Ohio Legal Ethics Narrative

I. CLIENT-LAWYER RELATIONSHIP

1.5 RULE 1.5 FEES AND EXPENSES

1.5:100 Comparative Analysis of Ohio Rule

• Primary Ohio References: Ohio Rule 1.5
• Background References: ABA Model Rule 1.5

1.5:101 Model Rule Comparison

Ohio Rule 1.5(a) differs from MR 1.5(a) in the following respects:

"illegal or clearly excessive fee" has been substituted for "unreasonable fee or an unreasonable amount for expenses".

A new second sentence has been added. (Purporting to provide guidance as to when a fee is excessive -- i.e., it is excessive when a prudent lawyer would have the firm conviction that it is "in excess of a reasonable fee.")

Subdivisions (a)(1)-(8) are identical to MR 1.5(a)(1)-(8).

Ohio Rule 1.5(b) differs from MR 1.5(b) in the following respects:

In the first sentence, "nature and" has been added before "scope"; "unless" has been substituted for "except when"; "client whom the lawyer has regularly represented" has been substituted for "regularly represented client"; and "as previously charged." has been substituted for "or rate."

In the second sentence, "changes" has been changed to "change"; "is subject to division (a) of this rule and" has been added after "expenses"; "promptly" replaces "also" after "shall"; and ", preferably in writing" has been added after "client".

Ohio Rule 1.5(c) differs from MR 1.5(c) in the following respects:

In the opening sentence, "of this rule" has been added after "division (d)".

The remainder of MR 1.5(c) has been placed in new subdivision (c)(1). In the first sentence of subdivision (c)(1), "Each" has been substituted for "A"; and "and the lawyer" has been added after "client". In the second sentence, "shall" has been substituted for "must". The last sentence of MR 1.5(c) has been deleted.

A new subdivision (c)(2) (dealing with closing statements to the client when the lawyer is entitled to a contingent fee) has been added.

Ohio Rule 1.5(d) differs from MR 1.5(d) in the following respects:

In subdivision (d)(1), "spousal or child" has been substituted for "alimony or";

A new subdivision (d)(3) (dealing with "earned upon receipt" or "nonrefundable", etc., fees) has been added.

Ohio Rule 1.5(e) (dealing with division of fees between lawyers not in same firm) has been substituted for the text of MR 1.5(e) on the same subject.

Ohio Rule 1.5(f) (dealing with resolution of fee disputes between lawyers) has no counterpart in MR 1.5.

1.5:102 Ohio Code Comparison

The following sections of the Ohio Code of Professional Responsibility are listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.5(a): DR 2-106(A) & (B).

The following section of the Ohio Code of Professional Responsibility is listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.5(b): EC 2-18.

The following are listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.5(c): EC 2-18, R.C. 4705.15.

The following sections of the Ohio Code of Professional Responsibility are listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 1.5(d): DR 2-106(C), EC 2-19.

The following section of the Ohio Code of Professional Responsibility is listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rules 1.5(e) & (f): DR 2-107.

1.5:200 A Lawyer's Claim to Compensation

• Primary Ohio References: Ohio Rule 1.5
• Background References: ABA Model Rule 1.5
• Ohio Commentary: Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 2.112, 2.115-2.117, 2.127, 2.129-2.130
• Commentary: ABA/BNA § 41:101, ALI-LGL §§ 38-42, Wolfram §§ 9.1-9.6

1.5:210 Client-Lawyer Fee Agreements

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 2.127 (1996).

In general: Fee agreements may be structured in many different ways. The Rule requires that, regardless of the form of the fee arrangement, the fees be both legal and not clearly excessive. Ohio Rule 1.5(a). The distinction between reasonable and excessive fees is discussed in section 1.5:410. Illegal fees are addressed in sections 1.5:710-:730. The Rule sets forth the requirements for contingent-fee arrangements in 1.5(c), and for fee-splitting arrangements among lawyers who are not in the same firm in 1.5(e). See sections 1.5:600-:610 and 1.5:800, respectively. In addition to these provisions, fee arrangements are also regulated by statute and court rules. See, e.g., ORC 4705.15 (contingency fees); OH Sup R 68(B), 69(B), 70(C), 71.  For an overview of fee agreements in Ohio, see Kenneth R. Donchatz, Fee Agreements: Who Needs Them?, Ohio Law. Nov./Dec. 2006, at 19.

Under the former OHCPR, if the lawyer and client entered into an express agreement as to fees, and the lawyer was not discharged before completion of the representation, that agreement controlled if otherwise proper.  Baer v. Woodruff, 111 Ohio App.3d 617, 676 N.E.2d 1195 (Franklin 1996). Quantum meruit was unavailable in such circumstances as an alternative measure of recovery. Id. Once an express agreement was entered into, it could not be unilaterally changed by the attorney.  Toledo Bar Ass'n v. Bell, 78 Ohio St.3d 88, 676 N.E.2d 527 (1997).

If the lawyer was discharged, with or without just cause, the rule of Fox & Assocs. Co., L.P.A. v. Purdon, 44 Ohio St.3d 69, 541 N.E.2d 448 (1989) (see section 1.16:600), limited his or her claim to compensation to the reasonable value of the services actually rendered prior to the date of discharge -- quantum meruit recovery.  Reid, Johnson, Downes, Andrachick & Webster v. Lansberry, 68 Ohio St.3d 570, 629 N.E.2d 431 (1994). Accord Harraman v. Howlett, 2004 Ohio 5566, 2004 Ohio App. LEXIS 5025 (Morrow); Roberts v. Hutton, 152 Ohio App.3d 412, 2003 Ohio 1650, 787 N.E.2d 1267 (Franklin). Any attempt in the retainer agreement to set in advance a reasonable value for services performed prior to termination was invalid if it did not reflect the true value of that work. Id. at para. 37 (finding invalid clause in contingent-fee contract that defined market value of discharged lawyer's pre-termination services as 33 1/3% of "last best offer" received before termination).

A more complicated fee-issue case was Charles Gruenspan Co., L.P.A. v. Thompson, 2003 Ohio 3641, 2003 Ohio App. LEXIS 3287 (Cuyahoga). There the court faced a situation in which a lawyer had two contracts with the client, each involving a separate matter, one for an hourly fee and the other on a contingency. In a fee dispute following discharge by the client in the litigation covered by the contingent-fee contract, the lower court lumped the fees together and evaluated them all on a quantum meruit basis. Reversing and remanding, the appellate court found that each contract should have been evaluated separately, providing hourly recovery on one and quantum meruit recovery on the other.

There is no reason to think that these pre-Rule decisions are not still good law.

Interest charges: Ohio Rule 1.5 does not address explicitly whether an attorney may charge a client interest on delinquent accounts. Under the former OHCPR, the Board of Commissioners on Grievances and Discipline opined that a lawyer was allowed to charge interest, but only if the fee agreement between attorney and client included both the interest rates to be charged and the time periods when they would apply. Bd. of Comm'rs on Grievances & Discipline Op. 91-12, 1991 Ohio Griev. Discip. LEXIS 18 (June 14, 1991). Accord Ohio State Bar Ass'n Formal Op. 35 (Nov. 20, 1981); Ethics Opinion, Cincinnati Bar Ass'n Report, Oct. 1985, at 8. To support this position, the Board of Commissioners cited a Cleveland Bar Association ethics opinion suggesting that interest may be charged only if the client is advised and expressly agrees to pay interest. Cleveland Bar Ass'n Op. 145 (Mar. 28, 1980). Interest charges must be in compliance with any applicable statutory requirements pertaining to interest rates and related charges, Op. 91-12, 1991 Ohio Griev. Discip. LEXIS 18, and cannot be "clearly excessive." Ohio State Bar Ass'n Informal Op. 82-1 (Mar. 10 1982). It is unsettled whether an interest charge that is in compliance with statutory requirements could nevertheless be found to be clearly excessive; one would think not.

A somewhat different issue arises where a lawyer successfully sues a client in a fee dispute. Absent a superseding written contractual arrangement, the court may make an award of post-judgment interest. Ryan v. Terra Vista Estates, 108 Ohio App.3d 595, 671 N.E.2d 551 (Cuyahoga 1996) (applying ORC 1343.03).

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

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 2.112, 2.129 (1996).

Under former law, in the absence of a fee agreement the lawyer's right to compensation was determined by application of the doctrine of quantum meruit. Gioffre v. Simakis, 72 Ohio App.3d 424, 594 N.E.2d 1013 (Franklin 1991). See Sonkin & Melena Co., L.P.A. v. Zaransky, 83 Ohio App.3d 169, 614 N.E.2d 807 (Cuyahoga 1992) (providing a good explanation of the doctrine of quantum meruit). As noted, under that doctrine, the lawyer is to be paid the reasonable value of the services rendered, based on the totality of the circumstances, in accordance with the guidelines set forth in former OH DR 2-106.  Reid, Johnson, Downes, Andrachik & Webster v. Lansberry, 68 Ohio St.3d 570, 629 N.E.2d 431 (1994). See generally 1 Restatement (Third) of the Law Governing Lawyers §  39 (2000).

Presumably, this application of quantum meruit will continue under the Rules, although its applicability will be restricted by the Rule 1.5(b) requirement of a fee agreement in all matters except those involving a regularly represented client charged on the same basis as previously charged. See section 1.5:500.

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

1.5:240 Fee Collection Procedures

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 2.130 (1996).

Fee disputes often can be avoided if the lawyer and client have a clear understanding of the fee arrangement at the outset. See section 1.5:500. Even with such precautions, however, fee disputes still may arise.

Under the former OHCPR, the Board of Commissioners on Grievances and Discipline interpreted OH EC 2-15 (reasonable fees are necessary for the viability of the legal community) and OH EC 2-22 (urging amicable resolution of fee disputes) together, not only to acknowledge the necessity of collecting reasonable fees, but also to encourage the lawyer to be amicable in the effort to do so. Bd. of Comm'rs on Grievances & Discipline Op. 91-16, 1991 Ohio Griev. Discip. LEXIS 13 (June 14, 1991). This might include requiring a lawyer to submit fee disputes to an appropriate bar association fee dispute committee, if the client so desires. Bd. of Comm'rs on Grievances & Discipline Op. 92-1, 1992 Ohio Griev. Discip. LEXIS 20 (Feb. 14, 1992). See Rule 1.5 cmt. [10], discussed in section 1.5:250.

