Illinois Legal Ethics

1.5 Rule 1.5 Fees

1.5:100 Comparative Analysis of Illinois Rule

¥ Primary Illinois References: IL RuleÊ1.5
¥ Background References: ABA Model Rule 1.5, Other Jurisdictions
¥ Commentary:

1.5:101 Model Rule Comparison

Illinois adopted MR 1.5(a) and (b), except that IRPCÊ1.5(b) omits the ABA words "preferably in writing" between "client" and "before." "Preferably" was felt to be a word which does not belong in a Rule.

The related provisions of the Illinois Code are to be found in Illinois CodeÊ2-106(a) and (b).

Illinois adopted MR 1.5(c) and (d), with (d)(1) modified by a proviso contained in Illinois CodeÊ2-106(c)(4) relating to matters after final judgment; the substance of MR 1.5(e) is contained in Illinois CodeÊ2-106(c)(4).

IRPCÊ1.5(d)(1), and 1.5(e) reflect Illinois practice on questions not covered by the MRs.

IRPCÊ1.5(f), (g) and (h) are not derived from the MR but instead are Illinois CodeÊ2-107(a) and (b), substantially modified.

MR 1.5(e) on fee division was not adopted; the Illinois Code included some substantive differences, and appeared, to the Illinois drafters, more precise than MRÊ1.5(e).

The IRPC, and MRÊ1.5, largely ignore the problem of interstate referral, with possible inconsistent commands as to IRPCÊ1.5(f), (g) and (h). See IRPCÊ5.5(a) and 8.5.

IRPCÊ1.5(i) and (j) also have no equivalent in the MRs but were derived from Illinois CodeÊ2-107(a)(4) and (b), slightly modified.

1.5:102 Model Code Comparison

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1.5:200 A Lawyer's Claim to Compensation

¥ Primary Illinois References: IL RuleÊ1.5
¥ Background References: ABA Model Rule 1.5, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:101, ALI-LGL ¤¤ 50-54, Wolfram ¤¤ 9.1-9.6

Decisions construing RuleÊ1.5(b) and the communication of fee agreements between the attorney and client include: In re Poznanovich, 96 Ill. Atty. Reg.Ê& Disc. Comm. CHÊ514 NovemberÊ25, 1997 (recommendation of disbarment for various violations, including failure to communicate with client the basis or rate of the fee within a reasonable time after commencing representation).

More opinions construing RuleÊ1.5(c) include: In re Gainer, 94 Ill. Atty. Reg.Ê& Disc. Comm. CHÊ353 NovemberÊ30, 1994 (recommendation of two year suspension where attorney engaged in various acts of professional misconduct, including an excessive contingent fee arrangement).

Opinions construing RuleÊ1.5(d)(2) include: In re Kepple, 95 Ill. Atty. Reg.Ê& Disc. Comm. CHÊ876 MayÊ22, 1996 (recommendation of one year suspension where attorney engaged in various acts of professional misconduct, including entering into a contingent fee arrangement for a criminal case).

Opinions construing RuleÊ1.5(e) include: In re Muhammad, 96 Ill. Atty. Reg.Ê& Disc. Comm. CHÊ892 JanuaryÊ30, 1997 (disbarment recommended where attorney charged and collected an excessive fee in violation of RuleÊ1.5(e)).

Other opinions include: In re Martay, 91 Ill. Atty. Reg.Ê& Disc. Comm. CHÊ206 MarchÊ30, 1992 (recommending one year suspension for attorney dividing fees in violation of RuleÊ1.5(f); In re Mendelson, 95 Ill. Atty. Reg.Ê& Disc. Comm. CHÊ339 NovemberÊ26, 1996 (recommending six month suspension for attorney dividing fees in violation of RuleÊ1.5(f), and citing to Holstein, and Kaplan).

1.5:210 Client-Lawyer Fee Agreements

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

In the absence of a contract between an attorney and a client, the client shall owe the attorney a reasonable fee. Cripe v. Leiter, 703 N.E.2d 100, 106 (Ill. 1998). Similarly, when a contract requires the shifting of attorney fees, a trial court should award all reasonable fees. J.B. Esker & Sons v. Cle-Pa's P'Ship, 2001 Ill. App. LEXIS 793, *12 (5th Dist. 2001). The primary method used to determine a reasonable fee is to assess the fair value of the attorney's services. This is accomplished by assessing the nature of the attorney's work, and applying the quantum meruit doctrine, or by using the lodestar method. Generally, the burden of proof rests with the attorney to prove the reasonable value of his or her services. In re Marriage of Shinn, 729 N.E.2d 546, 551 (Ill. App. Ct., 4th Dist. 2000).

The reasonable value of the services is determined by considering several factors. These include the standing and skill of the attorney involved, the nature of the case and the novelty and difficulty of responsibility involved in the management of the case, the time and labor required, the usual and customary charge in the community and the benefits resulting to the client. Id. at 552. The determination of reasonableness is a matter for the trial court's discretion. Esker, 2001 Ill. App. LEXIS 793, *13. Once the factors have been weighed, an award of attorney fees may be considered reasonable to a court, even if the fee is disproportionate to the monetary amount of the obtained result. Id. In order to recover fees based on these factors, an attorney must present accurate records kept over the course of the representation, which contain detailed facts upon which the claims are predicated. Id. at 551. The attorney must also specify the services performed, by whom the services were performed, the time spent, and the rate charged. Kruse v. Kuntz, 683 N.E.2d 1185, 1188 (Ill. App. Ct., 4th Dist. 1996). However, while keeping contemporaneous time records will generally ensure the greatest accuracy, an attorney may instead present "sufficient evidence to allow the trial court to determine a reasonable fee for her services." Shinn, 729 N.E.2d at 551.

In Shinn, the attorney did not provide her actual contemporaneous records. Id. at 552. However, she testified that she wrote down her hours each day 90% of the time, and presented the court with computer-generated documents that detailed the work she performed, when performed, who performed the work (attorney or paralegal), the total amount of hours spent, and the amount billed for that month. Although the summaries were not made contemporaneous with the work performed, the court held that this information was adequate to determine a reasonable attorney fee. Id. at 554. When an attorney has been discharged after completing legal services, he may be reimbursed for those services on a quantum meruit basis. Much Shelist Freed Denenberg & Ament, P.C. v. Lison, 696 N.E.2d 1196, 1199 (Ill. App. Ct., 4th Dist. 1998). Quantum meruit literally means "as much as he deserves." Under this doctrine a client is liable to the attorney for the reasonable value of the services performed by the attorney. Id. Quantum meruit is based on the client's implied promise to pay for the services that are of value to him. In Illinois, an attorney's action for a fee based on quantum meruit accrues immediately upon discharge. Id. In Much Shelist, a corporation in a class action lawsuit withdrew from the class action, and terminated its contingency fee relationship with its law firm. Id. at 1202. This terminated the contingency fee contract, but the corporation was then liable to its former firm for the quantum meruit value of the legal services the law firm performed prior to termination. Despite the fact that the original contingency fee agreement had not been in writing, and that the lawsuit generated no economic benefit to the corporation, the court held that the law firm was entitled to attorney fees based on quantum meruit. Id. In awarding fees based on quantum meruit, courts look to the factors listed above concerning the reasonableness of a fee. Wegner v. Arnold, 713 N.E.2d 247, 250 (Ill. App. Ct., 2nd Dist. 1999).

