Supreme Court of Florida
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No. SC14-2112
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IN RE: AMENDMENTS TO RULE REGULATING
THE FLORIDA BAR 4-1.5—FEES AND COSTS FOR LEGAL SERVICES.
[September 17, 2015]
PER CURIAM.
This matter is before the Court on the petition of The Florida Bar proposing
that the Court amend the Rules Regulating The Florida Bar. We have jurisdiction.
See art. V, § 15, Fla. Const.
As part of its biennial rule amendments, The Florida Bar proposed
amendments to Rule Regulating The Florida Bar 4-1.5 (Fees and Costs for Legal
Services). Specifically, the Bar proposed an amendment to subdivision 4-1.5(e) to
provide definitions for the terms “retainer,” “flat fee,” and “advance fee” and to
provide guidance, in the comments to rule 4-1.5, as to whether such fees should be
deposited into an attorney’s operating account or trust account. It also proposed a
new subdivision (E) to be added to rule 4-1.5(f)(4) to address fees for subrogation
and lien resolution in personal injury or wrongful death cases where there is a
contingency fee agreement. Pursuant to Bar Rule 1-12.1(g), the Bar published
formal notice of its intent to file a petition recommending amendments to the Bar
Rules in The Florida Bar News. This notice was published on August 15, 2014,
and allowed interested persons thirty days after the filing of the Bar’s petition to
provide comments to the Court. Five comments were filed. Oral argument was
heard in this matter on May 5, 2015.
Upon consideration of the petition, the comments filed, and the presentations
of those who participated in oral argument, we adopt the amendments to
subdivision 4-1.5(e) as proposed by the Bar. Rule Regulating The Florida Bar
4-1.5 (Fees and Costs for Legal Services) is hereby amended as set forth in the
appendix to this opinion. New language is indicated by underscoring; deletions are
indicated by struck-through type. The comments are offered for explanation and
guidance only and are not adopted as an official part of the rules. The amendments
shall become effective on October 1, 2015, at 12:01 a.m.
As for the proposed new subdivision (E) to rule 4-1.5(f)(4), after oral
argument, the Bar filed a motion for partial stay, seeking a stay of the Court’s
consideration of this proposal and an opportunity to submit an alternative proposal.
The motion is hereby granted, and The Florida Bar is directed to file a new petition
with its alternative proposal on or before January 15, 2016.
It is so ordered.
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LABARGA, C.J., and PARIENTE, LEWIS, QUINCE, CANADY, POLSTON,
and PERRY, JJ., concur.
THE FILING OF A MOTION FOR REHEARING SHALL NOT ALTER THE
EFFECTIVE DATE OF THESE AMENDMENTS.
Original Proceeding – Rules Regulating The Florida Bar
John F. Harkness, Jr., Executive Director, Gregory William Coleman, President
2014-15, Ramón A. Abadin, President-elect 2014-15, Jay Cohen, Chair, Special
Committee on Lien Resolution, Andrew Blaise Sasso, Board of Governors, Mary
Ellen Bateman, DEUP Division Director, and Elizabeth Clark Tarbert, Ethics
Counsel, The Florida Bar, Tallahassee, Florida,
for Petitioner
Dan Cytryn and Joshua G. Simon of the Law Offices Cytryn & Velazquez, P.A.,
Coral Springs, Florida; John William Staunton of Staunton & Faglie, PL,
Clearwater, Florida; Floyd Benjamin Faglie of Staunton & Faglie, PL, Monticello,
Florida; Carl B. Schwait, Gainesville, Florida; Charles Allen Morehead, III of
Abramowitz, Pomerantz & Morehead PA, Sunrise, Florida; Jana McConnaughhay
of Waldoch and McConnaughhay, P.A., Tallahassee, Florida; and Shannon
McKenzie Miller of The Miller Elder Law Firm, Gainesville, Florida,
Responding with Comments
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APPENDIX
RULE 4-1.5 FEES AND COSTS FOR LEGAL SERVICES
(a) - (d) [no change]
(e) Duty to Communicate Basis or Rate of Fee or Costs to Client and
Definitions.
(1) Duty to Communicate. When the lawyer has not regularly represented
the client, the basis or rate of the fee and costs shall be communicated to the
client, preferably in writing, before or within a reasonable time after
commencing the representation. A fee for legal services that is nonrefundable
in any part shall be confirmed in writing and shall explain the intent of the
parties as to the nature and amount of the nonrefundable fee. The test of
reasonableness found in subdivision (b), above, applies to all fees for legal
services without regard to their characterization by the parties.
The fact that a contract may not be in accord with these rules is an issue
between the attorney and client and a matter of professional ethics, but is not
the proper basis for an action or defense by an opposing party when fee-
shifting litigation is involved.