While the explicit focus of former OH EC 2-22 was on avoiding fee controversies, the Board stated that similar concerns apply with respect to costs and expenses as well. Bd. of Comm'rs on Grievances & Discipline Op. 87-001, 1987 Ohio Griev. Discip. LEXIS 28 (Oct. 16, 1987). To help avoid unnecessary disputes over these items, the Board encouraged attorneys to inform the client up front that the client is ultimately liable for costs and expenses incurred. Id. See section 1.8:610, discussing advancement of litigation expenses by the attorney and ultimate liability of the client for those expenses, unless repayment by the client of such expenses is made contingent on the outcome of the litigation. Ohio Rule 1.8(e)(1). For whatever reason, Ohio Rule 1.5(a) deletes the MR 1.5(a) language banning unreasonable expenses. See section 1.5:410, at "Expenses and the reasonableness requirement."

The decision to sue a client for fees or costs is a business decision, not a legal one. Op. 87-001, 1987 Ohio Griev. Discip. LEXIS 28. Before the attorney sues a client for delinquent fees, the attorney should be sure that the fee is reasonable and that every effort has been made by the lawyer to resolve the dispute in an amicable manner. Bd. of Comm'rs on Grievances & Discipline Op. 91-16, 1991 Ohio Griev. Discip. LEXIS 13 (June 14, 1991). If this fails, however, a lawyer may bring suit for unpaid fees, use a collection agency to collect delinquent bills, and/or employ a retaining lien. Bd. of Comm'rs on Grievances & Discipline Op. 92-8, 1992 Ohio Griev. Discip. LEXIS 13 (Apr. 10, 1992) (common-law right to retaining lien codified in former OH DR 5-103(A), now Rule 1.8(i)(1); see section 1.8:1130); Op. 91-16, 1991 Ohio Griev. Discip. LEXIS 13 (approving use of a collection agency, but warning that former OH DR 4-101(C)(4) allowed an attorney to reveal only those secrets and confidences of the client necessary to collect delinquent fees). The applicable rule is now stated in Ohio Rule 1.6(b)(5). See section 1.6:340. See generally, as to limits on fee-collection methods, 1 Restatement (Third) of the Law Governing Laywers §  41 (2000).

Finally, there are instances in the cases in which it would appear that the decision to sue a client for fees is a bad business decision.  E.g., Donald Harris Law Firm v. Dwight-Killian, 166 Ohio App.3d 796, 2006 Ohio 2347, 853 N.E.2d 364 (Erie).  In Donald Harris, the agreed upon fee was $450, of which the client paid $270.  Although it was made clear to the client that the firm would not go forward with the bankruptcy petition for which the firm had been engaged unless the fee was paid in full, the client thereafter decided she did not want to proceed with the bankruptcy.  The firm nevertheless sued the client for the balance ($180), plus interest, because it had prepared a "preliminary" petition.  The client counterclaimed for a refund of the $270, asserting that the firm told her that if she decided not to go forward, the firm would refund any payments already made.  The lower court ruled against the firm on its claim and for the client on her refund counterclaim.  The court of appeals affirmed.  One wonders how many dollars the firm spent chasing $180 and ending up having to pay $270.

Bringing a suit for fees may also trigger a claim for malpractice in response. In fact such a counterclaim may be compulsory. Compare Climaco, Seminatore, Delligatti & Hollenbaugh v. Carter, 100 Ohio App.3d 313, 653 N.E.2d 1245 (Franklin 1995) (treating the two claims as so intertwined as to trigger the compulsory counterclaim rule in the ordinary case; here the original claim was for malpractice and the fee counterclaim would have been compulsory), with Ross v. Burns, No. 1996CA00190, 1997 Ohio App. LEXIS 1023 (Stark) (finding that fee claim and malpractice claim on the facts of this case were not so linked as to make one a compulsory counterclaim to the other).

1.5:250 Fee Arbitration

Ohio Rule 1.5 cmt. [9] provides that if a mandatory procedure has been prescribed for settling fee disputes between a client and a lawyer, such as arbitration or mediation by a local or the state bar association, the lawyer must comply. The comment urges that the lawyer conscientiously consider submitting to such procedures, even where voluntary.

When arbitration is agreed upon by the lawyer and client as the means to resolve a fee dispute, the lawyer ignores the arbitration award at his peril.  After failing to appear at the arbitration hearing, at which the client was awarded $10,000+, respondent's failure to comply with the award resulted in a violation of DR 1-102(A)(6).  Cuyahoga County Bar Ass'n v. Kehn, 112 Ohio St.3d 547, 2007 Ohio 809, 862 N.E.2d 92.

While fee arbitration is a favored form of dispute resolution, it was opined under the former OHCPR that it would be improper to include in the engagement letter a requirement that the client submit all fee disputes to arbitration. Bd. of Comm'rs on Grievances & Discipline Op. 96-9, 1996 WL 734408 (Dec. 6, 1996). It is doubtful that this Board opinion survives under the new Rules. See ABA, Annotated Model Rules of Professional Conduct 73 (5th ed. 2003), noting that the Comment [9] procedure "may be one upon which the parties agree before representation," citing ABA Formal Op. 02-425 (Feb. 20, 2002) (retainer agreement requiring arbitration of fee disputes permissible if client is fully apprised of pros and cons and gives informed consent). As the ABA opinion indicates, in any resolution procedure envisioned by Comment [9], mandatory or otherwise for the lawyer, the client would have to consent thereto, even though the comment does not expressly so state. See 1 Restatement (Third) of the Law Governing Lawyers §  42(1) & cmt. b(iv) (2000).

See section 1.5:800 at "Disputes between lawyers over fee splitting" for discussion of arbitration between lawyers of different firms in the fee-splitting context.

1.5:260 Forfeiture of Lawyer's Compensation

In contrast to the lawyer's right to quantum meruit compensation even if discharged by the client for cause (see section 1.16:600), a lawyer's withdrawal from representation without just cause results in forfeiture of the fee; the lawyer may not recover for the services rendered either under the contract or on a quantum meruit theory.  W. Wagner & Co., L.P.A. v. Block, 107 Ohio App.3d 603, 669 N.E.2d 272 (Erie 1995); Sandler v. Gossick, 87 Ohio App.3d 372, 622 N.E.2d 389 (Cuyahoga 1993).

It should be noted that one of the sanctions for conflict-of-interest violations is fee forfeiture, and at least one court in Ohio (a federal district court finding violations of the OHCPR), in addition to ordering disqualification, precluded the lawyer from recovering any fee.  Baker v. Bridgestone/Firestone, Inc., 893 F. Supp. 1349 (N.D. Ohio 1995). See section 1.7:260.

1.5:270 Remedies and Burden of Persuasion in Fee Disputes

The material in this section is excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 2.115-2.117 (1996).

The rate to be charged for legal services depends a great deal on the standards of the legal community. A fee is considered "clearly excessive" and therefore improper under Ohio Rule 1.5(a) when, "after 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." While this requirement suggests a high standard of proof in disciplinary cases before one is sanctioned for charging an excessive fee, the courts, under the identical language of former OH DR 2-106(B), usually have not relied explicitly on this standard. For the most part, it seems as though the court determines what a reasonable fee would be, and then if the fee charged is substantially in excess of that, treats the fee as clearly excessive. See, e.g., Office of Disciplinary Counsel v. Curren, 39 Ohio St.3d 117, 529 N.E.2d 930 (1988) ($67,000 constituted excessive fee where Court found $30,000 to be reasonable); Office of Disciplinary Counsel v. Stinson, 25 Ohio St.3d 130, 495 N.E.2d 434 (1986) ($9,400 constituted excessive fee where $2,000 found to be reasonable); Lake County Bar Ass'n v. Ostrander, 41 Ohio St.2d 93, 322 N.E.2d 653 (1975) ($19,600 constituted excessive fee where $3,800 found to be reasonable).

To the extent questions of reasonableness arise in a contract dispute over payment of the fee, the burden of proof is on the attorney to show the fee's reasonableness.  Heller v. McLaughlin, No. 70072, 1996 Ohio App. LEXIS 4179 (Cuyahoga Sept. 26, 1996). Accord Climaco, Seminatore, Delligatti & Hollenbaugh v. Carter, 100 Ohio App.3d 313, 653 N.E.2d 1245 (Franklin 1995); Wilson v. Lynch & Lynch Co., L.P.A., 99 Ohio App.3d 760, 651 N.E.2d 1328 (Geauga 1994). See Monastra v. D'Amore, 111 Ohio App.3d 296, 676 N.E.2d 132 (Cuyahoga 1996) (on need for expert testimony to refute reasonableness of attorney fees claim, unless issues are within understanding of layperson). See generally, as to a lawyer's burden of proof in fee disputes, 1 Restatement (Third) of the Law Governing Lawyers §  42(2) (2000).

If the contract between an attorney and a client bases the fee on an hourly rate and the exact number of hours to be worked is not specified, the attorney has the burden to show, in an action for the alleged fees due, that the hours charged were fairly and properly charged. Jacobs v. Holston, 70 Ohio App.2d 55, 434 N.E.2d 738 (Lucas 1980). To help meet this burden, an attorney should keep time records of the work done for each client. In re Betts, 62 Ohio Misc.2d 30, 587 N.E.2d 997 (C.P. Ross 1991). In a case where the attorney failed to provide an itemized list specifying the time spent on each charge, the court, in its discretion in fixing a fee award for civil contempt, reduced the attorney's estimated fee by one half. Dayton Women's Health Ctr., Inc. v. Enix, 86 Ohio App.3d 777, 621 N.E.2d 1262 (Montgomery 1993). While an attorney has an implied duty to keep track of the time spent on a case to determine attorney fees, according to one Ohio appellate court time records are not mandatory, Cannell v. Bulicek, 8 Ohio App.3d 331, 457 N.E.2d 891 (Cuyahoga 1983). Nor are they expressly required by Rule 1.5.