The court noted that the market rate for attorney fees "depends in part on the risk of nonpayment a firm agrees to bear, in part on the quality of its performance, in part on the amount of work necessary to resolve the litigation, and in part on the stakes of the case." Id. at *23. It is difficult to apply these factors after a case has been litigated, so the Seventh Circuit advocates an ex ante approach. This method aims to determine what agreement the party and its attorneys would have reached prior to litigation. Although difficult to determine, some guides are available: the fee contracts some parties have signed with their attorneys; "data from large common-pool cases where fees were privately negotiated; and information on class-counsel auctions, where judges have entertained bids from different attorneys seeking the right to represent a class." Id. at *19. The Seventh Circuit remanded the Synthroid case, because the trial judge did not consider a market approach for determining attorney fees. The trial judge viewed the large settlement as a "megafund," and limited both the consumers and insurance companies fees to 10% of the total amount. The Seventh Circuit disapproved of the approach that fees over 6-10% in such a large case amount to windfalls, and remanded with orders to apply an ex ante market approach to determine appropriate attorney fees. In order to recover a reasonable fee, an attorney may bring an action under the Illinois Attorneys Lien Act, 770 ILCS 5/1 (2001). The statute requires that an attorney attempting to recover a reasonable fee for services under that Act must "serve notice in writing, which service may be made by registered or certified mail, upon the party against whom their clients may have such suits, claims or causes of action, claiming such lien and stating therein the interest they have in such suits, claims, demands or causes of action." Id. The Supreme Court of Illinois stated that this Act must be strictly construed, "both as to establishing the lien and as to the right of action for its enforcement," and that attorneys who do not strictly comply with the Act will not have lien rights. People v. Philip Morris, Inc., 2001 Ill. LEXIS 1431, at *11 (2001). In Philip Morris, the court held that the state of Illinois complied with the act by properly perfecting its lien against tobacco manufacturers, and petitioning the circuit court to adjudicate it. Id. at *12. In addition, in Illinois an attorney may acquire an interest in a cause of action that is being conducted for a client by acquiring a lien granted by law to secure fees or expenses. Illinois Rules of Professional Conduct 1.8.

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

In Illinois, a client has the right to discharge his attorney at any time, with or without cause. Rhoades v. NorfolkÊ& W. Ry., 399 N.E.2d 969, 974 (Ill. 1979); Balla v. Gambro, 584 N.E.2d 104 (Ill. 1991). This rule recognizes that the relationship between an attorney and client is based on trust and that the client must have confidence in his attorney in order to ensure that the relationship will function properly. Id. (An attorney who is discharged without cause is not entitled to recover contract fees from his client but is entitled to fees calculated on a quantum meruit basis for the services rendered prior to the termination of his employment.). Id.; Susan E. Loggans & Assocs. v. Estate of Magid, 589 N.E.2d 603 (Ill. App. 1st Dist. 1992). The term "quantum meruit" literally means "as much as he deserves" and describes a recovery which is based on the reasonable value of services that have been performed. VanÊC. ArgirisÊ& Co. v. FMC Corp., 494 N.E.2d 723, 725-26 (Ill. App. 1st Dist. 1986). The theory is that the "defendant has received a benefit which would be unjust for him to retain without paying for it. Therefore, in order to recover in quantum meruit, it is essential that the services performedÊ.Ê.Ê. be of some measurable benefit to the client." Id. An attorney may collect fees on the basis of quantum meruit even though he failed to perfect a lien. DeKing v. Urban Inv. & Dev. Co., 508 N.E.2d 377, 379 (Ill. App. 1st Dist. 1987). An attorney may collect fees after discharge on the basis of quantum meruit even though the attorney has been disbarred for the period prior to the date of the disbarment order. Harris TrustÊ& Sav. Bank v. Chicago College of Osteopathic Medicine, 452 N.E.2d 701 (Ill. App. 1st Dist. 1983). Sup.ÊCt. RuleÊ764.

In addition, an attorney may, subject to court approval, voluntarily withdraw from a case for good reason. If attorneys' fees are not paid during the course of a litigation, the attorney may demand payment and, if payment is not made within a reasonable amount of time, may withdraw from the case. Reed Yates Farms, Inc. v. Yates, 526 N.E.2d 1115, 1121 (Ill. App. 4th Dist. 1988). After his withdrawal, the attorney is entitled to receive fees for services performed prior to his withdrawal. Id. (attorney may voluntarily withdraw from case and recover fees based on quantum meruit where client filed a complaint against attorney with the Attorney Registration and Disciplinary Commission alleging that attorney deliberately misinformed the client).

The time and labor required in a given case is but one factor to be considered in assessing a reasonable attorney fee under the doctrine of quantum meruit. Johns v. Klecan, 556 N.E.2d 689 (Ill. App. 1st Dist. 1990). Other factors to be considered include the attorney's skill and standing, the nature of the cause and the novelty and difficulty of the subject matter, the degree of responsibility in managing the case, the usual and customary charge in the community, and the benefits resulting to the client. Neville v. Davinroy, 355 N.E.2d 86, 90 (Ill. App. 5th Dist. 1976).

The trial court's decision regarding whether to award attorneys' fees is a matter within its discretion and, upon review, will not be disturbed absent an abuse of that discretion. Lee v. Ingalls Mem. Hosp., 597 N.E.2d 747, 749-50 (Ill. App. 1st Dist. 1992); Johns v. Klecan, 556 N.E.2d 689, 692 (Ill. App. 1st Dist. 1990). A reviewing court may not disturb an award of attorneys' fees merely because it may have made a different award. Lee v. Ingalls Mem. Hosp., 597 N.E.2d at 750; In re Estate of Healy, 484 N.E.2d 890 (Ill. App. 2nd Dist. 1985). The amount awarded is fact dependent and is to be determined according to the weight of the evidence by the trial court. Lee v. Ingalls Mem. Hosp., 597 N.E.2d at 750 (appellate court affirmed trial court's award of attorneys' fees where discharged attorney spent seven years working on the case during which time attorney investigated the claim, found an expert witness, deposed witnesses, pursued a settlement and developed the theory of the case); see also In re Estate of Healy, 484 N.E.2d 890 (Ill. App. 2nd Dist. 1985). The Workers Compensation Act, however, provides for the Illinois Industrial Commission to retain exclusive jurisdiction over fee disputes and, therefore, a trial court lacks subject-matter jurisdiction in such cases. Muller v. Jones, 613 N.E.2d 271, 272-73 (Ill. App. 4th Dist. 1993).

The party seeking the fees, whether for himself or on behalf of a client, always bears the burden of presenting sufficient evidence from which the trial court can render a decision as to their reasonableness. An appropriate fee consists of reasonable charges for reasonable services; however, to justify a fee, more must be presented than a mere compilation of hours multiplied by a fixed hourly rate or bills issued to the client. Kaiser v. MEPC American Properties, Inc., 518 N.E.2d 424 (Ill. App. 1st Dist. 1987). While it may be proper for an attorney seeking fees to present expert testimony on the issue of what is a reasonable fee, he is not required to do so as a matter of law. See Johns v. Klecan, 556 N.E.2d 689, 696 (Ill. App. 1st Dist. 1990); In re Marriage of Angiuli, 480 N.E.2d 513 (Ill. App. 2nd Dist. 1985). The existence of a contractual provision obligating one party to pay the attorneys' fees of another party does not relieve the burden of establishing the reasonableness of the amount requested. Kaiser v. MEPC American Properties, Inc., 518 N.E.2d at 428.