(2) Definitions.
(A) Retainer. A retainer is a sum of money paid to a lawyer to
guarantee the lawyer’s future availability. A retainer is not payment for
past legal services and is not payment for future services.
(B) Flat Fee. A flat fee is a sum of money paid to a lawyer for all
legal services to be provided in the representation. A flat fee may be
termed “non-refundable.”
(C) Advance Fee. An advanced fee is a sum of money paid to the
lawyer against which the lawyer will bill the client as legal services are
provided.
(f) - (i) [no change]
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STATEMENT OF CLIENT’S RIGHTS FOR CONTINGENCY FEES
[no change]
COMMENT
Bases or rate of fees and costs
When the lawyer has regularly represented a client, they ordinarily will have
evolved an understanding concerning the basis or rate of the fee. The conduct of
the lawyer and client in prior relationships is relevant when analyzing the
requirements of this rule. In a new client-lawyer relationship, however, an
understanding as to the fee should be promptly established. 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 the basic rate is
an hourly charge or a fixed amount or an estimated amount, or to identify the
factors that may be taken into account in finally fixing the fee. Although hourly
billing or a fixed fee may be the most common bases for computing fees in an area
of practice, these may not be the only bases for computing fees. A lawyer should,
where appropriate, discuss alternative billing methods with the client. When
developments occur during the representation that render an earlier estimate
substantially inaccurate, a revised estimate should be provided to the client. A
written statement concerning the fee reduces the possibility of misunderstanding.
Furnishing the client with a simple memorandum or a copy of the lawyer’s
customary fee schedule is sufficient if the basis or rate of the fee is set forth.
General overhead should be accounted for in a lawyer’s fee, whether the
lawyer charges hourly, flat, or contingent fees. Filing fees, transcription, and the
like should be charged to the client at the actual amount paid by the lawyer. A
lawyer may agree with the client to charge a reasonable amount for in-house costs
or services. In-house costs include items such as copying, faxing, long distance
telephone, and computerized research. In-house services include paralegal
services, investigative services, accounting services, and courier services. The
lawyer should sufficiently communicate with the client regarding the costs charged
to the client so that the client understands the amount of costs being charged or the
method for calculation of those costs. Costs appearing in sufficient detail on
closing statements and approved by the parties to the transaction should meet the
requirements of this rule.
Rule 4-1.8(e) should be consulted regarding a lawyer’s providing financial
assistance to a client in connection with litigation.
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Lawyers should also be mindful of any statutory, constitutional, or other
requirements or restrictions on attorneys’ fees.
In order to avoid misunderstandings concerning the nature of legal fees, written
documentation is required when any aspect of the fee is nonrefundable. A written
contract provides a method to resolve misunderstandings and to protect the lawyer
in the event of continued misunderstanding. Rule 4-1.5 (e) does not require the
client to sign a written document memorializing the terms of the fee. A letter from
the lawyer to the client setting forth the basis or rate of the fee and the intent of the
parties in regard to the nonrefundable nature of the fee is sufficient to meet the
requirements of this rule.
All legal fees and contracts for legal fees are subject to the requirements of the
Rules Regulating The Florida Bar. In particular, the test for reasonableness of
legal fees found in rule 4-1.5(b) applies to all types of legal fees and contracts
related to them.
Terms of payment
A lawyer may require advance payment of a fee but is obliged to return any
unearned portion. See rule 4-1.16(d). A lawyer is not, however, required to return
retainers that, pursuant to an agreement with a client, are not refundable. A
nonrefundable retainer or nonrefundable flat fee is the property of the lawyer and
should not be held in trust. If a client gives the lawyer a negotiable instrument that
represents both an advance on costs plus either a nonrefundable retainer or a
nonrefundable flat fee, the entire amount should be deposited into the lawyer’s
trust account, then the portion representing the earned nonrefundable retainer or
nonrefundable flat fee should be withdrawn within a reasonable time. An advance
fee must be held in trust until it is earned. Nonrefundable fees are, as all fees,
subject to the prohibition against excessive fees.
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
4-1.8(i). 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
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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. Applicable law may
impose limitations on contingent fees, such as a ceiling on the percentage.
Prohibited contingent fees
Subdivision (f)(3)(A) prohibits a lawyer from charging a contingent fee in a
domestic relations matter when payment is contingent upon the securing of a
divorce or upon the amount of alimony or support or property settlement to be
obtained. This provision does not preclude a contract for a contingent fee for legal
representation in connection with the recovery of post-judgment balances due
under support, alimony, or other financial orders because such contracts do not
implicate the same policy concerns.