In establishing the reasonable value of services in the context of a statutory fee award, evidence of the novelty of the issue may need to be presented if novelty is asserted as a reason for increasing the fee. Moraine v. Baker, 34 Ohio Misc. 77, 297 N.E.2d 122 (C.P. Montgomery 1971) (where no evidence is brought to court's attention establishing novelty or difficulty of legal issues involved, fees cannot be inflated based on such grounds).

A disciplinary case in which the failure to produce billing records undercut the respondent's argument with respect to work allegedly done for the client on a domestic relations matter is Disciplinary Counsel v. Carlson, 111 Ohio St.3d 281, 2006 Ohio 5707, 855 N.E.2d 1218 (respondent testified he had lost client's file; fee charged found excessive). The failure adequately to document time spent (or to be able to reconstruct it) was also fatal to respondent's argument that his fee was not excessive in Columbus Bar Ass'n v. Farmer, 111 Ohio St.3d 137, 2006 Ohio 5342, 855 N.E.2d 462.  Underscoring that the burden of persuasion as to such matters is on the lawyer, the Court stressed that the respondent "still has not provided even the roughest estimate of how much time he devoted to each task." Id. at para. 34. As a result,

[r]espondent has failed to provide any reliable explanation for charging the Martins nearly $9,000 in legal fees.  Absent this accounting, we can only conclude that his fees were clearly excessive.

Id. at para. 35.

1.5:300 Attorney-Fee Awards (Fee Shifting)

• Primary Ohio References: ORC 119.092, 309.13, 2323.51, 2335.39, 4112.05(G)
• Background References: ABA Model Rule 1.5
• Commentary: ABA/BNA § 41:311, Wolfram § 16.6

1.5:310 Paying for Litigation: The American Rule

Under the American Rule, which has been adopted in Ohio, parties to litigation usually have to pay their own attorney fees and cannot recover them as costs from the other side if they prevail. E.g., Krasny-Kaplan Corp. v. Flo-Tork, Inc., 66 Ohio St.3d 75, 609 N.E.2d 152 (1993); Sorin v. Bd. of Educ., 46 Ohio St.2d 177, 347 N.E.2d 527 (1976). Nevertheless, this general principle is subject to both common-law and statutory exceptions.

1.5:320 Common-Law Fee Shifting

While a party is usually responsible for its own attorney fees under the American Rule, the common law recognizes instances in which this responsibility can be shifted to the losing party in litigation.

Perhaps most noteworthy is the so-called "bad faith" exception, which permits an award of attorney fees to the prevailing party when a court has determined that the opposing party has acted maliciously or in bad faith. See, e.g., State ex rel. Rose v. James, 57 Ohio St.3d 14, 565 N.E.2d 547 (1991); State ex rel. Durkin v. Ungaro, 39 Ohio St.3d 191, 529 N.E.2d 1268 (1988). The Sixth Circuit Court of Appeals has held, as a matter of federal law, that the bad-faith exception does not permit an award of attorney fees based upon a party's exercise of bad faith in the conduct giving rise to the underlying cause of action.  Shimman v. Int'l Union of Operating Eng'rs, 744 F.2d 1226 (6th Cir. 1984) (en banc). Rather, the exception applies only where the losing party has demonstrated bad faith during the course of the litigation, or in the filing of the suit itself. Id. It appears that this rule is observed, at least implicitly, by Ohio state courts as well. See, e.g., Sorin v. Bd. of Educ., 46 Ohio St.2d 177, 347 N.E.2d 527 (1976); Vinci v. Ceraolo, 79 Ohio App.3d 640, 607 N.E.2d 1079 (Cuyahoga 1992) (citing Shimman with approval). For a case in which the bad-faith exception was found inapplicable, see Murphey, Young & Smith Co., L.P.A. v. Billman, Nos. 84AP-49, 84 AP-198, 1984 Ohio App. LEXIS 11643 (Franklin Nov. 20, 1984) (presentation of "colorable" defenses sufficient to preclude finding of bad faith). See also Rubin v. Schottenstein, Zox & Dunn, 119 F. Supp.2d 787 (S.D. Ohio 2000) (nothing in record from which ill-will, malice, or bad faith could reasonably be inferred).

A second common-law exception to the American Rule permits a successful plaintiff to seek recovery of attorney fees whenever punitive damages are allowable under Ohio tort law. See, e.g., Galmish v. Cicchini, 90 Ohio St.3d 22, 35, 734 N.E.2d 782, 795 (2000); Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, 644 N.E.2d 397 (1994); Summa Health Sys. v. Viningre, 140 Ohio App.3d 780, 749 N.E.2d 344 (Summit 2000). However, a plaintiff's right to recover additional attorney fees for services rendered on appeal in such cases has not been recognized in Ohio. See Shimman v. Int'l Union of Operating Eng'rs, 744 F.2d 1226 (6th Cir. 1984) (en banc) (applying state law regarding attorney fees to state-law assault and battery claim pendent to federal claims). And see ORC 2307.80(C)(1) & (D)(1), enacted as part of Ohio's Tort Reform Act, effective April 7, 2005. Those provisions insulate manufacturers from punitive damages if they have complied with government standards concerning the matter at issue.

The final class of common-law exceptions to the American Rule involves the creation of a common fund through a class-action recovery. Ohio law allows an award of attorney fees to a plaintiff who, at his own expense, files a suit that is successful in creating, enlarging, or protecting a monetary or property fund shared by members of a class. See, e.g., Smith v. Kroeger, 138 Ohio St. 508, 37 N.E.2d 45 (1941); Wyser-Pratte v. Van Dorn Co., 49 F.3d 213 (6th Cir. 1995).

1.5:330 Statutory Fee Shifting

The American Rule is also sometimes altered by statute. A number of statutory provisions in Ohio allow prevailing parties to seek to recover some or all of their attorney fees from their opponents. Typical provisions allow an award of attorney fees to the prevailing party when:

• The state's position in initiating a lawsuit is not substantially justified, and the prevailing party has not engaged in any dilatory conduct that unnecessarily delayed the final resolution of the case. ORC 2335.39. The same holds true for adjudicative proceedings initiated by administrative agencies. ORC 119.092.

• The opposing party has engaged in frivolous conduct, either through its actions during the course of litigation or by the commencement of the suit itself, and such conduct has adversely affected the prevailing party. ORC 2323.51.

• A successful suit is filed by a taxpayer against a county government or agent, to prevent or enjoin the misapplication or illegal withdrawal of funds from the county treasury. ORC 309.13.

• A civil claim is brought under Ohio's RICO statute, ORC 2923.31 et. seq. A prevailing plaintiff "shall" be awarded reasonable attorney fees, ORC 2923.34(G); a prevailing defendant "may" be granted attorney fees. ORC 2923.34(H). See Bourke v. Carnahan, 163 Ohio App.3d 818, 2005 Ohio 5422, 840 N.E.2d 1101 (Franklin).

• The Ohio Civil Rights Commission has determined that an individual or entity has engaged in unlawful housing or lending discrimination. ORC 4112.05(G).

• The consumer files or maintains in bad faith a groundless action under the Ohio Consumer Sales Practices Act, or the supplier knowingly violates the Act. ORC 1345.09(F).

• The relator newspaper confers a public benefit in successfully seeking records under the Ohio Public Records Act, ORC 149.43. See, e.g., State ex rel. Beacon Journal Publ'g Co. v. Maurer, 91 Ohio St.3d 54, 741 N.E.2d 511 (2001).

Closely related to statutes such as ORC 2323.51 are the various court rules that permit the assessment of attorney fees against an offending party or lawyer for frivolous or otherwise improper conduct. See OH Civ R 11, OH App R 23, and SCt R XIV(5). These provisions, as well as ORC 2323.51, are discussed in detail in section 3.1:300.

In addition to the common-law (see section 1.5:320) and statutory exceptions, fee shifting may be provided for as a matter of contract. While the general rule apparently remains that a contractual provision that permits a party to recover its attorney fees as a cost of enforcing the contract is unenforceable as against public policy, Miller v. Kyle, 85 Ohio St. 186, 97 N.E. 372 (1911), the Supreme Court has recognized exceptions to the rule. See Nottingham Homeowner's Ass'n v. Darby, 33 Ohio St.3d 32, 514 N.E.2d 702 (1987) (condo-ownership declaration); Worth v. Aetna Cas. & Sur. Co., 32 Ohio St.3d 238, 513 N.E.2d 253 (1987) (indemnification agreement). Although the Court in Nottingham found that a "rule of law which prevents parties from agreeing to pay the other's attorney fees . . . is outmoded, unjustified and paternalistic," 33 Ohio St.3d at 36, 37, 514 N.E.2d at 705, 707, the Court distinguished, rather than overruled, Miller. The touchstone of enforceability appears to be one of an agreement to pay fees that "can fairly be said to be the product of a 'free and understanding negotiation, . . .' between 'parties of equal bargaining power and similar sophistication.'" Vermeer of S. Ohio, Inc. v. Argo Constr. Co., 144 Ohio App.3d 271, 278, 760 N.E.2d 1, 6 (Hamilton 2001) (quoting from Worth, 32 Ohio St.3d at 243, 513 N.E.2d at 258, and from Newman v. Salamander Indus. Prods., Inc., Nos. C-970811, C-970843, C-970879, 1999 Ohio App. LEXIS 1667, at *18-19 (Hamilton Apr. 16, 1999)). Both Vermeer and Newman provide helpful overviews of the current status of the contractual fee-shifting issue in Ohio. See 144 Ohio App.3d at 276-78, 760 N.E.2d at 5-6; 1999 Ohio App. LEXIS 1667, at *18-19.

1.5:340 Financing Litigation [see 1.8:600]

1.5:400 Reasonableness of a Fee Agreement

• Primary Ohio References: Ohio Rule 1.5(a), (d)(3)
• Background References: ABA Model Rule 1.5(a)
• Ohio Commentary: Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 2.112-2.113, 2.116-2.127
• Commentary: ABA/BNA § 41:301, ALI-LGL § 34, Wolfram § 9.3.1

1.5:410 Excessive Fees

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 2.112-2.113, 2.116-2.125, 2.127.1 (1996).