The petition for fees must specify the services performed, by whom they were performed, the time expended thereon and the hourly rate charged. The attorney must present detailed records maintained during the litigation that contain facts and computations upon which attorneys' fees are based. The trial court should consider a variety of additional factors such as the skill and standing of the attorneys, the nature of the case, the novelty and/or difficulty of the issues and work involved, the importance of the matter, the degree of responsibility required, the usual and customary charges for comparable services, the benefit to the client and whether there is a reasonable connection between the fees and the amount involved in the litigation. Kaiser, 518 N.E.2d at 427-28 (citing additional cases). See also Board of Educ. v. County of Lake, 509 N.E.2d 1088 (Ill. App. 2nd Dist. 1987) (timesheet and summaries containing general descriptions of work performed are not adequate substitutes for detailed contemporaneous records). But see Johns v. Klecan, 556 N.E.2d 689 (Ill. App. 1st Dist. 1990) (discharged attorney in a personal injury contingency fee case is not required to present evidence as detailed as that required in hourly fee cases and may recover a fee on the theory of quantum meruit where he presents sufficient evidence of the time and labor spent on the former client's case, which evidence is to be considered along with other factors in determining whether he receives a fee).

In determining how much time was spent on a particular matter, the attorney does not need to provide contemporaneous records and may construct a record of fees based on telephone bills and logs, correspondence and other file documents, and the recollection of the attorney and his employees. However, a contemporaneous record of events is generally more accurate. Muller v. Jones, 613 N.E.2d 271, 275 (Ill. App. 4th Dist. 1993). Deficiencies in documentation warrant a reduction in the fee, not a complete denial of fees. In re Marriage of Malec, 562 N.E.2d 1010, 1023 (Ill. App. 1st Dist. 1990). Notwithstanding the foregoing, the attorney must provide sufficient specificity of the nature of the work on any given date so that the trial court can determine whether the work was necessary and whether the time expended was reasonable. Muller, 613 N.E.2d at 275.

1.5:240 Fee Collection Procedures

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1.5:250 Fee Arbitration

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1.5:260 Forfeiture of Lawyer's Compensation

When a person such as an attorney breaches a fiduciary duty to a principal the appropriate remedy is within the equitable jurisdiction of the court. In re Marriage of Pagano, 607 N.E.2d 1242, 1249-50 (Ill. 1992). While the breach may be so egregious as to require the forfeiture of compensation by the fiduciary as a matter of public policy, such will not always be the case. Punitive damages are permissible where a duty based on a relationship of trust is violated, where the fraud is considered gross or where malice or willfulness are involved. An award of punitive damages in such cases is not automatic. Pagano, 607 N.E.2d 1242, 1249-50 (Ill. 1992) (attorney not barred from recovering fees in divorce where attorney provided substantial legal services to the client).

Where a contingent fee agreement is illegal, the attorney is barred from recovering fees pursuant to a contract or based on a quantum meruit theory. American Home Assurance Co. v. Golomb, 606 N.E.2d 793 (Ill. App. 4th Dist. 1992) (attorney barred from collecting fees where contingent fee agreement provided for fees in a medical malpractice case that were in excess of the statutory maximum and where attorney led clients to believe that he was providing value in exchange for the excess fees). See also Leoris v. Dicks, 501 N.E.2d 901 (Ill. App. 1st Dist. 1986) (fee agreement was unenforceable and attorney was denied recovery on the basis of quantum meruit where agreement violated public policy by providing for fee splitting which was prohibited at the time). But see, Anderson v. Anchor Organization for Health Maintenance, 654 N.E.2d 675, 681 (Ill. App. 1st Dist. 1995) (court declined to adopt a per se rule that contingent fees in excess of the statutory maximum in a medical malpractice case preclude recovery by the attorney on a quantum meruit basis and left determination in the discretion of the trial court).

An attorney may not recover fees for the preparation and service of an attorney lien after the attorney is terminated because such services are not for the benefit of the client. Muller v. Jones, 613 N.E.2d 271, 275 (Ill. App. 4th Dist. 1993); Ashby v. Price, 445 N.E.2d 438, 445 (Ill. App. 3rd Dist. 1983).

"An attorney cannot recover from the party that he has wronged for legal services where he has represented adverse, conflicting, and antagonistic interests in the same litigation." King v. King, 367 N.E.2d 1358 (Ill. App. 4th Dist. 1977) (attorney denied recovery of fees from client's spouse where spouse had contacted attorney two years earlier about marital problems and divulged confidential information).

An attorney who represents an administrator of an estate stands in a fiduciary relationship to the beneficiaries of the estate. In the attorney acts in bad faith and against the interest of the beneficiaries of the estate, attorneys fees may be denied. Szymakowski v. Szymakowski, 542 N.E.2d 372, 374 (Ill. App. 1st Dist. 1989).

An attorney may voluntarily withdraw from case and recover fees based on quantum meruit even though the client filed a complaint against attorney with the Attorney Registration and Disciplinary Commission alleging that attorney deliberately misinformed the client. Reed Yates Farms, Inc. v. Yates, 526 N.E.2d 1115, 1121 (Ill. App. 4th Dist. 1988). A reduction of attorneys' fees based on unprofessional conduct would "constitute an impermissible infringement on the exclusive power of the supreme court, acting through the [Attorney Registration and Disciplinary Commission], to adjudicate attorney discipline matters." Reed Yates, 526 N.E.2d at 1122-23. However, an attorney's alleged unethical conduct is relevant in determining whether he fulfilled his contractual obligations to the client. Reed Yates, 526 N.E.2d at 1123.

1.5:270 Remedies and Burden of Persuasion in Fee Disputes

In all cases where an award of attorney fees is appropriate, only those fees which are reasonable will be allowed, the determination of which is left to the sound discretion of the trial court. The party seeking the fees, whether for himself or on behalf of a client, always bears the burden of presenting sufficient evidence from which the trial court can render a decision as to their reasonableness. An appropriate fee consists of reasonable charges for reasonable services; however, to justify a fee, more must be presented than a mere compilation of hours multiplied by a fixed hourly rate or bills issued to the client. Kaiser v. MEPC American Properties, Inc., 518 N.E.2d 424 (Ill. App. 1st Dist. 1987). While it may be proper for an attorney seeking fees to present expert testimony on the issue of what is a reasonable fee, he is not required to do so as a matter of law. See, Johns v. Klecan, 556 N.E.2d 689, 696 (Ill. App. 1st Dist. 1990); In re Marriage of Angiuli, 480 N.E.2d 513 (Ill. App. 2nd Dist. 1985). The existence of a contractual provision obligating one party to pay the attorneys fees of another party does not relieve the burden of establishing the reasonableness of the amount requested. Kaiser v. MEPC American Properties, Inc., 518 N.E.2d 424, 428 (Ill. App. 1st Dist. 1987).