Contingent fees are prohibited in criminal and certain domestic relations
matters. In domestic relations cases, fees that include a bonus provision or
additional fee to be determined at a later time and based on results obtained have
been held to be impermissible contingency fees and therefore subject to restitution
and disciplinary sanction as elsewhere stated in these Rules Regulating The Florida
Bar.
Contingent fee regulation
Subdivision (e) is intended to clarify that whether the lawyer’s fee contract
complies with these rules is a matter between the lawyer and client and an issue for
professional disciplinary enforcement. The rules and subdivision (e) are not
intended to be used as procedural weapons or defenses by others. Allowing
opposing parties to assert noncompliance with these rules as a defense, including
whether the fee is fixed or contingent, allows for potential inequity if the opposing
party is allowed to escape responsibility for their actions solely through application
of these rules.
Rule 4-1.5(f)(4) should not be construed to apply to actions or claims seeking
property or other damages arising in the commercial litigation context.
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Rule 4-1.5(f)(4)(B) is intended to apply only to contingent aspects of fee
agreements. In the situation where a lawyer and client enter a contract for part
noncontingent and part contingent attorney’s fees, rule 4-1.5(f)(4)(B) should not be
construed to apply to and prohibit or limit the noncontingent portion of the fee
agreement. An attorney could properly charge and retain the noncontingent
portion of the fee even if the matter was not successfully prosecuted or if the
noncontingent portion of the fee exceeded the schedule set forth in rule
4-1.5(f)(4)(B). Rule 4-1.5(f)(4)(B) should, however, be construed to apply to any
additional contingent portion of such a contract when considered together with
earned noncontingent fees. Thus, under such a contract a lawyer may demand or
collect only such additional contingent fees as would not cause the total fees to
exceed the schedule set forth in rule 4-1.5(f)(4)(B).
The limitations in rule 4-1.5(f)(4)(B)(i)c. are only to be applied in the case
where all the defendants admit liability at the time they file their initial answer and
the trial is only on the issue of the amount or extent of the loss or the extent of
injury suffered by the client. If the trial involves not only the issue of damages but
also such questions as proximate cause, affirmative defenses, seat belt defense, or
other similar matters, the limitations are not to be applied because of the contingent
nature of the case being left for resolution by the trier of fact.
Rule 4-1.5(f)(4)(B)(ii) provides the limitations set forth in subdivision
(f)(4)(B)(i) may be waived by the client upon approval by the appropriate judge.
This waiver provision may not be used to authorize a lawyer to charge a client a
fee that would exceed rule 4-1.5(a) or (b). It is contemplated that this waiver
provision will not be necessary except where the client wants to retain a particular
lawyer to represent the client or the case involves complex, difficult, or novel
questions of law or fact that would justify a contingent fee greater than the
schedule but not a contingent fee that would exceed rule 4-1.5(b).
Upon a petition by a client, the trial court reviewing the waiver request must
grant that request if the trial court finds the client: (a) understands the right to
have the limitations in rule 4-1.5(f)(4)(B) applied in the specific matter; and
(b) understands and approves the terms of the proposed contract. The
consideration by the trial court of the waiver petition is not to be used as an
opportunity for the court to inquire into the merits or details of the particular action
or claim that is the subject of the contract.
The proceedings before the trial court and the trial court’s decision on a waiver
request are to be confidential and not subject to discovery by any of the parties to
the action or by any other individual or entity except The Florida Bar. However,
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terms of the contract approved by the trial court may be subject to discovery if the
contract (without court approval) was subject to discovery under applicable case
law or rules of evidence.
Rule 4-1.5 (f)(4)(B)(iii) is added to acknowledge the provisions of Article 1,
Section 26 of the Florida Constitution, and to create an affirmative obligation on
the part of an attorney contemplating a contingency fee contract to notify a
potential client with a medical liability claim of the limitations provided in that
constitutional provision. This addition to the rule is adopted prior to any judicial
interpretation of the meaning or scope of the constitutional provision and this rule
is not intended to make any substantive interpretation of the meaning or scope of
that provision. The rule also provides that a client who wishes to waive the rights
of the constitutional provision, as those rights may relate to attorney’s fees, must
do so in the form contained in the rule.
Rule 4-1.5(f)(6) prohibits a lawyer from charging the contingent fee percentage
on the total, future value of a recovery being paid on a structured or periodic basis.
This prohibition does not apply if the lawyer’s fee is being paid over the same
length of time as the schedule of payments to the client.
Contingent fees are prohibited in criminal and certain domestic relations
matters. In domestic relations cases, fees that include a bonus provision or
additional fee to be determined at a later time and based on results obtained have
been held to be impermissible contingency fees and therefore subject to restitution
and disciplinary sanction as elsewhere stated in these Rules Regulating The Florida
Bar.