Legal fees - In general: The basic principle underlying the fees-for-legal-services provisions is that a "lawyer shall not make an arrangement for, charge, or collect an illegal or clearly excessive fee." Ohio Rule 1.5(a). Excessive fees limit the availability of legal services to the public by making them less affordable, take advantage of the lawyer-client relationship, and cast the profession in a negative light. Reasonable fees, in contrast, enhance the availability of legal services by making them more affordable, and promote the provision of legal services by attorneys. Adequate compensation works to maintain the integrity and independence of the legal profession and to reduce the possibility that an under-compensated lawyer might be tempted to cut corners in representing a client or to take on more matters than the lawyer can handle effectively. If not for the possibility of collecting reasonable legal fees, there would likely be fewer and less-qualified lawyers to protect lay persons' legal rights.

The fee assessed ultimately must comply with the standards set forth in Ohio Rule 1.5(a). Judicial interpretations of the former rule, identical to the OHRPC standard, arose not only in disciplinary cases, but also in cases involving lawyer-client fee disputes and cases involving court-awarded attorney fees in which the factors set forth in former OH DR 2-106(B) often were examined for guidance. See, e.g., Bittner v. Tri-County Toyota, Inc., 58 Ohio St.3d 143, 569 N.E.2d 464 (1991) (in making attorney-fee award under the Consumer Sales Practices Act, the court should be guided by OH DR 2-106(B) factors);  In re J.F., 162 Ohio App.3d 716, 2005 Ohio 4258, 834 N.E.2d 876 (reversing and remanding fee award because probate court failed to review appellant law firm's agreement and services under the standards set forth in Sup R 71 and DR 2-106); In re Estate of Wirebaugh, 84 Ohio App.3d 1, 616 N.E.2d 245 (Wood 1992) (in making attorney-fee award, probate court should be guided by OH DR 2-106(B) factors); Meacham v. Miller, 79 Ohio App.3d 35, 606 N.E.2d 996 (Jackson 1992) (trial court should consider OH DR 2-106(B) factors in award of attorney fees to tenant against landlord under ORC CH 5321); cf. Dayton Women's Health Ctr., Inc. v. Enix, 86 Ohio App.3d 777, 621 N.E.2d 1262 (Montgomery 1993) (appellate court presumed, absent evidence to the contrary, that fee award set by trial court was based on consideration of factors found in OH DR 2-106).

In In re Thamann, 152 Ohio App.3d 574, 2003 Ohio 2069, 789 N.E.2d 654 (Hamilton), the court held that a probate court must hold a hearing before determining the reasonableness of a fee award. Thus, it was error to "automatically" set a fee award in a contingent-fee wrongful death matter, "without reviewing the reasonableness of the attorney fees as required by . . . [OH] DR 2-106." Id. at ¶ 12. Accord In re Thompson, 150 Ohio App.3d 98, 2002 Ohio 6065, 779 N.E.2d 816 (Hamilton).

Particular note should be made of the 2007 decision in Disciplinary Counsel v. Johnson, 113 Ohio St.3d 344, 2007 Ohio 2074, 865 N.E.2d 873.  This important case, decided under former OH DR 2-106(A) (identical to the first sentence of Rule 1.5(a)), is discussed at a number of points in this section infra.

Activities proscribed - In general: To ensure proper behavior throughout the compensation process, Ohio Rule 1.5(a) specifically prohibits three types of conduct -- making an agreement for, charging, or collecting an illegal or clearly excessive fee. The case law under the identical language of former OH DR 2-106(A), however, typically did not distinguish between these types of conduct. E.g., Disciplinary Counsel v. Mathewson, 113 Ohio St.3d 365, 2007 Ohio 2076, 865 N.E.2d 891 (failure to return unearned retainer; "charging or collecting" referenced, id. at para. 7); Disciplinary Counsel v. Carlson, 111 Ohio St.3d 281, 2006 Ohio 5707, 855 N.E.2d 1218 ("agreeing to charge or collecting an illegal or clearly excessive fee"). Nevertheless, examples can be found:

In re Betts, 62 Ohio Misc.2d 30, 587 N.E.2d 997 (C.P. Ross 1991), provides an example of entering into an excessive contingency-fee arrangement. (The contract provided for 40% of amount recovered, unilaterally reduced by attorneys to 33%; court awarded 20% as reasonable fees in case involving personal injury to minors in which risk of nonrecovery was minimal.)

Good illustrations of an attorney charging or attempting to charge an excessive fee are Stark County Bar Ass'n v. Hare, 99 Ohio St.3d 310, 2003 Ohio 3651, 791 N.E.2d 966, and Mahoning County Bar Ass'n v. Pagac, 39 Ohio St.3d 1, 528 N.E.2d 948 (1988). In Hare, respondent charged his clients $50,000 in legal fees (including an improper nonrefundable retainer of $1,500, see section 1.5:430) for the adoption of twins, even though the evidence indicated that local adoption lawyers charged hourly rates of $125 to $150 for customary total fees of $2,000 to $3,000. On top of this, in his submissions to the probate court, respondent "had dishonestly and selfishly attempted to conceal the exorbitant fee he charged for these adoptions." Id. at ¶ 31. For this and numerous other OHCPR violations, respondent was disbarred. In Pagac, the attorney, who charged a flat fee of $3000 for each felony defense, attempted to charge the client an additional $15,000 for five additional felony charges that were "thrown in" to a plea-bargain offer that had to be accepted almost immediately. Because the defense of the extra felony counts required no extra services, the fee charged by the attorney was excessive, and the attorney was suspended for six months. See Columbus Bar Ass'n v. Mills, 109 Ohio St.3d 245, 2006 Ohio 2290, 846 N.E.2d 1253, where, in addition to one instance of double-billing and other aggressive billing practices, respondent filed a case in the wrong court and then "charged [the client] for her time in refiling the case and gave him no credit for her initial mistake." Id. at ¶ 5. Accord Cleveland Bar Ass'n v. Dixon, 95 Ohio St.3d 490, 2002 Ohio 2490, 769 N.E.2d 816, in which respondent attempted to charge an excessive fee (fee payment later waived as part of a settlement agreement) and was found to have violated OH DR 2-106(A). Id. at ¶ 10.

A typical case in which the attorney is found to have collected an excessive fee is one in which the attorney, hired to represent an estate, withdraws more than a reasonable amount of funds from the estate account without the court's, or the client's, consent. See, e.g., Erie-Huron Counties Joint Certified Greivance Committee v. Meyerhoefer, 99 Ohio St.3d, 2003 Ohio 2467, 788 N.E.2d 1073. This conduct often raised OH DR 9-102 concerns as well. Another case involving collection of an excessive fee is Akron Bar Ass'n v. Naumoff, 62 Ohio St.3d 72, 578 N.E.2d 452 (1991), discussed in section 1.5:500 infra.

Reasonable fees - In general: The determination of what constitutes a reasonable fee requires a case-by-case analysis. In re Guardianship of Rider, 68 Ohio App.3d 709, 589 N.E.2d 465 (Huron 1990) (despite exorbitant amount of fees relative to size of estate, fees still may be reasonable because each case is unique). The Rule provides a nonexclusive list of eight factors to be considered in determining whether a fee is reasonable. Ohio Rule 1.5(a)(1)-(8). Once again, reference to cases decided under the identical language of former OH DR 2-106(B)(1)-(8) is instructive.

Needless to say, padding a client's statement by increasing the time billed over and above that actually worked is the epitome of an excessive fee and violated the reasonableness requirement of OH DR 2-106(A).  Toledo Bar Ass'n v. Batt, 78 Ohio St.3d 189, 677 N.E.2d 349 (1997) (obtaining fees based on such conduct equivalent to misappropriation of client funds; disbarment ordered). Similarly, padding bills with "unnecessary and repetitive tasks," for 2½ years in which respondent represented elderly, mentally impaired sisters, violated 2-106(A). Disciplinary Counsel v. Johnson, 113 Ohio St.3d 344, 2007 Ohio 2074, 865 N.E.2d 873, at para. 3. Removing $9,000 from a client trust account, when respondent could document having earned only $350 of it also violated DR 2-106(A).  Disciplinary Counsel v. Robertson, 113 Ohio St.3d 360, 2007 Ohio 2075, 865 N.E.2d 886. Likewise, double billing, "which is the practice of 'billing of fees and costs to more than one client for the same work or the same hours,'" violated the disciplinary rule.  Disciplinary Counsel v. Holland, 106 Ohio St.3d 372, 2005 Ohio 5322, 835 N.E.2d 361, at para. 21 (court-appointed counsel failed to apportion among his clients his per-hour in-court services; "[t]hat is, if respondent represented three clients in court in a single three-hour session, he would claim fees for three in-court hours in each case," id. at para. 7). Cf. Office of Disciplinary Counsel v. Holzer, 78 Ohio St.3d 309, 677 N.E.2d 1186 (1997) (charging work done for one client to another client violated former OH DR 1-102(A)(4); see section 8.4:400).

With Holland, compare Disciplinary Counsel v. Agopian, 112 Ohio St.3d 103, 2006 Ohio 6510, 858 N.E.2d 368, where, although a public reprimand was issued for "careless and sloppy timekeeping practice," id. at para. 6, by a lawyer regularly serving as court-appointed counsel for indigent criminal defendants, the effect of the sloppiness was the opposite of that in Holland:  "One panel member noted that Agopian 'wasn't taking one hour … and turning it into three.  It looks to me like he was taking three hours and turning it into one.'" Id. (ellipses in original). The Court in fact overruled the objection of Disciplinary Counsel to the Board's recommendation that the 2-106(A) charge be dismissed.  While that is not surprising, given the facts of the case, the panel found that respondent had violated DR 1-102(A)(4), the disciplinary rule prohibiting lawyer conduct "involving dishonesty, fraud, deceit, or misrepresentation," as well as 1-102(A)(6), and the Board adopted this finding. Given the fact that "there is no evidence of deceit," id. at para. 6, the Agopian case seems an unlikely candidate for invocation of DR 1-102(A)(4). Granted, the respondent "admitted that he had approximated his actual time to perform these services but had nevertheless certified to the court the accuracy of the information," id. at para. 5; however, it was clear that

Agopian did all the work on each individual case but failed to accurately record the exact days of his appearances in court or the specific number of hours that he spent on each case.