The petition for fees must specify the services performed, by whom they were performed, the time expended thereon and the hourly rate charged. The attorney must present detailed records maintained during the litigation that contain facts and computations upon which attorney's fees are based. The trial court should consider a variety of additional factors such as the skill and standing of the attorneys, the nature of the case, the novelty and/or difficulty of the issues and work involved, the importance of the matter, the degree of responsibility required, the usual and customary charges for comparable services, the benefit to the client and whether there is a reasonable connection between the fees and the amount involved in the litigation. Kaiser v. MEPC American Properties, Inc., 518 N.E.2d 424, 427-28 (Ill. App. 1st Dist. 1987) (citing additional cases). See also Board of Educ. v. County of Lake, 509 N.E.2d 1088 (Ill. App. 2nd Dist. 1987) (timesheet and summaries containing general descriptions of work performed are not adequate substitutes for detailed contemporaneous records). But see Johns v. Klecan, 556 N.E.2d 689 (Ill. App. 1st Dist. 1990) (discharged attorney in a personal injury contingency fee case is not required to present evidence as detailed as that required in hourly fee cases and may recover a fee on the theory of quantum meruit where he presents sufficient evidence of the time and labor spent on the former client's case, which evidence is to be considered along with other factors in determining whether he receives a fee).

The Illinois Marriage and Dissolution of Marriage Act, which authorizes the court to award fees, does not provide the sole recourse for the recovery of fees in domestic relations matters and therefore does not preclude a common law action to recover attorneys fees. Nottage v. Jeka, 667 N.E.2d 91 (Ill. 1996).

1.5:300 Attorney-Fee Awards (Fee Shifting)

¥ Primary Illinois References: IL RuleÊ1.5
¥ Background References: ABA Model Rule 1.5, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:301, Wolfram ¤ 16.6

1.5:310 Paying for Litigation: The American Rule

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1.5:320 Common-Law Fee Shifting

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1.5:330 Statutory Fee Shifting

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1.5:340 Financing Litigation [see 1.8:600]

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1.5:400 Reasonableness of a Fee Agreement

¥ Primary Illinois References: IL RuleÊ1.5(a)
¥ Background References: ABA Model Rule 1.5(a), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:301, ALI-LGL ¤ 46, Wolfram ¤ 9.3.1

An attorney who renders professional services has a right to be compensated for such services. Estate of Healy v. Tierney, 484 N.E.2d 890, 892 (Ill. App. 2nd Dist. 1985). As a general rule, this right depends on the terms of an express or implied contract of employment with the person to be charged. Id.

It is professionally proper to charge a client interest on expenses that are advanced to a client. There is no prohibition in IRPCÊ1.8(d) or any other rule that prohibits a lawyer from charging a client interest for advanced expenses. Any agreement providing for the accrual of interest should be put in writing at the earliest opportunity and prior to the accrual of any interest. A timely and regular statement issued by the attorney informing the client what legal fee is owed, including how much has been advanced to cover litigation costs, is appropriate. Such a statement would avoid surprise when substantial fees have accrued and would give the client an opportunity to remunerate the attorney before interest begins to accrue. Following IRPCÊ1.5(a), the rate of amount of interest charged upon advanced expenses should be reasonable, as should the costs and expenses upon which the interest is charged. ISBAÊ 94-06 (July, 1994), 1994 WL 904189. See also, ISBAÊ87-10 (January 1991), 1994 WL 904189 (an attorney may charge interest on expenses advanced on behalf of a client or past due statements rendered to the client); ISBAÊ632 (overruling ISBAÊ380 and 490 which had held that it was unethical to charge interest on either advanced expenses or past due fees).

It has been accepted that, while an attorney should not invoice for the necessary expenses of a properly equipped office, a client may be expected to bear reasonable additional expenditures required by diligent representation. The former category includes, for example, local telephone calls and ordinary secretarial assistance while the latter includes long distance telephone, photocopying, travel and court costs. Computerized legal research falls in the latter category as an expense which can be itemized and billed separate and apart from ordinary overhead. If legal research is to be billed as an expense in a situation involving a contingent fee contract, the client must be fully informed in advance whether legal research expenses are to be deducted before or after the contingent fee is calculated. An attorney may use a formula for estimating and charging a client for computerized legal research as an expense if the formula reasonably reflects the firm's actual cost, that is, those expenses directly attributable to providing computerized legal research to the firm's clients as opposed to those expenses which are a necessary part or adjunct of a properly equipped law office. An alternative approach is to incorporate the cost of computerized legal research into overhead within the standard fee structure. As long as the ultimate fee is reasonable, this approach is not prohibited by the Rules of Professional Conduct. ISBAÊ85-09 (JanuaryÊ17, 1986), 1986 WL 352852. See also Bennett v. Central Tel. Co., 619 F.ÊSupp. 640 (N.D. Ill. 1985) (court allowed charge for computerized research in addition to time of the attorney who conducted the research). But see, Losurdo Bros. v. Arkin Distrib. Co., 465 N.E.2d 139 (Ill. App. 2nd Dist. 1984) (costs of photocopying, check processing, legal newspaper subscriptions, local telephone and delivery services are ordinary expenses normally included in office overhead and encompassed in the hourly rate charged by a law firm). Of course, copying and telephone costs may also be charged to a client by agreement or local custom.

Likewise, an attorney may invoice a client for a secretary's overtime work where secretarial overtime is necessary to perform specific tasks to diligently represent the client, the overtime is not the result of the attorney's procrastination, neglect or design and the client is informed and consents to the payment of secretarial overtime as a special expense. ISBAÊ91-06 (OctoberÊ25, 1991), 1991 WLÊ735063.

An agreement between an attorney and a client that allows the attorney to seek additional fees and costs from the client if litigation is necessary to collect the attorney's fee does not violate the Rule of Professional Conduct on its face. ISBAÊ90-33 (MayÊ15, 1991), 1991 WLÊ735042. See In re Marriage of Pagano, 607 N.E.2d 1242, 1249-50 (Ill. 1993).

An attorney may not charge clients an hourly rate for a salaried paralegal as an expense in addition to a percentage of the recovery on a contingent fee contract. "A paralegal, as a salaried employee, falls into the same category as a salaried secretary, law clerk or associate, the costs of which should be treated as a part of the normal overhead expenses of a law office." ISBAÊ86-01 (JulyÊ7, 1986), 1986 WL 352858.

An attorney may not retain a fee from a title insurance company for furnishing "back title evidence" at the time the lawyer applies for title insurance because the fee is arbitrary and not based on any of the factors set forth in Illinois CodeÊ2-106 (now IRPCÊ1.5). However, the attorney may accept the fee and remit it to the client or credit the client's account. The fee must be fully disclosed to the client in accordance with the applicable rules. ISBAÊ799 (DecemberÊ4, 1982), 1982 WLÊ198402. See also ISBAÊ563.

1.5:410 Excessive Fees

The court is duty-bound to guard against the collection of excessive legal fees, both contingent and fixed. XL Disposal Corp. v. John Sexton Contractors Co., 659 N.E.2d 1312, 1315 (Ill. 1995); In re Teichner, 470 N.E.2d 972 (Ill. 1984); Gasperini v. Gasperini, 373 N.E.2d 576 (Ill. App. 1st Dist. 1978) ($20,000 fee in divorce proceeding that involved a $24,000 property settlement was excessive). Where there is an unconscionable fee fixed in a case, the matter is subject to action by the Attorney Registration and Disciplinary Commission. In re Kutner, 399 N.E.2d 963, 965 (Ill. 1979) (attorney censured where he received an excessive fee for representing client in criminal battery case). While a contingent fee contract may be valid at the time of its formation, the court must still ensure that the fee is not excessive. In re Doyle, 581 N.E.2d 669, 674 (Ill. 1991). Where the client raises the issue of excessive fees in litigation, the court must consider evidence of reasonableness even though the parties entered into an express contract for such fee. McCrackenÊ& McCracken, P.C. v. Haegele, 618 N.E.2d 577, 581-82 (Ill. App. 4th Dist. 1993). See In re Doyle, 581 N.E.2d 669, 674 (Ill. 1991), In re Teichner, 470 N.E.2d 972 (Ill. 1984) and In re Marriage of Pagano, 607 N.E.2d 1242, 1249-50 (Ill. 1993).

