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FEES AND FEASIBILITY:
Amendments To Mass. R. Prof. C. 1.5 on Fees


Constance V. Vecchione
Bar Counsel

Comprehensive amendments ordered by the Supreme Judicial Court to Mass. R. Prof. C. 1.5 on charging and collecting fees will take effect on March 15, 2011. Some of the revisions mirror amendments made to the corresponding ABA model rule in 2002; some are grammatical or stylistic and do not reflect changes in substance. But other significant amendments, especially those concerning contingent fee agreements, are intended to conform Rule 1.5 to four decisions by the SJC since 2004— Malonis v. Harrington, 442 Mass. 692 (2004), Saggese v. Kelley, 455 Mass. 434 (2005), Liss v. Studeny, 450 Mass. 473 (2008), and Matter of an Attorney, 451 Mass. 131 (2008). These changes are unique to Massachusetts.

Basis or Rate of Fees and Expenses

Consistent with 2002 changes to the ABA model rule, Rule 1.5(a) has now been revised to add a prohibition on entering into an agreement for, charging, or collecting unreasonable expenses. Rule 1.5(b) has been similarly amended to require lawyers to advise clients of the basis or rate of expenses, not just fees, at or near the outset of the representation and to inform clients of any changes in the basis or rate of fees or expenses.

The existing version of Mass. R. Prof. C. 1.5(a) already proscribes illegal or clearly excessive fees; that provision, as well as the familiar list of eight factors to consider in making a determination as to whether a fee is clearly excessive, is unchanged. However, new comment 3 notes that the requirement that fees not be clearly excessive also applies to contingent fees and, very critically, states that lawyers should inform clients of alternative bases on which the fee can be charged if there is doubt whether a contingent fee is in the client’s best interests.

Referral Fees

While Rule 1.5(e) has always required client consent to any division of fees between lawyers not in the same firm, the rule has now been amended to be consistent with the court’s decision in Saggese v. Kelley, requiring that the consent be in writing and obtained before or at the time that the client enters into the fee agreement. The rule still requires that the total fees charged be reasonable.

Contingent Fees

The most extensive changes are to Rule 1.5(c) governing contingent fees and Rule 1.5(f), prescribing authorized forms of contingent fee agreement. The provisions of Mass. R. Prof. C. 1.5(c) have always differed from the ABA model rule, and our Rule 1.5(f) has no ABA counterpart. The revisions to these provisions are unique to Massachusetts.

What has not changed is that contingent fee agreements must still be in writing and signed in duplicate by both lawyer and client within a reasonable time of making the agreement. The agreement must still, as required by sections (c)(1) through (c)(3), include the names and addresses of the clients and lawyers and a statement of the nature of the claim or other matter for which the services are to be performed. Minor stylistic changes have been made to section (c)(5), which is the provision on calculation of contingent fees when fees are also awarded by a court or included in a settlement, and to section (c)(6), pertaining to the method by which fees and expenses are calculated and paid or reimbursed.

Three other sections of Rule 1.5(c), however, have either been substantially revised or are entirely new, as follows:

The unnumbered paragraph at the end of Rule 1.5(c) has also been significantly revised. Unchanged is the obligation to provide the client with a written statement at the conclusion of any contingent fee case explaining the outcome and showing how the client’s remittance was calculated. The revised paragraph, however, imposes additional accounting requirements consistent with the court’s decisions in Malonis v. Harrington and Matter of an Attorney.

Specifically, at any time prior to the occurrence of the contingency, if the representation is terminated or if the client so requests, the lawyer must provide a written itemization of services rendered and expenses incurred within twenty days, unless the lawyer informs the client in writing that the lawyer does not intend to make a claim. New comment 3C explains that, if the lawyer is unable to determine the precise amount claimed because the case has not been resolved, the lawyer nonetheless must identify the amount of work performed and the basis employed for calculating the fee due.

Prohibited Contingent Fees

The text of Rule 1.5(d) has not been amended. It continues to prohibit contingent fees in criminal cases and in domestic relations cases contingent upon securing a divorce or upon the amount obtained as alimony, support or property settlement. However, new comment 6, identical to the corresponding ABA model comment, clarifies that contingent fee agreements are not prohibited in connection with collecting post-judgment balances in domestic matters.

The Form Contingent Fee Agreements

In Matter of an Attorney, the court discussed a number of concerns regarding the contingent fee agreement used by the lawyer, ultimately deciding that discipline was not warranted on those issues in the particular circumstances of the case. Going forward, however, the court held that attorneys should specifically explain to clients any terms in a contingent fee agreement that differ materially from those in the model fee agreement set forth in Rule 1.5(f) and obtain the clients’ consent in writing to those terms.

To implement this directive, Rule 1.5(f) has now been amended to include two alternative forms of model contingent fee agreement, Form A and Form B. Rule 1.5(f)(1)-(3) contains directions for the use of the two model agreements, as well as for the use of any other contingent fee agreement. Per section (f)(4), the requirements of sections (f)(1)-(3) do not apply when the client is an organization including a non-profit or governmental entity.

Both Form A and Form B incorporate the changes to Rules 1.5(c) and (d) previously discussed. One very critical revision, identical in both forms, appears in paragraph 6 and prescribes the notice required when the attorney wishes to retain the option of seeking payment if the representation terminates before the conclusion of the case. New comment 3D elaborates on this issue. Paragraph 6 further states that any such payment shall not exceed the lesser of the fair value of the legal services rendered or the contingent fee to which the lawyer would have been entitled upon the occurrence of the contingency. Thus, if there is no recovery, no fee is owed in quantum meruit.

The differences between the two forms are explained in new comment 11, but in essence:

Attorneys using Form B are required to show both alternatives for paragraph 3 and, if applicable, paragraph 7. The client will thus see the options and can question the alternative selected by the lawyer. The lawyer is required to obtain the client’s informed consent confirmed in writing to each selected option. The client’s initialing the selected option meets the “confirmed in writing” requirement.

Lawyers are permitted to use other forms of contingent fee agreement consistent with Rule 1.5. However, when representing individuals, the attorney must provide explanations to the client of any provisions that are materially different from or add to those in the model forms and then must obtain the client’s informed consent, confirmed in writing, to those provisions.

For purposes of this rule, a contingent fee agreement that omits the first option (i.e., the Form A language) from paragraph 3 or paragraph 7 of Form B is an agreement that materially differs from the model forms. See new comment 12. Per comment 9, a provision in a contingent fee agreement requiring fee disputes to be resolved by arbitration is a provision that materially differs from the model forms such that the lawyer must provide a special explanation to the client and obtain written consent.

The goal of any fee agreement is to ensure that both parties understand their responsibilities. Clients also need to know how and what they are paying for and the consequences of terminating the agreement. These amendments are intended to advance that goal and to reduce misunderstandings between lawyers and clients.



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