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Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.

Michigan Legal Ethics

1.5   Rule 1.5 Fees

1.5:100   Comparative Analysis of MI Rule

¥ Primary Michigan References: MI Rule 1.5
¥ Background References: ABA Model Rule 1.5, Other Jurisdictions
¥ Commentary:

1.5:101      Model Rule Comparison

Instead of the admonition that Òa lawyerÕs fee shall be reasonable,Ó Subsection (a) of MRPC 1.5 prohibits a lawyer from Òentering into an agreement for or to charge or collect any illegal or clearly excessive feeÓ and defines excessive fee as one which Òafter a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.Ó

With respect to contingent fees, Subsection (c) has deleted the Model RuleÕs phrase Òincluding 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 the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated.Ó

Subsection (d) of MRPC 1.5 has a minor semantic variation. Subsection (e) does not contain the Model RuleÕs requirement that the division be in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation.

1.5:102      Model Code Comparison

[The discussion of this topic has not yet been written.]

1.5:200   A Lawyer's Claim to Compensation

¥ Primary Michigan References: MI Rule 1.5
¥ Background References: ABA Model Rule 1.5, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:101, ALI-LGL ¤¤ 38-41, Wolfram ¤¤ 9.1-9.6
¥ MI Commentary: Dubin and Schwartz MRPC 1.5

1.5:210      Client-Lawyer Fee Agreements

Except for contingent fees in actions for personal injury, which are governed by court rule, the measure of compensation of attorneys is left, by Michigan statute, to the express or implied agreement of the parties. MCL 600.919(1). In reaching agreement on the fee, it is sufficient to state that 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. If an earlier estimate proves to be substantially inaccurate, the attorney should provide a revised estimate to the client. Comment to MRPC 1.5. The rule contemplates that when the lawyer has not represented the client on a regular basis, there should be a clear understanding for the basis or rate of the fee, preferably in writing.

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

See 1.5:210 above. The reasonableness of a lawyerÕs fee is determined by the factors set forth in Rule 1.5. See also Wood v DAIIE, 413 Mich 573; 321 NW2d 653 (1982).

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

An attorney is entitled to be paid in accordance with the fee contract for services rendered up to the time of discharge. An attorney on a contingent fee arrangement who is wrongfully discharged or who rightfully withdraws is entitled to compensation for the reasonable value of the attorneyÕs services based upon quantum meruit rather than the contingent fee contract. Reynolds v Polen, 222 Mich App 20; 564 NW2d 467 (1997). The reasonable value of the attorneyÕs services on the basis of quantum meruit is best determined by evaluating the actual agreement between the client and the attorney. Id. If the contract is for a fixed fee, the attorney who is discharged is entitled to recover the percentage of services completed multiplied by the contract price. Plunkett & Cooney, PC v Capitol Bancorp, Ltd, 212 Mich App 325; 536 NW2d 886 (1995).

1.5:240      Fee Collection Procedures

Michigan courts recognize the right of attorneys to assert retaining and charging liens to secure payment for professional services. Kysor Industrial Corp v DM Liquidating Co, 11 Mich App 438; 161 NW2d 452 (1968). An attorneyÕs charging lien is created by a contingent fee agreement. Doxtader v Sivertsen, 183 Mich App 812; 455 NW2d 437 (1990). An attorneyÕs retaining lien on a childÕs support payment has been upheld. Landry v Roebuck, 193 Mich App 431; 484 NW2d 402 (1992). An attorney may not retain money belonging to a client for the purpose of forcing the client to settle at unreasonable terms. Haskins v Bell, 373 Mich 389; 129 NW2d 390 (1964). An attorney is not precluded from collecting a fee because the client does not agree with the attorneyÕs accounting system or billing schedule. Lester N Turner PC v Eyde, 182 Mich App 396; 451 NW2d 644 (1990).

1.5:250      Fee Arbitration

Pursuant to MCR 9.130, the Attorney Grievance Commission has the authority to arbitrate fee disputes on application in writing made by either of the parties to the Commission. The State Bar has not, as of this time, established a procedure such as arbitration or mediation for resolution of fee disputes. There is no ethical prohibition preventing an attorney from including in a fee contract with the client a provision requiring arbitration of fee disputes, provided that the client obtains independent counsel concerning the advisability of entering into such an agreement. Informal Opinion RI-2.

1.5:260      Forfeiture of Lawyer's Compensation

In order to enforce a contingent fee agreement, the agreement must be in writing and state the method by which the fee is to be determined. MRPC 1.5(c). The amount of contingent fees in claims or actions for personal injury is governed by court rule. MCR 8.121. Fee agreements are void if employment of the attorney was induced by the solicitation of the attorney or anyone acting on his or her behalf. MCL 600.919(2). Solicitation of personal injury claims is a misdemeanor and also results in the voiding of any contract for fees. MCL 750.410(1).

1.5:270      Remedies and Burden of Persuasion in Fee Disputes

The determination of what constitutes a reasonable fee is largely discretionary with the trial court which may determine the value of the services with or without the aid of expert testimony. In re Estate of Dei, 293 Mich 651; 292 NW 513 (1940). The trial courtÕs decision will be sustained on appeal in the absence of an abuse of discretion. King v Taylor Chrysler-Plymouth Inc, 184 Mich App 204; 457 NW2d 42 (1990). A jury may decide the reasonableness of attorney fees based on lay witness testimony provided the witness explains the reasonableness of the fees based on the factors listed in the rules. Zeeland Farm Services Inc v JBL Enterprises Inc, 219 Mich App 190; 555 NW2d 733 (1996).