In Maksym v. Loesch, 937 F.2d 1237 (7th Cir. 1991), an attorney sued his client to recover on a contract for attorneys' fees. One of the defenses raised by the client was that the fee was excessive and violative of RuleÊ2-106 of the Illinois Code. The Seventh Circuit, applying Illinois law, found that a contract for professional services can be rendered unenforceable by being found to be contrary to public policy. The court stated that although not every violation of the rules of professional ethics will make a lawyer's contract with his client voidable per se, "conduct which violates both professional ethics and contract law, such as the charging of exorbitant fees by a lawyer, is not placed beyond the reach of contract law because it violates professional standards as well." Maksym, 937 F.2d at 1244.

Where attorney performs both title insurance services and legal services on behalf of a client with respect to the client's real estate closing and attorney receives a separate fee from title insurance company for his services, IRPCÊ1.5 applies to all monies received regardless of source. ISBAÊ93-01 (JanuaryÊ21, 1994), 1994 WL 904187. When the attorney is functioning only as a title insurance agent conducting title insurance business, the Rules of Professional Conduct do not apply to the fixing or division of the title insurance payments. See also, ISBAÊ90-32. An attorney is no longer prohibited or restricted by the Rules from engaging in another profession or business, even if such business is conducted from the same office as his law practice.

A client is permitted to prove that his or her attorney's fees are excessive or otherwise unreasonable even though the client agreed to a fixed fee for such attorney's services. In re Marriage of Pitulla, 491 N.E.2d 90, 94 (Ill. App. 1st Dist. 1986). "[T]he public is entitled to protection to the extent that an attorney's fee must be reasonable irrespective of whether the fee is determined per diem or by a fixed contractual provision." Id.

An attorney owes a duty to a client not to overcharge; exorbitant, excessive or fraudulent fees can be challenged by the client and are therefore actionable as malpractice. Coughlin v. Serine, 507 N.E.2d 505, 514 (Ill. App. 1st Dist. 1987). In order to state a cause of action for malpractice, the client must plead (1)Êthe existence of an attorney-client relationship, (2)Êa duty arising from that relationship, (3)Êa breach of that duty, (4)Êcausation, and (5)Êresulting damages. Id.

Coercion and Undue Influence

A fiduciary relationship exists as a matter of law between an attorney and client and all transactions growing out of such a relationship, including contracts for payment, are subject to close scrutiny. Neville v. Davinroy, 355 N.E.2d 86, 88-89 (Ill. App. 5th Dist. 1976); Durr v. Beatty, 491 N.E.2d 902, 906 (Ill. App. 5th Dist. 1986). A presumption of undue influence arises when an attorney enters into a transaction with his client during the existence of the fiduciary relationship. Franciscan Sisters Health Care Corp. v. Dean, 448 N.E.2d 872 (Ill. 1983). When an attorney presents sufficient evidence to rebut the presumption, the burden shifts to the party seeking to set aside the transaction to persuade the trier of fact that the transaction was brought about by fraud or undue influence. Id. As a matter of public policy, an attorney must provide "clear and convincing" evidence to rebut the presumption of undue influence once it has been raised. Id. at 877-78. To rebut the presumption, an attorney must present evidence that the attorney made a full and fair disclosure to the client of all material facts, the client's agreement was based on adequate consideration, the client had independent advice before completing the transaction and the transaction is fair (Neville v. Davinroy, 355 N.E.2d 86, 88-89 (Ill. App. 5th Dist. 1976)). See In re Marriage of Pagano, 607 N.E.2d 1242, 1247 (Ill. 1992) (attorney successfully rebutted presumption of undue influence where client understood that she was ultimately responsible for attorneys fees and, therefore, did not need independent legal advice).

When an attorney enters into a transaction with a client, including a new fee agreement, after the attorney has been retained, it is presumed that the attorney exercised undue influence. Pagano, 607 N.E.2d at 1247; American Home Assurance Co. v. Golomb, 606 N.E.2d 793, 795 (Ill. App. 4th Dist. 1992).

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

Retainers are a recognized means for an attorney to obtain advance payment of a fee. A lawyer may set in advance of the performance of his or her work a lump sum as his or her fee or require payment of the fee in advance. ISBAÊ722 (AprilÊ30, 1981), 1981 WL 167083. An attorney may use an engagement agreement that provides for a non-cancelable and non-refundable retainer as long as the fee is not excessive and no statute is violated. However, an attorney may not retain funds advanced by a client for time never spent by the law firm, even though the law firm might stand ready to perform. ISBAÊ432; Client Trust Account Handbook (ARDC 1997; hereafter ÒARDC HandbookÓ) 17. The attorney could then deduct, from the amount refunded to the client, payment at the agreed hourly rate for services performed to the date of termination, apparently on a quantum meruit basis. See In re Kutner, 399 N.E.2d 963 (Ill. 1979).

An attorney may enter into a retainer contract for legal services in exchange for a client's goods or labor provided the exchange does not result in the attorney receiving an excessive fee. ISBAÊ689 (AugustÊ11, 1980), 1980 WL 130458. However, an attorney may not join a trade association where he barters legal services for "exchange checks" redeemable only in goods and services from other members of the association. See ISBAÊ583. The attorney may require the goods to be provided or services to be performed by the client prior to the time the legal services are performed.

Even where attorney and client have agreed upon a fixed fee for the attorney's legal services, there is an implied right in the contract that the client has a right to know what the attorney did or does and how much time he took to do it. In re Marriage of Pitulla, 491 N.E.2d 90, 94 (Ill. App. 1st Dist. 1986). If by agreement with the client a retainer remains the clientÕs money until the attorney performs services and the client agrees to the amount of fees and authorizes disbursement, the money must be held in a trust account. ARDC Handbook 13.

1.5:430 Nonrefundable Fees

The fact that a fee contract clearly provides for a non-refundable retainer and additional fees on a contingency basis does not render the contract ambiguous nor does such a fee arrangement constitute an "obvious injustice." Reed Yates Farms, Inc. v. Yates, 526 N.E.2d 1115, 1124 (Ill. App. 4th Dist. 1988). Payments made to ensure an attorneyÕs availability are earned when paid and must be deposited in a trust account. ARDC Handbook 15.

1.5:500 Communication Regarding Fees

¥ Primary Illinois References: IL RuleÊ1.5(b)
¥ Background References: ABA Model Rule 1.5(b), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:101, ALI-LGL ¤ 50, Wolfram ¤ 9.2.1

ISBA had previously held that Illinois CodeÊ9-102(a) did not apply to retainer fees unless, when paid to an attorney or law firm, they were expressly designated in writing to constitute security for fees to be earned. Absent such designation, retainers are not "funds of clients" within the meaning of Illinois CodeÊ9-102(a), but became the funds of the attorney or law firm and were therefore not required to be segregated in a trust account. See ISBAÊ703. Funds which are paid to an attorney as security for payment of fees or "advance fees that have not been earned" are not retainers that are property of the attorney. Such security or advance are property of the client to be deposited into a trust account. The ISBA interprets IRPCÊ1.5(b) to mandate the attorney to fully disclose to the client the nature of the fee agreement as to whether it is a non-refundable retainer or an advance for fees and costs that have not been earned. ISBAÊ90-10 (JanuaryÊ29, 1991), 1991 WL 735051. See also 1.5:420.

