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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.


Alabama Legal Ethics

1.5 Rule 1.5 Fees

1.5:100 Comparative Analysis of Alabama Rule

  • Primary Alabama References: AL Rule 1.5
  • Background References: ABA Model Rule 1.5, Other Jurisdictions
  • Commentary:
  • Alabama Commentary:

1.5:101   Model Rule Comparison

ARPC 1.5 specifies three parameters for referral fees. The division may be in proportion to services performed by each lawyer (ARPC 1.5(e)(1)(a)), by written agreement with the client, and each lawyer assumes joint responsibility for the representation (ARPC 1.5(e)(1)(6)), or in a contingency fee case, the division is between the referring or forwarding lawyer and the receiving lawyer. (ARPC 1.5(e)(1)(c)). In all three scenarios, (1) the client must be advised of and not object to the participation of all lawyers, (2) the client must be advised that a division of the fee will occur, and (3) the total fee must not be clearly excessive. (ARPC 1.5(e)(2),(3), and (4)). Note that the model rule requires a fee to be reasonable whereas the Alabama rule requires that the fee be "not clearly excessive." Contingent fees which are increased in order to pay the referring lawyer will not be deemed a violation of this rule. Alabama does prohibit fee splitting in non-contingent cases unless the referring lawyer performs proportional services or retains joint responsibility.

1.5:102   Model Code Comparison

Inapplicable.

1.5:200 A Lawyer's Claim to Compensation

  • Primary Alabama References: AL Rule 1.5
  • Background References: ABA Model Rule 1.5, Other Jurisdictions
  • Commentary: ABA/BNA § 41:101, ALI-LGL §§ 38-42, Wolfram §§ 9.1-9.6
  • Alabama Commentary:

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1.5:210   Client-Lawyer Fee Agreements

ARPC 1.5 applies to the reasonableness of both the hourly rate and "the total cost to the client." RO-94-02. In determining a proper fee one must consider the interest of both the client and the lawyer. Id. Consequently, a delicate balance must be reached between providing the lawyer with adequate compensation for effectively serving his client and the fear that excessive costs may deter laymen from using the legal system to protect their rights. Id. ARPC 1.5(b) requires a lawyer to communicate to the client, particularly a client the lawyer does not regularly represent, the basis or rate of his fee, within a reasonable time before he begins representing the client. Rule 1.5(b) imposes on an attorney a "two-fold duty to explain at the beginning of engagement the basis on which fees and other charges will be billed," and to provide the client with a sufficient explanation of what will actually be billed. RO-94-02. In complying with this requirement 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.

The General Counsel has issued opinion RO-94-02 which incorporates ABA formal opinion 93-979, which holds that a lawyer must disclose to a client the basis on which he will be billed and that the attorney must also indicate which professional and non-professional charges will be billed to the client. While a lawyer cannot charge a client for overhead expenses in the absence of consent, he can charge the client for expenses reasonably incurred in connection with his services (such as long distance phone calls, computer research, photocopying, secretarial overtime, etc.). RO-94-02. In the absence of an agreement to the contrary the lawyer should charge for such in-house services no more than the direct cost associated with the service plus a reasonable allocation of overhead expenses directly associated with the provision of the service.

1.5:220   A Lawyer's Fee in Absence of Agreement

"The general principle is everywhere established that an attorney is in such a case entitled to reasonable compensation for his services, appropriate to his employment, rendered by him to his client." Humes v. Decatur, 98 Ala. 461 (1893). A written fee agreement is not conclusive evidence of a reasonable attorney's fee. Lanier v. Moore-Handley, Inc., 575 So.2d 83, 87 (Ala. 1991). See Peebles v. Miley, 439 So.2d 137 (Ala. 1983), for a detailed list of twelve factors considered important in determining attorney's fees.

1.5:230   Fees on Termination [see 1.16:600]

In Gaines, Gaines & Gaines v. Hare, 554 So.2d 445 (Ala. Civ. App. 1989), the Court stated: "The rule in Alabama is an attorney discharged without cause or otherwise prevented from full performance, is entitled to be reasonably compensated only for services rendered before such discharge." quoting, Hall v. Gunther, 157 Ala. 375 (1908). The Court further stated that the law firm was due an attorney's fee award based on quantum merit. While this decision was a contingent fee case, the same principle would apply in any fixed fee contract as well.

RO-86-02 discussed delivery of papers and property to which the client is entitled. Subject to the attorney's lien on any recovery provided in Ala. Code §  34-3-61, the attorney must provide copies of a client's complete file to the client upon request. The attorney is not required to provide copies of legal analysis unless he has previously agreed to do so and is not required to furnish notes which went towards the completion of the final project unless he has previously agreed to do so. When the attorney has received full compensation for his services in regard to a particular file, he must surrender those materials to the client upon request. See also RO-89-58.

1.5:240   Fee Collection Procedures

Inapplicable.