Id. at para. 6. In the panel’s words, he "routinely performs services far in excess of the time for which he submits payment requests." Id. The Supreme Court reduced the sanction from a stayed one-year suspension to a public reprimand.

Reasonable fees - Time, labor, and skill required: The first set of factors the Rule identifies as relevant in assessing the reasonableness of the fee is "the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly." Ohio Rule 1.5(a)(1). These factors are often of primary concern. In re Betts, 62 Ohio Misc.2d 30, 587 N.E.2d 997 (C.P. Ross 1991) (highlighting primacy of these factors in context of awarding attorney fees under ORC 2111.18 and applicable court rules). (Of course, the service performed must be "legal service"; if the lawyer is spending his time in social discussions with the client, such hand-holding cannot be billed as lawyer's time at a lawyer's rate. Cincinnati Bar Ass'n v. Alsfelder, 103 Ohio St.3d 375, 2004 Ohio 5216, 816 N.E.2d 218 (violation of former OH DR 2-106(A)). Accord Disciplinary Counsel v. Hunter, 106 Ohio St.3d 418, 2005 Ohio 5411, 835 N.E.2d 707, at ¶ 25 ("respondent charged Lester legal fees for a variety of nonlegal services [such as picking up mail, paying bills, and arranging for lawn care]. This practice of overcharging violates DR 2-106(A)," citing Alsfelder).)

While important as a starting point in computing a reasonable fee, something more than a mere multiplication of the base rate for the lawyer's services by the hours that the lawyer worked on the representation is required. See, e.g., Bertrand v. Lax, 2005 Ohio 3261, 2005 Ohio App. LEXIS 3011 (Portage) (failure to establish 2-106 reasonable or customary fees: "'[a] simple multiplication of hours by a minimum hourly rate is not by itself a proper method to determine such charges,'" id. at para. 28 (citation omitted));  In re Estate of Wirebaugh, 84 Ohio App.3d 1, 616 N.E.2d 245 (Wood 1992) ("time and labor" are but one of many factors to be considered in determining reasonableness of fee); Perry v. LTV Steel Co., 84 Ohio App.3d 670, 618 N.E.2d 179 (Cuyahoga 1992) (language of applicable fee-award statute indicated award should be based on "time and effort" expended, but court looked beyond multiplication of lawyer's base rate by hours worked and reviewed factors similar to OH DR 2-106(B)(2)-(8)); Swanson v. Swanson, 48 Ohio App.2d 85, 355 N.E.2d 894 (Cuyahoga 1976) (because value of legal services may be greater or less than product of base rate and hours spent, multiplying hours spent by rate is deficient method for determining reasonable value for services). The theory, as expressed by the court in Betts supra, is that time alone should not be the determining factor because the more experienced lawyer can do the same work as the less-skilled lawyer can do in a shorter period of time. This explanation, however, seems to overlook the fact that the more experienced lawyer would be likely to charge more per hour for his services. While the product of the hours worked multiplied by the lawyer's hourly rate in and of itself is not sufficient to determine a reasonable fee, if that computation provides a number substantially less than the amount charged, it may indicate that the fee charged is excessive.  Lake County Bar Ass'n v. Lillback, 41 Ohio St.3d 13, 535 N.E.2d 300 (1989) (charging $33,000 in fees for services that, if billed at an hourly rate would amount to approximately $3000 per hour, violated OH DR 2-106).

The inadequacy of rate x time in and of themselves as determining factors of the reasonableness of a fee is strikingly illustrated by Disciplinary Counsel v. Johnson, 113 Ohio St.3d 344, 2007 Ohio 2074, 865 N.E.2d 873.  In Johnson, respondent represented two elderly, mentally impaired, sisters who had been swindled out of $800,000 by their previous attorney.  Respondent diligently (as it turned out, too diligently) sought to recover his clients' lost assets.  He did in fact recover $197,000 of the misappropriated funds, but the problem was that he billed $159,000 in doing so.  There apparently was nothing wrong with his billing records, which showed 1200 hours billed in 1/10-hour increments.  Nor was there any question raised about his hourly rate, which was $150.  But Johnson, irrespective of whether his time and efforts were producing any results for his clients, took a course of action that threatened to milk his clients dry, and he nearly succeeded in doing so. As respondent admitted, "he did not even consider a cost-benefit analysis."  Id. at para. 71.  This state of affairs was graphically summed up by the Court in the following language:

Respondent recovered the most significant assets, over $165,000, in the first six months of representation . . . and billed around $46,000 for his services.  During the remaining 25 months, however, respondent recovered only around $21,000 and yet billed over $100,000 in fees.  In all, he billed $159,452.95 to collect $197,683.45.

Id. at para. 26.  The Court quoted with approval the expert testimony on behalf of the relator that "you can work very, very hard and lots and lots of hours, but if you're not accomplishing anything, you can't reasonably expect to be paid for it, particularly when you're working as a fiduciary.  You're the guardian.  You're not dealing with somebody at arm's length."  Id. at para. 56. (Relator's expert also "found questionable many of respondent's hundreds of billing entries, and noted his serious concern over entries for preparing or reviewing a memo; in which the 'memo' was written on a post-it note," id. at para. 68.)  Overall, the Court found the expert's testimony persuasive:

His remarks underscore a fundamental tenet:  attorney fees are not justified merely because the lawyer has charged his professional time and expenses at reasonable rates; a legitimate purpose must also explain why the lawyer spent the time and incurred those costs.

Id. at para. 71.  The biggest "black hole" in the last 25 months of representation revolved around the malpractice action Johnson filed against his clients' former attorney, Bond.  The detail with respect to this effort is examined in the subsection "Reasonable fees - The amount involved and the results obtained" infra.

As Johnson so vividly illustrates, in a fee-award or contract dispute, even if a lawyer keeps time records, a court still may disagree with the attorney about whether the time spent was required to render the services in question. See Nielson v. Bob Schmidt Homes, Inc., 69 Ohio App.3d 395, 590 N.E.2d 1291 (Cuyahoga 1990). In Bittner v. Tri-County Toyota, Inc., 62 Ohio Misc.2d 345, 598 N.E.2d 925 (Fairfield Mun. Ct. 1992), for example, the trial court had been asked on remand to state the basis for its determination of a statutory award of attorney fees. The court cited four reasons for finding the hours claimed by the attorney to be excessive: (1) conflicting time records, (2) duplication of effort by the two firms involved, (3) poor discovery practice (taking a deposition to prove a claim that was provable by other, more efficient means, such as requests for admissions), and (4) the fact that the original attorney had to bring in an expert attorney, which was evidence that the inexperience of the original attorney most likely caused an inordinate amount of time to be expended at the beginning of the trial. Davis v. Mut. Life Ins. Co., No. C-1-87-727, 1990 WL 375612 (S.D. Ohio Aug. 10, 1990), aff'd in part on other grounds, rev'd in part on other grounds, 6 F.3d 367 (6th Cir. 1993), presented a similar case where an attorney fee request was limited because: (1) some of the time charged was spent on representation of another related case, (2) "legal research" and "trial preparation" notations are too vague to allow the court to determine the time spent working on any given issue, (3) two or more attorneys on the same phone call or at the same conference was a duplication of effort, (4) a lack of clear documentation indicated "padding" of the time records, and (5) the primary attorney being accompanied by another at all times indicated a duplication of effort. Nevertheless, it must be recognized that while hours spent in unnecessary or duplicative efforts should not be included in justifying the reasonableness of the fee charged, substantial discretion remains in assessing whether the time spent was in fact unnecessary or duplicative.  Freeman v. Crown City Mining, Inc., 90 Ohio App.3d 546, 630 N.E.2d 19 (Gallia 1993) (in fee-award case, trial court did not abuse its discretion in finding hours spent by lawyers collaborating on a matter non-duplicative).

Charging a client fees without rendering services obviously is improper. E.g., Cincinnati Bar Ass'n v. Washington, 109 Ohio St.3d 308, 2006 Ohio 2423, 847 N.E.2d 435 (billing multiple insurance-company clients of his firm over $91,000 for work he did not perform). If such conduct is undertaken in combination with other violations, the attorney may be subject to serious penalties, including permanent disbarment. See, under the former OHCPR, Disciplinary Counsel v. Griffith, 104 Ohio St.3d 50, 2004 Ohio 5991, 818 N.E.2d 226 (indefinite suspension; multiple violations, including acceptance of retainer to represent client on appeal of criminal conviction but then filing nothing on client's behalf); Cleveland Bar Ass'n v. Oliver, 67 Ohio St.3d 69, 616 N.E.2d 188 (1993) (permanent disbarment warranted where attorney violated OH DR 2-106(A) by retaining fees for services not performed, along with thirteen other OHCPR violations); Mahoning County Bar Ass'n v. Pagac, 39 Ohio St.3d 1, 528 N.E.2d 948 (1988) (attorney suspended for six months for charging client for defense of five felony counts that required no additional services, because felonies were added to "take it or leave it" plea bargain where choice had to be made immediately, and for intimidating client, thereby preventing client from making uncoerced decision about paying fees, in violation of former OH DR 1-102(A)(6) and 2-106(A)).

The quality of the services required to fulfill the representation also is a crucial factor. This often turns on the novelty and difficulty of the underlying issues involved. The greater the skills required to perform the legal services in question, the higher the fee can be while still being considered reasonable.  Perry v. LTV Steel Co., 84 Ohio App.3d 670, 618 N.E.2d 179 (Cuyahoga 1992). Conversely, if the issues involved are mundane and the services required are simple, the fee should be limited. Disciplinary Counsel v. Carlson, 111 Ohio St.3d, 2006 Ohio 5707, 855 N.E.2d 1218 (charging one-third contingent fee with respect to the client's share of estate, the obtaining of which required no special effort on respondent's part, constituted clearly excessive fee); Cleveland Bar Ass'n v. McNally, 109 Ohio St.3d 560, 2006 Ohio 3258, 849 N.E.2d 1022 (charging $5,000 to partition property, after telling client not to worry about fee because case would require only filing a short complaint and a few telephone calls, violated DR 2-106(A)); Butler County Bar Ass'n v. Nash, 66 Ohio St.3d 101, 609 N.E.2d 53 (1993) ($5000 fee excessive under former OH DR 2-106(B)(1) where litigation not complicated, issues not complex, client's case weak, and cursory investigation revealed all this); Swanson v. Swanson, 48 Ohio App.2d 85, 355 N.E.2d 894 (Cuyahoga 1976) (filing six briefs, each involving routine issues, while commendable, does not merit inflated fee; moreover, after some point, attorney cannot be expected to be compensated for time spent in telephone conversations and conferences). Cf.  In re Estate of York, 133 Ohio App.3d 234, 727 N.E.2d 607 (Warren 1999) (probate court reduced amount of attorney fees under previously approved contingent-fee agreement, based on reasoning that case had not required significant preparation nor did it proceed to trial; case remanded, however, because probate court failed to hold hearing to evaluate the fee agreement under OH DR 2-106(B) standards, particularly time, effort, and skill and the results obtained). Another factor that may be considered in determining the difficulty of a case, according to one decision at least, is the eminence of the opposing counsel.  Moraine v. Baker, 34 Ohio Misc. 77, 297 N.E.2d 122 (C.P. Montgomery 1971).