1.5:600 Contingent Fees

¥ Primary Illinois References: IL RuleÊ1.5(c)
¥ Background References: ABA Model Rule 1.5(c), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:901, ALI-LGL ¤¤ 46, 47, Wolfram ¤ 9.4

A contingent fee contract by definition is one that provides that a fee is to be paid to the attorney for his services only if the succeeds in winning the client's case; that is, the fee depends upon the success or failure of the case and is generally paid from the amount recovered by the client. Pocius v. Halvorsen, 195 N.E.2d 137, 139 (Ill. 1963). Contingent fee contracts have the practical effect of giving an attorney a financial interest in the success of the litigation and, therefore, Òit is felt that unless absolutely fair they will adversely affect the usual attorney-client relationship.Ó Id. at 142.

A fee agreement that provides that an attorney will be paid a specific percentage of securities upon the successful registration of such securities is a contingent fee agreement. Although contingent fee agreements may be used in non-litigation contexts, the reasonableness of the contingent fee may be more closely scrutinized by the courts because such matters generally involve less uncertainty than litigation. In addition, the attorney may advertise such contingent fee agreements to other potential clients provided that the IRPC regarding advertising and communication are followed. ISBAÊ91-13 (NovemberÊ22, 1991), 1991 WL 735048.

Absent a statutory prohibition, an attorney and his client may enter into a contingent fee agreement which provides for a fee that is larger than the fee awarded to the attorney by the court or in a settlement. If the awarded fee is greater than the fee provided for in the contingent fee agreement, the attorney's fee is limited to the agreement amount. ISBAÊ723 (AprilÊ30, 1981), 1981 WL 167084.

In In re Teichner, 470 N.E.2d 972 (Ill. 1984), the Illinois Supreme Court held that disbarment was warranted where Teichner collected an excessive fee based upon a contingent fee agreement. Teichner was consulted by Helen Escobedo in matters arising from the death of Juan Escobedo, the man with whom she lived. Juan Escobedo had died from an accident, leaving Helen as the beneficiary of a life insurance policy. Helen was concerned that Juan's wife would attempt to claim the life insurance proceeds and, after filing a claim with the insurance company, consulted Teichner. Teichner and Helen executed a contingent fee agreement in which Teichner would receive "one-fourth of any amount realized from [claims arising from Juan's death] either by settlement or judgment." Juan's wife did not claim the insurance proceeds and the life insurance policy was paid to Helen in a routine manner four days later. Relying on the contingent fee agreement, Teichner collected one-fourth of the proceeds as his fee. Teichner extends the rule of In re Kutner to contingent fee agreements, that is, that it is the duty of the courts to guard against excessive fees in both fixed and contingent fee cases. Where there is an unconscionable fee in a contingent fee arrangement, the fee is subject to action by the Attorney Registration and Disciplinary Commission, with the contingent nature of the contract becoming an additional factor to be considered in determining the reasonableness of the fee charged.

1.5:610 Special Requirements Concerning Contingent Fees

Contingent fee contracts are always subject to the supervision of the courts, whether or not they are entered into during the attorney-client relationship, and will be enforced as written only if they are reasonable. Pocius v. Halvorsen, 195 N.E.2d 137 (Ill. 1963); McCrackenÊ& McCracken, P.C. v. Haegele, 618 N.E.2d 577 (Ill. App. 4th Dist. 1993). Despite the fact that a contingent fee agreement is negotiated and executed in an arm's length transaction and that the fees were unambiguously set forth in the agreement, a court must consider evidence concerning the reasonableness of the fee charged. Id. at 582.

In Partee v. Compton, 653 N.E.2d 454 (Ill. App. 5th Dist. 1995), the court enforced a contingent fee agreement where the defendants acknowledged that they agreed to pay Compton a fee but nevertheless attempted to void the agreement because it did not meet the technical requirements of Illinois CodeÊ2-106. "If there was a violation of [RuleÊ2-106] here, the harm is not to defendants, but it is to the administration of justice and society at large because of the breach of the Code of Professional Responsibility." Id. at 456.

In In re Gerard, 548 N.E.2d 1051 (Ill. 1989), the Illinois Supreme Court suspended Gerard for one year after Gerard collected a fee based on a contingent fee contract. Gerard entered into a contingent fee agreement with Ruth Randolph, an elderly woman who believed that a substantial amount of certificates of deposit had been stolen from her. The fee agreement provided that Gerard would receive one-third of all assets "recovered." Using information provided by Randolph, Gerard easily located and re-registered all of the certificates. None of the certificates had been stolen and no third party claimed ownership of them. To collect the fee due him under the contingency agreement, Gerard cashed several certificates. The Supreme Court held that "a contingent fee is to be collected only if an attorney successfully champions the legal rights and claims of his client, with the result that the client is compensated through a settlement with, or judgment against, those who denied his claims." Because no settlement or judgment was necessary in this case, Gerard's fee was excessive. The Illinois Supreme Court also ruled that in the event the eight factors set forth in IRPCÊ1.5 suggest the fee amount is unreasonable, a lawyer must use his own "common sense" to reduce that fee after consulting with his client as to the work performed and to renegotiate a lower percentage to produce an amount which is reasonable.

"For an attorney to settle a personal injury case and direct the cashing of settlement checks without authorization by his client is itself an impropriety requiring discipline." In re Walner, 519 N.E.2d 903, 909 (Ill. 1988) (citing In re Agin, 256 N.E.2d 810 (Ill. 1970)). An attorney must have specific authority from his client to settle the client's claim and deduct his contingent fee from the settlement proceeds. ISBAÊ88-04 (FebruaryÊ9, 1989), 1989 WL 550792.

Absent a narrowly drawn power of attorney, a law firm cannot withdraw its contingent fee from the settlement proceeds on behalf of a missing client. It is of no consequence that the amounts involved are small because "there is no 'cut-rate' version of the Rules of Professional Conduct." In the event that a law firm has improperly negotiated checks on behalf of missing clients and paid itself a fee, law firm cannot fully correct these past practices; nevertheless, law firm should repay any fees improperly deducted from negotiated checks with interest. ISBAÊ95-11 (January 1996), 1996 WL 466443.

A contingent fee agreement made on behalf of a minor by the minor's next friend is not per se unenforceable such that the attorney may only be compensated on a quantum meruit basis. Leonard C. Arnold, Ltd. v. Northern Trust Co., 506 N.E.2d 1279, 1281 (Ill. 1987). The next friend clearly has the authority to employ legal counsel when necessary and "if [he or] she could employ counsel, it follows as a matter of course, [he or] she could make a contract for the amount of [the attorney's] compensation." Id. at 1281 (citing Taylor v. Bemiss, 110 U.S. 42, 44 (1884)). Contingent fee contracts involving minors have generally been enforced unless the contract is unreasonable. LeonardÊC. Arnold, 506 N.E.2d at 1281; In re Estate of Sass, 616 N.E.2d 702 (Ill. App. 2nd Dist. 1993) (trial court must carefully scrutinize any contingent fee agreement involving a minor child and has the discretion to reduce the fees provided by such an agreement where the attorney spent a small amount of time working on the case).