1.5:250   Fee Arbitration

While the Office of the General Counsel takes the position that mandatory fee arbitration agreements with clients violate the ARPC, there has been no definitive court decision as to whether it is permissible to include mandatory arbitration of fee disputes in a lawyer's fee agreement with a client. Consider the impact of Rule 1.8(h) versus the Alabama Supreme Court's decisions regarding arbitration agreements. Many local bar organizations provide mechanisms for voluntary arbitration of fee disputes.

1.5:260   Forfeiture of Lawyer's Compensation

Inapplicable.

1.5:270   Remedies and Burden of Persuasion in Fee Disputes

See Section 1.5:22 and 1.5:230.

1.5:300 Attorney-Fee Awards (Fee Shifting)

  • Primary Alabama References: AL Rule 1.5
  • Background References: ABA Model Rule 1.5, Other Jurisdictions
  • Commentary: ABA/BNA § 41:301, Wolfram § 16.6
  • Alabama Commentary:

1.5:310   Paying for Litigation: The American Rule

Alabama generally follows the American Rule that each party to a lawsuit bears the cost of its own lawyer.

1.5:320   Common-Law Fee Shifting

Alabama adheres to the common law rule that generally precludes recovery of attorney's fees in the absence of express authorization in a statute, contract or rule of court - for example, recovery of fees from the creation of a common fund for a class of persons.

1.5:330   Statutory Fee Shifting

Alabama adheres to the common law rule that generally precludes recovery of attorney's fees in the absence of express authorization in a statute, contract or rule of court - for example, recovery of fees from the creation of a common fund for a class of persons.

1.5:340   Financing Litigation [see 1.8:600]

See discussion under 1.8:600 below.

1.5:400 Reasonableness of a Fee Agreement

  • Primary Alabama References: AL Rule 1.5(a)
  • Background References: ABA Model Rule 1.5(a), Other Jurisdictions
  • Commentary: ABA/BNA § 41:301, ALI-LGL § 34, Wolfram § 9.3.1
  • Alabama Commentary:

1.5:410   Excessive Fees

A reasonable contingent fee is one that "compensate[s] the lawyer for the time reasonably expended" and does not "take advantage of the client." RO-94-02. In Smesler v. Trent, 698 So.2d 1094, 1095 (Ala. 1997) the Alabama Supreme Court upheld a one-third contingent fee arrangement on the sale price of a farm focusing on the nature and extent of the attorney's work, the amount involved and the results obtained.

1.5:420   "Retainer Fees:" Advance Payment, Engagement Fee, or Lump-Sum Fee

There is no prohibition against retainer fees, advance payment, engagement fee, or lump-sum fees. However, the client has the absolute right to terminate the services of his or her lawyer, with or without cause, and to retain another lawyer of their choice. This right would be substantially limited if the client was required to pay the full amount of the agreed on fee without the services being performed. A lawyer is entitled to be reasonably compensated only for the service rendered before discharge by the client. See Gaines, Gaines & Gaines v. Hare, Wynn, 554 So.2d 445 (Ala. Civ. App. 1989); and Hall v. Gunter, 157 Ala. 375, (Ala. 1908). Further, ARCP 1.16(d) requires, among other things that upon termination of representation a lawyer must refund "any advance payment of the fee that has not been earned." Therefore, no retainer should be nonrefundable to the extent that it exceeds a reasonable fee for services rendered. (RO-92-17). Indeed, the mere designation of a retainer as nonrefundable may constitute a violation of ARCP 1.16(d).

1.5:430   Nonrefundable Fees

Alabama does not permit nonrefundable retainer fees. The mere denomination of a retainer as "nonrefundable" is a per se violation.

1.5:500 Communication Regarding Fees

  • Primary Alabama References: AL Rule 1.5(b)
  • Background References: ABA Model Rule 1.5(b), Other Jurisdictions
  • Commentary: ABA/BNA § 41:101, ALI-LGL § 38, Wolfram § 9.2.1
  • Alabama Commentary:

Rule 1.5(b) suggests, but does not mandate that attorneys provide their clients with a written statement detailing the basis or rate for the fee. However, ARPC 1.5(c) requires a lawyer to put a contingent fee agreement in writing. The writing must include: the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from recovery, and whether such expenses shall be deducted before or after the contingent fee is calculated. The lawyer must also provide the client with a written statement indicating the outcome of the matter and in the case of recovery, a showing of the remittance to the client how it was determined.

1.5:600 Contingent Fees

  • Primary Alabama References: AL Rule 1.5(c)
  • Background References: ABA Model Rule 1.5(c), Other Jurisdictions
  • Commentary: ABA/BNA § 41:901, ALI-LGL §§ 34, 35, Wolfram § 9.4
  • Alabama Commentary:

1.5:610   Special Requirements Concerning Contingent Fees

A lawyer may participate in a confidential settlement even though there may be a possibility of adverse consequences on third parties or the public. It is not a violation of the rules for a confidential settlement agreement to impose more restrictions on plaintiff's lawyers than the plaintiff. Further, a defendant or defendant's counsel may require confidentiality as to plaintiff's counsel as a condition of settlement even though counsel is technically not a party to the suit. (RO-92-17).