In Office of Disciplinary Counsel v. Galinas, 76 Ohio St.3d 87, 666 N.E.2d 1083 (1996), a lawyer was sanctioned for, inter alia, charging $150,000 in attorney fees for work performed in representing the estate. In finding the fee charged clearly excessive, the Court commented:

There was no litigation surrounding the estate, the estate was not particularly complex, and respondent provided no extraordinary services in representing the estate that could have conceivably justified a fee of that magnitude.

Id. at 89-90, 666 N.E.2d at 1085-86.

For an informative opinion involving reasonable-fee analysis where the underlying claim was difficult to maintain and prevail upon, see Goldauskas v. Elyria Foundry Co., 145 Ohio App.3d 490, 763 N.E.2d 645 (Lorain 2001). In this personal injury action, law firm A, working on a contingent fee, commenced the action on behalf of plaintiff, did a substantial amount of work on the case, and then was discharged and replaced by law firm B, which likewise did significant work on the case. While defendant's motion for summary judgment was pending, the case was settled by law firm B for a significant, undisclosed sum. (The settlement amount was sealed.) Law firm A sought what it deemed its proper share — one-half of the 40% contingent fee. The trial court awarded firm A $300,000 in quantum meruit; on appeal, the court found this amount to be unreasonable and an abuse of discretion and set A's fee at $200,000. The court's analysis was as follows: Both firms agreed that the case, an intentional tort action, was a difficult one to win. There was significant risk of an adverse verdict and likewise a significant risk of loss at the summary judgment stage. Firm A had valued the case as being worth $750,000 - $1,000,000, after trial. All of the testimony indicated that firm A would have taken far less prior to trial and "especially prior to summary judgment, which all believe is highly risky. Hence, we find the trial court's determination of attorney fees to be unreasonable, as it gave . . . firm [A] the same amount as if, by its own estimation, it had pursued the cause through the perils of summary judgment and trial." Id. at 497, 763 N.E.2d at 651. (i.e., $750,000 x 40% = $300,000.) In recomputing the amount, the court of appeals took the high end of firm A's after-trial estimate ($1,000,000), multiplied it by the 40% contingent fee percentage, and applied firm A's 50% entitlement formula to arrive at $200,000 as the appropriate fee in quantum meruit. (While this seems a generous approach, the settlement amount for this truly gruesome accident, obtained by firm B prior to a ruling on defendant's summary judgment motion was, according to the court, "far in excess" of firm A's $1,000,000 valuation after trial, id., and thus firm B's contingency fee was also presumably "far in excess" of the $200,000 fee awarded to firm A.)

Reasonable fees - Forgone employment: The second factor used to determine the reasonableness of a fee under Ohio Rule 1.5(a) is "the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer." Rule 1.5(a)(2). This requires, first, that there be sufficient likelihood that accepting the case will preclude accepting other employment, which turns on how likely it is that another client willing to pay significantly higher fees would have hired the lawyer had the lawyer been available. Charles W. Wolfram, Modern Legal Ethics §  9.3.1, at 519 (1986). Second, the potential sacrifice involved in accepting representation must be "apparent" to the client.  We are aware of no Ohio cases dealing with the apparent-to-the-client requirement.

As a related matter under this provision, a lawyer may charge a reasonable fee to be kept on retainer by a client, thereby assuring that the lawyer will forgo other employment to be available should client needs arise, even if no services actually are performed. Ohio State Bar Ass'n Informal Op. 90-8 (Oct. 31, 1990); Cleveland Bar Ass'n Op. 84-1 (Oct. 19, 1984); cf. Jacobs v. Holston, 70 Ohio App.2d 55, 434 N.E.2d 738 (Lucas 1980). The term "retainer" has several different usages. This and other retainer arrangements are discussed in section 1.5:420.

Reasonable fees - Customary charge: "[T]he fee customarily charged in the locality for similar legal services" is the third guide given to determine a reasonable fee. Ohio Rule 1.5(a)(3). Cf. Hermann, Cahn & Schneider v. Viny, 42 Ohio App.3d 132, 137, 537 N.E.2d 236, 241 (Cuyahoga 1987) (in a fee dispute, "[t]estimony as to the necessary and reasonable value of services by an attorney engaged in a similar area of practice will corroborate an attorney's claim for fees"). If the lawyer is a specialist, reference to the fee customarily charged by similar specialists in the community is appropriate. Freeman v. Crown City Mining, Inc., 90 Ohio App.3d 546, 630 N.E.2d 19 (Gallia 1993). If a service provided is unique, there may be no customary charge for a similar service. In re Betts, 62 Ohio Misc.2d 30, 587 N.E.2d 997 (C.P. Ross 1991).

One ambiguity in the Rule (and the identical language in the Code) is how to define the "locality" for which a customary charge is to be determined. This issue was confronted under the OHCPR by the Sixth District Court of Appeals in Hamilton Mutual Insurance Co. v. Perry, 124 Ohio App.3d 147, 705 N.E.2d 731 (Ottawa 1997), a case involving court-awarded attorney fees to a prevailing-party insured in a declaratory judgment action filed by the insurer. Insured's counsel argued that, given that it had a state-wide practice, a customary charge for a lawyer of similar expertise in Ohio would be appropriate. The insurer argued that the relevant locale was the eleven-county area of northern Ohio in which the action was brought. The trial court found the state-wide definition appropriate in this context, and the appellate court agreed:

We agree with the trial court that the evidence presented in this case shows that the locality to be considered in relation to DR 2-106(B)(3) is the state of Ohio. Appellee's attorneys presented evidence showing that they accept cases from all parts of Ohio and from states other than Ohio. They regularly conduct trials and appeals in all parts of Ohio. Their reputation as successful trial attorneys permits them to conduct a statewide practice from a law office located in Sandusky, Ohio. This court is not persuaded that the purpose of DR 2-106(B)(3) is to compel attorneys who accept cases from various parts of a state (or from more than one state) to vary their hourly fees based upon the prevailing fees charged by other attorneys who do not conduct a statewide practice but who limit their practice to a smaller geographical area.

Id. at 152, 705 N.E.2d at 734. (Cf. discussion of locality standard in context of malpractice duty of care, at section 1.1:330.)

In attorney-fee-award situations, local rules have been used to establish what customary, and hence reasonable, charges would be. See, e.g., Office of Disciplinary Counsel v. Curren, 39 Ohio St.3d 117, 529 N.E.2d 930 (1988) (reasonable guardianship fees set in Clinton County Probate Court by Local Rule 19; one-year suspension warranted for attorney who charged more than double what was reasonable under Rule 19). Former OH EC 2-17 suggested that fee schedules and economic reports of state and local bar associations provide some guidance as to customary charges. The effect of these publications is limited, though, by the finding of the United States Supreme Court in Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), that such fee schedules, used inappropriately, may constitute price fixing.

Reasonable fees - The amount involved and results obtained: The fourth guide in determining whether a fee is reasonable is "the amount involved and the results obtained." Ohio Rule 1.5(a)(4). In applying this standard, it is important to recognize that "consideration of 'results obtained' is not synonymous with the monetary amount of the recovery; it encompasses the degree of success enjoyed by the prevailing party." Freeman v. Crown City Mining, Inc., 90 Ohio App.3d 546, 556, 630 N.E.2d 19, 26 (Gallia 1993) (considering identical language in DR 2-106(B)(4)). These factors serve as a rough estimate of the potential malpractice exposure of the lawyer and of the value of the case to the client. See Charles W. Wolfram, Modern Legal Ethics §  9.3.1, at 519 (1986) (discussing fees fixed as a percentage of the value of property). Consideration of the responsibility involved and the results obtained may justify increased fees, even if the services rendered would have been identical to those services rendered for a less valuable case.  In re Betts, 62 Ohio Misc.2d 30, 587 N.E.2d 997 (C.P. Ross 1991). Protecting the client's interest, by winning the case or cases, allows the relative fees to increase.  In re Estate of Ziechmann, 63 Ohio App.3d 717, 580 N.E.2d 31 (Cuyahoga 1989) (fees amounting to 40% of estate found reasonable when services performed involved representing estate in many suits over period of six years and ultimately saved estate $100,000). There are limits, however, to the extent to which this factor figures into the determination of the fee deserved. For example, if a lawyer loses a case, it does not follow that no fees are due, unless there is a contingency-fee arrangement, but the amount deemed reasonable may be less. See Moraine v Baker, 34 Ohio Misc. 77, 297 N.E.2d 122 (C. P. Montgomery 1971). See also Crary v. Goldsmith, 34 N.W.2d 28 (Mich. 1948):

It is true that the efforts of the attorney were abortive and failed to accomplish the desired result. While this cannot operate to deprive an attorney of compensation for services faithfully and intelligently performed, in good faith, it does have a bearing on the amount of compensation for the services rendered.

Id. at 33.

It would be hard to find a decision that better illustrates the application of the amount involved and results obtained criteria of 2-106(B)(4) than Disciplinary Counsel v. Johnson, 113 Ohio St.3d 344, 2007 Ohio 2074, 865 N.E.2d 873, where the respondent sought to obtain recovery on behalf of his clients in a malpractice action against the clients' former attorney, Bond, who had stolen $800,000 from them.  In that action

[r]espondent established Bond's malpractice, but her insurer succeeded in showing that Bond had stolen assets intentionally and that the policy did not cover theft.  [The clients] thus recovered nothing from the malpractice action.