1.5:620 Quantum Meruit in Contingent Fee Cases

If the client discharges an attorney retained under a contingent agreement, the contract no longer exists and the attorney cannot seek compensation under the terms of a nonexistent contract. In re Estate of Callahan, 578 N.E.2d 985 (Ill. 1991); Kannewurf v. Johns, 632 N.E.2d 711 (Ill. App. 5th Dist. 1994). However a contingent fee contract does not automatically bar an attorney who withdraws from receiving reasonable compensation based upon quantum meruit. Id. (clients' refusal to consider reasonable offers of settlement resulted in a "complete breakdown" of the attorney-client relationship and, therefore, withdrawing attorney was entitled to recover fees on the theory of quantum meruit). See also, LeorisÊ& Cohen, P.C. v. McNiece, 589 N.E.2d 1060 (Ill. App. 2nd Dist. 1992); Reed Yates Farm, Inc. v. Yates, 526 N.E.2d 1115 (Ill. App. 4th Dist. 1988). Quantum meruit also applies where an attorney voluntarily withdraws from a case for good reason. Id. at 1124-25. An attorney may recover fees in quantum meruit even though the contingency fee agreement provides that no fee is due absent a recovery by the client. Leoris, 589 N.E.2d at 1064.

Where a personal injury case involves a discharged attorney retained under a contingency fee agreement, the attorney is not required to present evidence of time and labor spent on behalf of a client that is as detailed as that required in hourly fee cases. Johns v. Klecan, 556 N.E.2d 689, 696-97 (Ill. App. 1st Dist. 1990). Where the attorney presents sufficient evidence of the time and labor spent on his former client's case, that evidence must be considered along with all the other relevant factors in deciding upon his entitlement to any fees for services rendered. Id. (failure to account for time spent on a case in exacting detail does not alone preclude recovery). Relevant factors other than the time and labor spent on the case include the attorney's skill and standing, the nature of the cause and the novelty and difficulty of the subject matter, the degree of responsibility in managing the cause, the usual and customary charge in the community and the benefits resulting to the client. Neville v. Davinroy, 355 N.E.2d 86 (Ill. App. 5th Dist. 1976); Johns, 556 N.E.2d at 693. In addition to the evidence presented, the trial court may use the knowledge it has acquired in the discharge of professional duties to value the legal services rendered. Id. at 695. See also, In re Estate of Tierney, 484 N.E.2d 890 (Ill. App. 2nd Dist. 1985); Bellow v. Bellow, 419 N.E.2d 924 (Ill. App. 1st Dist. 1981).

A court may determine a reasonable fee based on the total amount of time spent performing legitimate services on behalf of a client and then multiplying that time by a reasonable hourly rate. Johns v. Klecan, 556 N.E.2d 689, 694 (Ill. App. 1st Dist. 1990) (court rejected the use of the comparison/apportionment approach and the lodestar approach for determining a reasonable fee in a personal injury case). See also SusanÊE. Loggans & Assocs. v. Estate of Magid, 589 N.E.2d 603, 610-14 (Ill. App. 1st Dist. 1992) (court followed Johns v. Klecan and rejected the comparison/apportionment approach which compared the percentage of work done by the fired attorney with the percentage of work done by the successor attorney); Ashby v. Price, 445 N.E.2d 438 (Ill. App. 3rd Dist. 1983). Other courts have decided that the comparison/apportionment approach is appropriate in determining a reasonable fee in a contingency fee case. See, e.g., Baker v. City of Granite City, 446 N.E.2d 531 (Ill. App. 5th Dist. 1983) (awarding discharged attorney a percentage of the recovery); Phelps v. Elgin, J.Ê& E. Ry., 217 N.E.2d 519 (Ill. App. 1st Dist. 1966).

A fee enhancement or lodestar is an upward adjustment to a court-awarded fee intended to compensate an attorney for the risks assumed in representing a party in a factually complex matter where the probability of success is low. Fiorito v. Jones, 377 N.E.2d 1019 (Ill. 1978), abrogated , Brundidge v. Glendale Fed. Bank, 659 N.E.2d 909 (Ill. 1995) (circuit court is vested with discretionary authority to choose the percentage-of-the-award method or the lodestar method to determine the amount of fees to be awarded in common fund class action litigation). To justify a fee enhancement, the risks assumed by an attorney must be greater than those normally assumed in contingent fee matters and the benefits derived by the client as a result of the efforts must be greater than could normally have been expected under the circumstances. While normally associated with class representation, fee enhancements are not limited to class actions. Anderson v. Anchor Organization for Health Maintenance, 654 N.E.2d 675, 681 (Ill. App. 1st Dist. 1995). The determination of whether a fee enhancement is warranted is discretionary with the trial court and must be analyzed on a case-by-case basis. Fiorito v. Jones, 377 N.E.2d 1019 (Ill. 1978). If, upon evaluating the relevant factors, "the trial court finds that an increased award is warranted under the circumstances, it should identify those factors which warrant the increase, state the value of the multiplier being used, and give a brief statement of the reasons therefor." Id.

1.5:700 Unlawful Fees

¥ Primary Illinois References: IL RuleÊ1.5(d)
¥ Background References: ABA Model Rule 1.5(d), Other Jurisdictions
¥ Commentary: ABA/BNA ¤¤ 41:901, ALI-LGL ¤ 48, Wolfram ¤¤ 9.3.2; 9.4

1.5:710 Contingent Fees in Criminal Cases

A fee agreement did not violate the IRPC where a client was responsible for all costs and fees connected with his criminal charge if he did not pursue a civil action related to his arrest. Where the client pursued a civil action and such action was successful, the costs of defending the client against the criminal charge would be deducted from the civil recovery or settlement. Fee agreement did not violate the rule against contingent fee agreements in criminal actions because the agreement was not contingent upon the successful outcome of the criminal charge. ISBAÊ84-09 (JanuaryÊ2, 1985), 1985 WL 286862.

1.5:720 Contingent Fees in Domestic Relations Matters

In marriage and dissolution of marriage cases, attorneys' fees can be by agreement between the attorney and the client or set by the court pursuant to the Illinois Marriage and Dissolution of Marriage Act. If determined under the Act, the fee must be reasonable in amount and necessarily incurred. If an attorney and client have an express contract for fees, such contract will control if it is not unconscionable or improper. Fletcher v. Fletcher, 591 N.E.2d 91, 93 (Ill. App. 4th Dist. 1992).

Contingent fees are not permitted in marital dissolution cases when the fee is contingent upon obtaining the dissolution or based upon the financial aspects of the dissolution. Id. Such fees have been held to be against public policy because such arrangements could encourage divorce and hinder reconciliation if the attorney is permitted to have a financial interest in property settlements. Id. at 94. In addition, an attorney may not enter into a contingent fee agreement with a client after a final divorce decree has been entered where the subsequent proceedings involve the division of marital property. Licciardi v. Collins, 536 N.E.2d 840 (Ill. App. 1st Dist. 1989) (attorney barred from receiving attorneys' fees even on the basis of quantum meruit where he represented client in post-judgment divorce proceedings which alleged that property settlement was unconscionable and sought to have proceedings re-opened). An attorney may not recover a fee that is contingent upon specific results relating to visitation and property settlement. In re Marriage of Malec, 562 N.E.2d 1010, 1021-22 (Ill. App. 1st Dist. 1990).