1.5:620   Quantum Meruit in Contingent Fee Cases

1.5:700 Unlawful Fees

  • Primary Alabama References: AL Rule 1.5(d)
  • Background References: ABA Model Rule 1.5(d), Other Jurisdictions
  • Commentary: ABA/BNA §§ 41:901, ALI-LGL § 36, Wolfram §§ 9.3.2; 9.4
  • Alabama Commentary:

1.5:710   Contingent Fees in Criminal Cases

ARPC 1.5(d)(2) precludes the use of contingent fees for representing a defendant in a criminal case.

1.5:720   Contingent Fees in Domestic Relations Matters

ARPC 1.5(d)(1) prohibits an attorney from charging or collecting a contingent fee in domestic relations matters that are contingent upon securing a divorce or upon the awarded amount of alimony, child support or property settlement. Contingency fee arrangements in initial divorce proceedings are prohibited. One concern is that a contingent fee in such a situation is unnecessary since the spouse retaining the majority of the property will have sufficient funds to compensate the lawyer and the spouse without assets will also be protected by a court order directing the spouse with the greater assets to pay the other spouse's attorney's fees. RO-96-01. In addition to fairness concerns, the rules take into account a fear that allowing a contingent fee arrangement would give the lawyer an interest in discouraging or thwarting reconciliation of the parties. 54 Alabama Lawyer 20 (1993). A lawyer is prohibited from using contingent fees where the fees are in any way contingent upon securing a divorce. RO-96-01.

A lawyer may enter into a contingent fee agreement once a final divorce decree has been entered awarding alimony, child support or as to the collection of arrearage. Therefore a lawyer can accept representation in a paternity action on a contingent fee basis (RO-87-96) and in actions seeking money damages for the breach of an anti-nuptial contract (RO-88-103). The General Counsel reasoned that allowing lawyers to accept cases where the representation is limited to collecting an existing judgment does not violate ARPC 1.5 because that rule specifically prohibits contingent fee arrangements based on winning the action, rather than collecting on a preexisting judgment. (RO-90-98). Thus, the General Counsel previously held that an attorney may use a contingent fee arrangement in collecting a divorce judgment because it is analogous to any other collection. However, in order to accept such a case on a contingency basis, the attorney must charge a fair and reasonable fee, and verify "that the client is indigent. . . and there are no means available to the client to collect arrearage." (RO-91-05).

However, based upon recent decisions in Alabama Appellate Courts and federally mandated changes which effect child support proceedings, the General Counsel has narrowly limited its holdings in opinion RO-91-05, almost to the point of overruling it. (RO-98-01). The first development which led the General Counsel to revise its decision was the fact that a number of Alabama Appellate Courts have held in child support cases that the money belongs to the child and not the custodial parent. Secondly, in response to new federal rules, the Department of Human Resources is now required "to provide collection services to any individual, regardless of his or her economic status or ability to pay." In light of these recent developments, the Disciplinary Commission has difficulty envisioning any circumstances where a contingent fee contract would be ethical. However, the Commission has emphasized that an attorney can accept a contingency fee arrangement if the attorney reasonably thought that it would be in the child's best interest. In addition to the stringent requirement that focuses on the child's best interest, the Commission also instructs the attorney to carefully consider the following factors before accepting a child support arrearage case on a contingency basis: that the parent understands collection services are available from the state at no cost, that the fee is reasonable and not excessive and that the attorney has conducted a sufficient inquiry to make a good faith determination that the parent cannot pay an hourly rate from funds other than those designated for support of the child. An attorney's failure to adequately advise the parents about the services of the state's collection agency would be an ethical violation. Thus, in effect, it is virtually impossible for an attorney to ethically accept a child support collection case on a contingency basis.

1.5:730   Other Illegal Fees in Alabama

ARPC 1.5(f) prohibits a court appointed lawyer from collecting a fee from an indigent criminal defendant. However, a lawyer may accept a fee from the defendant or someone acting on his behalf if the lawyer obtains prior approval from the court. A lawyer may also accept a fee from a defendant who is indigent at the time of appointment but is later able to pay, in which case the fee should be placed in a trust to be disbursed later pursuant to the court's directions. Certain fees are statutory and must be court awarded, such as in worker's compensation cases.

1.5:800 Fee Splitting (Referral Fees)

  • Primary Alabama References: AL Rule 1.5(e)
  • Background References: ABA Model Rule 1.5(e), Other Jurisdictions
  • Commentary: ABA/BNA § 41:701, ALI-LGL § 47, Wolfram § 9.24
  • Alabama Commentary:

See generally, 1.5:101. An attorney who refers a case because of a conflict of interest should not share in the fee eventually recovered. (RO-87-92).