Respondent's law clerk had warned him as early as November 1998 that the malpractice claim had little chance of success, and in January 1999, another attorney whom respondent consulted agreed with that conclusion.  Notwithstanding this advice, respondent continued to bill for his services in pursuit of malpractice-insurance proceeds through May 2000.

Id. at paras. 9-10.  In doing so, respondent ignored what relator's expert characterized as "'Insurance Law 101,' that 'an insurance company does not have the duty of indemnification of [an insured's] illegal act.'"  The expert further testified as follows:

"[H]e kept that lawsuit alive and kept churning the file creating events * * * to achieve billable hours on something that * * * no rational, competent, ethical lawyer would allow his client to do – He just went on and on and on, billing long after * * * there was nothing to be accomplished with the malpractice case, or no realistic potential of collecting anything."

Id. at para. 64 (ellipsis and brackets by the Court).  "To Murman [relator's expert], respondent's billing his clients an hourly rate to pursue the malpractice lawsuit against Bond's malpractice insurer when there was no reasonable hope of recovery was respondent's biggest ethical violation."  Id. at para. 68.

Reasonable fees - Time limitations: The fifth factor listed in the Rule used to determine a reasonable fee is "the time limitations imposed by the client or by the circumstances." Ohio Rule 1.5(a)(5). The Ohio courts and the Board of Commissioners on Grievances and Discipline have not yet explicitly interpreted this factor, either in the new Rule or its predecessor, OH DR 2-106(B)(5). The idea seems to be that if the attorney is under a tight schedule, as a result of the demands of the client or the circumstances of the case, then a higher fee is warranted. On the other hand, if there are very few time pressures, this might be a reason to limit the fee.

This factor can be distinguished from the first factor, the time and labor required, in that it includes cases where "the client's demand for legal services requires a large infusion of staff that creates inefficiencies in the law office because a client's needs bulk so large at times that other matters cannot be handled simultaneously." Charles W. Wolfram, Modern Legal Ethics §  9.3.1, at 519-20 (1986). While the first factor simply considers the time spent in the representation, the fifth factor takes into account special time considerations that impact the reasonableness of fees. One hour of working "under the gun" is presumably more valuable than one hour of regular work. Furthermore, this factor seems to account for cases where there is no novel or difficult issue requiring special skill "to perform the legal services properly" under Ohio Rule 1.5(a)(1), but where the limit on time makes representation on a mundane issue more difficult.

Reasonable fees - Professional relationship with the client: The sixth factor is "the nature and length of the professional relationship with the client." Ohio Rule 1.5(a)(6). This factor also has received little or no interpretation by Ohio authorities. One commentator, with regard to the corresponding provision in the ABA Code of Professional Responsibility, has suggested that while a new client should be charged market rates, an established client might be charged less in gratitude for past fees. Charles W. Wolfram, Modern Legal Ethics § 9.3.1, at 520 (1986). [Query whether this accurately assesses today's legal marketplace.]

Reasonable fees - Qualifications of the lawyer: The Rule's seventh guide is "the experience, reputation, and ability of the lawyer or lawyers performing the services." Ohio Rule 1.5(a)(7). Former OH EC 2-17 also mentioned the attorney's experience, reputation, and ability as relevant in determining a reasonable fee. See Freeman v. Crown City Mining, Inc., 90 Ohio App.3d 546, 630 N.E.2d 19 (Gallia 1993). These factors support increased fees for at least two reasons. First, the more highly qualified lawyer may simply do a better job for the client. The lawyer's standing in terms of possessing unique skills and abilities, however, should be considered only in determining the reasonableness of a fee where such skills are required in the representation.  In re Betts, 62 Ohio Misc.2d 30, 587 N.E.2d 997 (C.P. Ross 1991). Second, when the fee is determined by an hourly rate, the lawyer's qualifications interact with the first factor, the time and labor required for the representation. A more experienced attorney may be presumed to work more efficiently than a less experienced one. An increase in the fees charged takes this into account.

Reasonable fees - Nature of the fee: "[W]hether the fee is fixed or contingent" is the last factor set forth to be considered in determining a reasonable fee. Ohio Rule 1.5(a)(8). Each type of fee presents its own difficulties.

The Rule's approval of fixed fees is somewhat ambiguous. It clearly allows one to charge a fixed hourly rate for work performed. Also permissible, however, are fixed flat fees whereby a lawyer is paid a fixed fee on a per-matter or per-capita basis. See, under the former rule, Bd. of Comm'rs on Grievances & Discipline Op. 95-2, 1995 Ohio Griev. Discip. LEXIS 12 (Feb. 3, 1995); accord Bd. of Comm'rs on Grievances & Discipline Op. 96-4, 1996 Ohio Griev. Discip. LEXIS 5 (June 14, 1996) (approving per-matter fixed flat fees for criminal representation). In the per-capita situation, a lawyer is hired for a fixed fee to handle all of the cases that may arise in a particular area for the client, with the fee based on an estimate of the number of cases likely to arise. While fixed flat fees are permitted under the Rules, they do pose some danger. Because they are not linked directly either to the hours invested by the attorney on the case or the outcome achieved, they may encourage lawyers to slight the representation. Nevertheless, this does not create a per se barrier to their use as long as the other restrictions of the Rules -- barring excessive fees, requiring client responsibility for litigation expenses, and assuring competent and diligent representation -- are met. Op. 95-2, 1995 Ohio Griev. Discip. LEXIS 12. (The rule requiring client responsibility for litigation expenses has since been modified. See Rule 1.8(e) and section 1.8:610.)

The Rule provides some insight with respect to the fixed-fee situation. Comment [6A] states that a

flat [fixed] fee is a fee of a set amount for performance of agreed work, which may or may not be paid in advance but is not deemed earned until the work is performed.

Ohio Rule 1.5 cmt. [6A]. Comment [5] warns that an

agreement may not be made whose terms might induce the lawyer improperly to curtail services for a client or perform them in a way contrary to the client's interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is forseeable that more extensive services will be required, unless the situation is adequately explained to the client . . . . However, it is proper to define the extent of services in light of the client's ability to pay.

Ohio Rule 1.5 cmt. [5]. (It is also proper, under Rule 1.2(c), to limit the scope of the representation in any other reasonable way. See section 1.2:510). Note that with respect to the type of agreement counseled against in Comment [5], the example would appear to permit the very type of agreement counseled against, so long as "the situation is adequately explained to the client."

Special problems arise where a third party, such as an insurer, is paying the fixed fee for the lawyer's representation of another, such as an insured. Here the risk of the fee structure undercutting the representation would be borne by one who did not control the fee arrangement. Nevertheless, this practice was approved in Board of Commissioners on Grievances & Discipline Op. 97-7, 1997 Ohio Griev. Discip. LEXIS 2 (Dec. 5, 1997), as long as the fee agreement provides reasonable and adequate compensation and the insurer remains responsible for the expenses of litigation.

If a fee is contingent rather than fixed, a higher fee may be justified because of the inherent risk of nonrecovery for the lawyer if the representation is unsuccessful. See generally 1 Restatement (Third) of the Law Governing Lawyers § 35 cmt. c (2000). The risk factor was given significant emphasis in the court's fee analysis in Goldauskas v. Elyria Foundry Co., 145 Ohio App.3d 490, 763 N.E.2d 645 (Lorain) (2001), discussed above in this section at "Reasonable fees - Time, labor, and skill required." See also section 1.5:600 concerning contingent fees. The extent of the risk involved is a product of the degree of effort the lawyer will likely have to expend in pursuing the action, and the likelihood of ultimate recovery. In re Betts, 62 Ohio Misc.2d 30, 587 N.E.2d 997 (C.P. Ross 1991). Some doubt was cast on this basic description, however, by Judge Ford's concurring and dissenting opinion in Wilson v. Lynch & Lynch Co., L.P.A., 99 Ohio App.3d 760, 651 N.E.2d 1328 (Geauga 1994). Judge Ford argued that the reasonableness of a contingency fee should turn solely on whether the percentage being charged is reasonable, without regard to the extent of the lawyer's efforts.

Regardless of the size of the award, the attorney is entitled to that agreed-upon percentage irrespective of the amount of time spent by that attorney on the file. The size of the fee is not subject to review as long as it is not unreasonable in proportion to the sum recovered by the client. In other words, as long as the percentage is reasonable, the size of the fee generated should not be questioned.

Id. at 777, 651 N.E.2d at 1339 (emphasis added).

For a penetrating analysis under general law of the importance of the risk factor in determining the reasonableness of a contingent fee, see Judge O'Malley's opinion in In re: Sulzer Hip Prosthesis & Knee Prosthesis Liability Litig., 290 F. Supp.2d 840, 850-56 (N.D. Ohio 2003) ("the obvious but critical characteristic of a contingent fee arrangement [is] the presence of risk. That is why the attorney's fee is called 'contingent.'" Id. at 850.).

It is per se unreasonable, however, to allow a lawyer to charge a fee whereby the client pays an hourly fee until a settlement or judgment is obtained, at which point the attorney has the option to keep the hourly fee or receive a contingency fee instead, whichever is higher. Bd. of Comm'rs on Grievances & Discipline Op. 95-7, 1995 Ohio Griev. Discip. LEXIS 8 (June 2, 1995). In reaching this conclusion, the Board of Commissioners on Grievances and Discipline reasoned: "Under such circumstances, reasonableness is not a determinative factor and the contingency is illusory. By waiting until after settlement or recovery to choose the most advantageous fee, the attorney is assured of getting the larger of two fees without incurring any risk of nonrecovery." Op. 95-7, 1995 Ohio Griev. Discip. LEXIS 8, at *5 (acknowledging but rejecting a Michigan opinion approving the practice). A variation on this theme was the contingent-fee contract that respondent had his clients enter into in Cuyahoga Bar Ass'n v. Levey, 88 Ohio St.3d 146, 724 N.E.2d 395 (2000); it "provided for an hourly charge if respondent was discharged 'whether or not successful completion' occurred." Id. (emphasis in original). Such a contract was held to violate the excessive fee provisions of OH DR 2-106(A). Likewise violative of 2-106(A) was the lawyer's conduct in Office of Disciplinary Counsel v. Watson, 95 Ohio St.3d 364, 2002 Ohio 2222, 768 N.E.2d 617, where, after entering into a contingent-fee contract, respondent was discharged "and then attempted to obtain a fee based on an hourly rate" by suing his ex-client for $ 20,000 in attorney fees. Id. at paras. 3, 5.