Contingent fee contracts are not prohibited as to legal matters that arise following the final judgment in a dissolution case. Therefore, a contingent fee contract is permissible if it relates to the collection of unpaid child support and maintenance. Fletcher v. Fletcher, 591 N.E.2d, 91, 94 (Ill. App. 4th Dist. 1992) An attorney involved in an action for unpaid child support or maintenance must seek payment of attorneys' fees pursuant to sectionÊ508(b) of the Illinois Marriage and Dissolution of Marriage Act. Id.

Assuming that a contingent fee agreement was evidenced by a writing that set forth the method by which the fee was to be determined and the fee was reasonable, such agreement was permissible in a post-judgment dissolution of marriage, collection and bankruptcy proceeding. In this case, as part of their divorce, Mr.ÊB agreed to pay Mrs.ÊB a lump sum settlement for 20 years and to maintain a life insurance policy until Mrs.ÊB was fully paid. Mr.ÊB's business failed and Mr.ÊB stopped making payments and let the life insurance policy lapse. Mrs.ÊB retained attorneys on a contingent fee basis. Post-judgment proceedings decided that the obligation to Mrs.ÊB was non-modifiable and the bankruptcy court determined that the obligation was not dischargeable. Citing Fletcher v. Fletcher, the Illinois State Bar Association concluded that the contingent fee agreement in this case was proper. "Here, the final judgment of dissolution, maintenance, support and property settlement had occurred. It was only after the failure of Mr.ÊB's business and his stoppage of the payment obligations that the contingent fee contract was entered. We believe the last clause of RuleÊ1.5(d), added in the IRPCÊfrom the [ABA's] Model Rule's language, constitutes just this exception to prohibition of contingent fee agreements in matters such as Mr.ÊB's bankruptcy or post-judgment petition and appeal which are 'subsequent to final judgments.' Therefore, on the basis of the language in RuleÊ1.5(d)(1), a contingent fee agreement in a fact situation as here, assumed to be in proper written form and objectively reasonable in amount, should be permitted under the Illinois Rules of Professional Conduct." ISBAÊ95-16 (MayÊ17, 1996), 1996 WL 478488.

1.5:730 Other Illegal Fees in Illinois

An attorney may only charge a fair and reasonable fee for his legal services in connection with an adoption and may not charge for services in connection with acting as an intermediary or making arrangements for placement of a child (such as receiving and screening responses to an advertisement placed by prospective adoptive parents encouraging women to give their children up for adoption). An attorney is strictly prohibited by Illinois law from receiving fees for placing a child for adoption; to do so constitutes a felony. Ill. Rev. Stat., ch.Ê40, para.Ê1527 (now 750 ILCS 50/22) and 1701 (now 720 ILCS 525/1) et seq. ISBAÊ91-14 (January 1992), 1992 WL 754612.

1.5:800 Fee Splitting (Referral Fees)

¥ Primary Illinois References: IL Rule 1.5(f)-(j)
¥ Background References: ABA Model Rule 1.5(e), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:701, ALI-LGL ¤ 59, Wolfram ¤ 9.24

IRPCÊ1.5(f)-(i) differs from MR 1.5(e) in several respects. First, the IRPC requires greater disclosure to a client with respect to a proposed division of fees than does the MR. In Illinois, a client must be informed of the basis upon which the division will be made, including any economic benefit to be received by the other attorney as a result of the fee split. Furthermore, the disclosure must be in the form of a writing which is signed by the client. In such cases, the fee division must be proportional to the services performed and the responsibilities assumed by each lawyer. In addition, all fees are subject to a reasonableness standard.

Second, the IRPC contains a provision allowing for referral fees if the receiving lawyer discloses the referral agreement to the client. The disclosure must inform the receiving party of the size of the fee. Referral fees are also subject to the writing requirement. In these cases, the fee division does not have to be proportional to the services performed and responsibilities assumed by each lawyer.

Third, the IRPC does not apply to payments made to a lawyer formerly in a firm, subject to a separation or retirement agreement. The MR makes no such exception.

Generally, courts have strictly construed the writing requirement for permissible fee splitting under Illinois law. For example, in Holstein v. Grossman, 616 N.E.2d 1224 (Ill. App. 1st Dist. 1993), the court determined that the writing requirement was a crucial element of Illinois' public policy and as such, had to be strictly enforced. In Kaplan v. PavalonÊ& Gifford, 12 F.3d 87 (7th Cir. 1993), the Seventh Circuit held that under Illinois law, "precise compliance" with the terms of IRPCÊ1.5 is required, even though it might conceivably provide a means for attorneys to avoid their agreements with each other. See also Baer v. First Options of Chicago, Inc., 72 F.3d 1294 (7th Cir. 1995) (the court held that an oral agreement amending an earlier written fee splitting agreement is unenforceable as a matter of public policy).

In cases involving referrals, the referring lawyer must agree to assume the same legal responsibilities as would a partner of the receiving lawyer. However, according to an Illinois appellate decision, Elane v. St.ÊBernard Hosp., 672 N.E.2d 820 (Ill. App. 1st Dist. 1996), the referring lawyer does not have to actively participate in the actual handling of the case, but rather is required to assume only "passive, financial guaranty obligations." (quoting CBAÊ87-2, at 4). This decision is particularly noteworthy in light of the position formerly taken by the ABA with regard to referral fees under the Model Code. See, e.g., ABA 85-1514 (1985) ("[t]he Committee has stated consistently.Ê.Ê. that payment of a referral fee for merely referring a matter to other counsel, without performance of other service and without assumption of responsibility, is not proper."). However, the Committee comments discussing the adoption of this rule (Illinois CodeÊ2-107 at the time) articulated its reasoning in adopting this policy: "Referring lawyers are sometimes given make-work tasks after referral to earn a fee. The public is best served by encouraging lawyers to refer matters to those more skilled in a particular area." 107 Ill.Ê2d 614, Code RuleÊ2-107, Committee Comments at 625.

A lawyer who is required to withdraw from a case because of a conflict of interest may refer the case to another lawyer. However, the referring lawyer may not enter into an agreement with the receiving lawyer in which the former would receive any fees from the latter. ISBAÊ90-26 (MarchÊ9, 1991).

Once a referral agreement is made, there is no restriction in the manner in which the referral fee can be divided between the referring lawyer and the receiving lawyer, as long as the requirements of IRPCÊ1.5 are satisfied. ISBAÊ90-18 (JanuaryÊ29, 1991) provides guidance as to this issue:

[a]ssuming the lawyers have complied with RulesÊ1.5(f) and (g)(1) and (2) which require, among other things, that the client consent in a writing which discloses the division of the fee, the basis on which it will be made, and the responsibility to be assumed by the referring lawyer, the Rules of Professional Conduct impose no restrictions on the way such reasonable fee may be divided between the lawyers.

Despite the Illinois' permissive stance towards referral fees (at least when compared to the former ABA position under the ABA Code), fee splitting agreements between lawyers and nonlawyers are absolutely prohibited, as provided in IRPCÊ5.4. This is the case even if all of the formal requirements for a valid fee splitting agreement are satisfied. See, e.g., In re Discipio, 645 N.E.2d 906 (Ill. 1994); In re Cetwinski, 574 N.E.2d 645 (Ill. 1991). O'Hara v. Algren, Ill. Sup.ÊCt. - splitting fee with non-lawyer. Ill. Sup.ÊCt. RuleÊ764.