Fees that provide for a bonus or additional fees and that otherwise are not
prohibited under the Rules Regulating The Florida Bar can be effective tools for
structuring fees. For example, a fee contract calling for a flat fee and the payment
of a bonus based on the amount of property retained or recovered in a general civil
action is not prohibited by these rules. However, the bonus or additional fee must
be stated clearly in amount or formula for calculation of the fee (basis or rate).
Courts have held that unilateral bonus fees are unenforceable. The test of
reasonableness and other requirements of this rule apply to permissible bonus fees.
Division of fee
A division of fee is a single billing to a client covering the fee of 2 or more
lawyers who are not in the same firm. A division of fee facilitates association of
more than 1 lawyer in a matter in which neither alone could serve the client as
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well, and most often is used when the fee is contingent and the division is between
a referring lawyer and a trial specialist. Subject to the provisions of subdivision
(f)(4)(D), subdivision (g) permits the lawyers to divide a fee on either the basis of
the proportion of services they render or by agreement between the participating
lawyers if all assume responsibility for the representation as a whole and the client
is advised and does not object. It does require disclosure to the client of the share
that each lawyer is to receive. Joint responsibility for the representation entails the
obligations stated in rule 4-5.1 for purposes of the matter involved.
Disputes over fees
Since the fee arbitration rule (chapter 14) has been established by the bar to
provide a procedure for resolution of fee disputes, the lawyer should
conscientiously consider submitting to it. Where law prescribes a procedure for
determining a lawyer’s fee, for example, in representation of an executor or
administrator, a class, or a 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.
Referral fees and practices
A secondary lawyer shall not be entitled to a fee greater than the limitation set
forth in rule 4-1.5(f)(4)(D)(ii) merely because the lawyer agrees to do some or all
of the following: (a) consults with the client; (b) answers interrogatories;
(c) attends depositions; (d) reviews pleadings; (e) attends the trial; or (f) assumes
joint legal responsibility to the client. However, the provisions do not contemplate
that a secondary lawyer who does more than the above is necessarily entitled to a
larger percentage of the fee than that allowed by the limitation.
The provisions of rule 4-1.5(f)(4)(D)(iii) only apply where the participating
lawyers have for purposes of the specific case established a co-counsel
relationship. The need for court approval of a referral fee arrangement under rule
4-1.5(f)(4)(D)(iii) should only occur in a small percentage of cases arising under
rule 4-1.5(f)(4) and usually occurs prior to the commencement of litigation or at
the onset of the representation. However, in those cases in which litigation has
been commenced or the representation has already begun, approval of the fee
division should be sought within a reasonable period of time after the need for
court approval of the fee division arises.
In determining if a co-counsel relationship exists, the court should look to see
if the lawyers have established a special partnership agreement for the purpose of
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the specific case or matter. If such an agreement does exist, it must provide for a
sharing of services or responsibility and the fee division is based upon a division of
the services to be rendered or the responsibility assumed. It is contemplated that a
co-counsel situation would exist where a division of responsibility is based upon,
but not limited to, the following: (a) based upon geographic considerations, the
lawyers agree to divide the legal work, responsibility, and representation in a
convenient fashion. Such a situation would occur when different aspects of a case
must be handled in different locations; (b) where the lawyers agree to divide the
legal work and representation based upon their particular expertise in the
substantive areas of law involved in the litigation; or (c) where the lawyers agree to
divide the legal work and representation along established lines of division, such as
liability and damages, causation and damages, or other similar factors.
The trial court’s responsibility when reviewing an application for authorization
of a fee division under rule 4-1.5(f)(4)(D)(iii) is to determine if a co-counsel
relationship exists in that particular case. If the court determines a co-counsel
relationship exists and authorizes the fee division requested, the court does not
have any responsibility to review or approve the specific amount of the fee division
agreed upon by the lawyers and the client.
Rule 4-1.5(f)(4)(D)(iv) applies to the situation where appellate counsel is
retained during the trial of the case to assist with the appeal of the case. The
percentages set forth in subdivision (f)(4)(D) are to be applicable after appellate
counsel’s fee is established. However, the effect should not be to impose an
unreasonable fee on the client.
Credit Plans
Credit plans include credit cards. If a lawyer accepts payment from a credit
plan for an advance of fees and costs, the amount must be held in trust in
accordance with chapter 5, Rules Regulating The Florida Bar, and the lawyer must
add the lawyer’s own money to the trust account in an amount equal to the amount
charged by the credit plan for doing business with the credit plan.
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