client for providing her a copy of the lawyer’s file unless the client has agreed in writing to such a charge. Rule 1.16(f).
C.Alternative Fee Arrangements. As long as the overall fee is reasonable, the Rules of Professional Conduct do not prevent lawyers from entering into a variety of fee agreements with clients, such as:
1.Flat fees for specific tasks.
2.Fee Caps – a per diem rate up to an agreed upon maximum.
3.Nonrefundable flat fee to begin work, followed by hourly rate, up to an agreed upon maximum.
4.Blended hourly and contingent fee agreements. The lawyer and client share the risk of going forward with a case. The lawyer charges an hourly rate far below her usual rate but in the event of recovery also shares a percentage of the award, but likely a lower percentage than if the lawyer had not charged an hourly fee.
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