1.5:300   Attorney-Fee Awards (Fee Shifting)

¥ Primary Michigan References: MI Rule 1.5
¥ Background References: ABA Model Rule 1.5, Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:301, Wolfram ¤ 16.6
¥ MI Commentary: Dubin and Schwartz MRPC 1.5

1.5:310      Paying for Litigation: The American Rule

Recovery of attorneyÕs fees in Michigan is governed by the American Rule. Matras v Amoco Oil Co, 424 Mich 675; 385 NW2d 586 (1986). Attorney fees are not allowed, either as costs or as damages, unless recovery of those fees is authorized expressly by statute, by court rule or by a recognized court-made exception. Burnside v State Farm Fire & Casualty Co, 208 Mich App 422; 528 NW2d 749 (1995); In re Swantek Estate, 172 Mich App 509; 432 NW2d 307 (1988).

1.5:320      Common-Law Fee Shifting

See Discussion under 1.5:310 above.

1.5:330      Statutory Fee Shifting

See 1.5:310 above. For example, the Michigan Civil Rights Act, MCL 37.2801, provides for the recovery of legal fees in actions brought under that Act. See also MCR 2.403 which provides for recovery of sanctions in the form of reasonable attorneyÕs fees for rejection of mediation awards rendered under the court rule.

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 Michigan References: MI 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
¥ MI Commentary: Dubin and Schwartz MRPC 1.5

1.5:410      Excessive Fees

The Rule prohibits entering into an agreement for charging or collecting a Òclearly excessive fee.Ó The Rule then sets forth a Òreasonable lawyerÓ test for determining whether a fee is excessive and lists the factors for determining the reasonableness of a fee. Expert witnesses are not required to establish the reasonableness of attorney fees. Zeeland Farm Services v JBL Enterprises, 219 Mich App 190; 555 NW2d 733 (1996). Although there are no specific factors set forth in the Rule regarding a determination as to whether the collection of disbursements is reasonable, an analogy can be made to the collection of fees, so that just as it is inappropriate to charge the client for more than the time actually spent on the clientÕs case, it is also inappropriate to charge the client for more than the expenses actually paid or incurred by the lawyer. Informal Opinion RI-241.

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

There is no prohibition against retainer fees, advance payment, engagement fees or lump-sum fees. However, the unearned portion of an advanced payment for legal services may be recovered from an attorney who has the obligation to pay it back. Begovich v Murphy, 359 Mich 156; 101 NW2d 278 (1960). On the other hand, it has been held not unethical for a lawyer who has been discharged without cause to keep all of a lump-sum paid at the inception of representation, notwithstanding that the sum is only partially ÒearnedÓ on an hourly rate basis, provided that the complexity of the case and its likelihood of preempting the lawyer from other work were apparent to the client at the outset and other factors, including the clientÕs sophistication and intelligence, warrant such a result. Informal Opinion RI-10.

1.5:430      Nonrefundable Fees

See Discussion under 1.5:420 above.

1.5:500   Communication Regarding Fees

¥ Primary Michigan References: MI 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
¥ MI Commentary: Dubin and Schwartz MRPC 1.5

MRPC 1.5 recommends but does not require that non-contingent fee agreements be in writing; but it mandates that the basis or rate of the fees shall be communicated to the client within a reasonable time after commencing the representation. MRPC 1.5(b). Contingent fee agreements must be in writing to be enforceable. MRPC 1.5(c). See Discussion under 1.5:260 above.

1.5:600   Contingent Fees

¥ Primary Michigan References: MI Rule 1.5(c)
¥ Background References: ABA Model Rule 1.5(c), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:901, ALI-LGL ¤ 35, Wolfram ¤ 9.4
¥ MI Commentary: Dubin and Schwartz MRPC 1.5

1.5:610      Special Requirements Concerning Contingent Fees

See Discussion under 1.5:210 above.

1.5:620      Quantum Meruit in Contingent Fee Cases

[The discussion of this topic has not yet been written.]

1.5:700   Unlawful Fees

¥ Primary Michigan References: MI Rule 1.5(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
¥ MI Commentary: Dubin and Schwartz MRPC 1.5

1.5:710      Contingent Fees in Criminal Cases

The Rule specifically prohibits entering into an arrangement for charging or collecting a contingent fee in a criminal matter.

1.5:720      Contingent Fees in Domestic Relations Matters

The Rule specifically prohibits entering into an arrangement for charging or collecting a contingent fee in a domestic relations matter.

1.5:730      Other Illegal Fees in MI

[The discussion of this topic has not yet been written.]

1.5:800   Fee Splitting (Referral Fees)

¥ Primary Michigan References: MI Rule 1.5(e)
¥ Background References: ABA Model Rule 1.5(e), Other Jurisdictions
¥ Commentary: ABA/BNA ¤ 41:701, ALI-LGL ¤ 59, Wolfram ¤ 9.24
¥ MI Commentary: Dubin and Schwartz MRPC 1.5

The Rule permits division of fees between lawyers who are not in the same firm, but only if the client is advised of and does not object to the participation of all lawyers involved and the total fee is reasonable. An employment agreement between a law firm and its individual members that provides for dividing an already existing fee if the member leaves the firm to practice elsewhere does not violate this Rule. McCroskey, Feldman, Cochrane & Brock PC v Waters, 197 Mich App 282; 494 NW2d 826 (1992).