Neither the Board's opinion in Opinion 95-7 nor the Ohio Supreme Court's case law directly addresses the propriety of a mixed fee in which a lawyer, without double billing, charges both a fixed fee and a contingent fee, but the Ohio State Bar Association's general counsel reads the case law as implicitly finding mixed fees improper in Ohio. See Eugene P. Whetzel, Contingency Fee Arrangement in Civil Cases, Ohio Law., Jan.-Feb. 2003, at 24, 26.

Reasonable fees - Other "relevant circumstances": Rule 1.5(a) states that reasonableness of the fee is to be determined by factors "includ[ing]" those set forth in subdivisions (a)(1)-(8). See Rule 1.5 cmt. [1]: "The factors specified in divisions (a)(1) through (8) are not exclusive."

One circumstance requiring special consideration, as set forth in former OH EC 2-15, may be whether the client is "unable to pay all or a portion of a reasonable fee." Bd. of Comm'rs on Grievances & Discipline Op. 91-16, 1991 Ohio Griev. Discip. LEXIS 13 (June 14, 1991). The Ethical Consideration advised that "reasonable fees should be charged in appropriate cases to clients able to pay them." This suggests that on some occasions, based on the appropriateness of the case and the ability of the client to pay, even an otherwise reasonable fee should not be charged. Charles W. Wolfram, Modern Legal Ethics §  9.3.1, at 521 (1986) ("Courts have occasionally determined that a fee was excessive in part on the basis of the modest resources of the client").

A similar circumstance, mentioned in former OH EC 2-17, is the "commendable and longstanding [and now outmoded?] tradition of the bar" to consider specially the fees lawyers charge to other lawyers or their immediate families. Query whether this traditional, special consideration given to fellow lawyers and relatives under the Code should any longer be taken into account in determining a reasonable fee. If it were, then an attorney might be guilty of charging an excessive fee to fellow lawyers and relatives, while the same fee for the same services would not be excessive if charged to other clients.

An unusual application of former DR 2-106(A) occurred in Disciplinary Counsel v. Johnson, 113 Ohio St.3d 344, 2007 Ohio 2074, 865 N.E.2d 873. Respondent's clients were paid $100,000 from the Client Security Fund, because their prior lawyer had misappropriated some $800,000 of their assets.  Respondent admitted "that he had charged for his help in securing money from the Client Security Fund . . . ."  Id. at para. 23.  Gov Bar R VIII (6)(B), however, states that unless authorized by the Board of Commissioners of The Clients' Security Fund of Ohio (an exception not present here),

[n]o attorney fees may be paid from the proceeds of an award made to a claimant under authority of this rule.

Id.  Although respondent admitted that he had charged time in connection with the Security Fund recovery, he apparently did not in fact collect for that time:  "if his final bills had been paid, [he] would have consumed a substantial portion of the awards from the Client Security Fund."  113 Ohio St.3d 344, at para. 71.  Nevertheless, even though not paid for the time charged in pursuing the awards, respondent was found to have violated the "[n]o attorney fees may be paid" language of Gov Bar R VIII 6(B), which in turn violated DR 2-106(A).

A lawyer may enter into competitive bidding for legal work as long as the ultimate fee arrangement comports with the Rule 1.5(a) guidelines. Ohio State Bar Ass'n Informal Op. 77-4 (Apr. 6, 1977) (opining on former OHCPR). See generally Rees Morrison, Michael Roster & Jimmy Holland, Corporations Are Paring Use of Outside Counsel, Nat'l L.J., Apr. 17, 1995, at C12 (discussing corporations putting their legal work out for competitive bidding by law firms). See also section 1.18:200, noting Ohio's deletion of MR 1.18 cmt. [5], applicable in "beauty contest" situations.

Expenses and the reasonableness requirement: Ohio Rule 1.5(a) addresses the reasonableness of lawyers' fees. It does not, as does MR 1.5(a) & cmt. [1], address the reasonableness of other expenses and disbursements for which a lawyer may bill. To the extent expenses are treated at all in the Rules, it is found in Ohio Rule 1.5 cmt. [2]. It was opined under the OHCPR that the identical standards set forth in former OH DR 2-106(B)(1)-(8) should apply to these other billing matters as well. Cincinnati Bar Ass'n Op. 95-96-02 (n.d.). See also ABA Formal Op. 93-379 (Dec. 6, 1963).

As a related concern, care must be taken to assure that the client understands what expenses of the representation are to be billed separately. For example, secretarial and paraprofessional services typically are considered part of overhead to be recouped as part of the lawyer's hourly rate or percentage fee. They may be billed for separately only if the client is informed of and agrees to the arrangement. See Ohio Rule 1.5 cmt. [2]. Absent that, separate billing for these services may result in charging a clearly excessive fee. Columbus Bar Ass'n v. Brooks, 87 Ohio St. 3d 344, 721 N.E.2d 23 (1999).

It has been held, however, in the context of attorney fees awarded as sanctions under ORC 2323.51 and OH Civ R 11, that a law clerk's time can properly be included in the fee award, rather than as overhead. All Climate Heating & Cooling, Inc. v. Zee Props., Inc., No. 01AP-784, 2002 Ohio App. LEXIS 1951 (Franklin Apr. 25, 2002). Accord Ron Scheiderer & Assoc. v. London, Nos. CA95-08-022, CA95-08-024, 1996 Ohio App. LEXIS 3296 (Madison Aug. 5, 1996) (paralegal's hourly rates properly included in fee award; "[w]here expenses can be clearly and directly traced to the costs associated with a particular matter, those expenses are not properly considered as part of an attorney's 'overhead,'" id. at *6), aff'd on other grounds, 81 Ohio St.3d 94, 689 N.E.2d 552 (1998); Jackson v. Brown, 83 Ohio App.3d 230, 614 N.E.2d 847 (Cuyahoga 1992).

Cincinnati Bar Ass'n Op. 95-96-02 (n.d.) commented on the propriety of a law firm's adding mark-ups to charges it incurs or pays on the client's behalf and passing on certain costs associated with after-hours work on a client's behalf. The opinion addressed six hypothetical situations: (1) hiring an outside attorney to help on a matter and billing the client a higher hourly rate for the service than the attorney charged the firm; (2) hiring an expert witness to help on a matter and billing the client a higher hourly rate for the service than the expert witness charged the firm; (3) charging the client more for deposition transcripts than the firm was charged; (4) charging the client for overtime and the costs of transportation home for secretarial personnel; (5) charging the client for evening meals delivered to the office for lawyers working late; and (6) factoring in wear and tear into per page photocopy charges passed through to the client. In each situation, the bar association looked to the eight factors in former OH DR 2-106(B) as a guide. Again, see Ohio Rule 1.5 cmt. [2].

With respect to the mark-up of the hourly rate of an outside attorney used on a matter, the bar association felt the practice would be justified only if two conditions were met. First, the hourly rate charged, with the mark-up included, must remain reasonable in relation to the rates usually charged in the community for such legal services. See former OH DR 2-106(B)(3) (on the significance of local custom). Second, there must be some justification for the mark-up. The firm must have incurred some extra expense (such as the outside lawyer's use of the firm's facilities) or incurred some additional risk (such as covering the work of the outside lawyer on the firm's professional liability policy) to justify the increase in fee. The bar association also advised that the rules pertaining to fee division in former OH DR 2-107 should apply to this situation. See section 1.5:800.

Adding a mark-up to the fees charged by an expert witness presents a similar problem. Here, however, the bar association stressed that adding such a mark-up was not customary in the community and, as such, absent a clear justification, would be unreasonable, even if the amount charged was itself reasonable and the client knowingly consented to the mark-up. See former OH DR 2-106(B)(3) (on the significance of local custom). The bar association also warned that an unjustified mark-up of the expert's fee might constitute fee splitting with a nonlawyer in violation of former OH DR 3-102(A). See section 5.4:200.

Similarly, the bar association indicated that a mark-up of the amount charged for deposition transcripts would be unreasonable absent some economic justification for the increase. If the firm incurs photocopy expenses or delivery charges in connection with the handling of the transcripts, those charges actually incurred can be passed through to the client. Once again, see Ohio Rule 1.5 cmt. [2].

The bar association concluded that it was appropriate to charge a client for secretarial overtime and transportation, but only if the overtime and related travel expenses were occasioned by time limits imposed by the client or the circumstances. See former OH DR 2-106(B)(5). If they were, the client could be charged the direct costs associated with the overtime, plus an allocation of overhead expenses. Whether the expenses incurred by the secretary for transportation home should be charged and, if so, in what amount depend on community practice.

The propriety of charging a client for late meals turns on the reason the charges were incurred. If the attorneys are working late generally and happen to be working on a particular client's matter, the charge would be inappropriate. If, in contrast, the exigencies of the client's case necessitated the evening hours, passing through reasonable costs would be appropriate. See former OH DR 2-106(B)(5).

Finally, with respect to photocopy charges, the bar association was of the opinion that a lawyer could charge a client for the direct cost associated with the service plus a reasonable allocation of overhead expenses directly associated with the service, which includes wear and tear on the photocopy machine. As with any charge to a client, the overall charge must be reasonable. Under Ohio Rule 1.5 cmt. [2], reasonable charges of this nature are permissible with client consent.

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

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 2.126 (1996).

As part of a fee arrangement, a lawyer and a client may enter into a retainer agreement. The term "retainer" has at least four very different meanings. First, it can represent a payment required to secure the lawyer's agreement to handle a case, with separate fees charged for the work performed. Second, it sometimes describes an arrangement where the lawyer, for a fee, agrees to be available to the client for a specific period of time should the client need the lawyer's services. Third, it can refer to a deposit of funds by the client from which the lawyer will draw necessary funds to cover fees and expenses. If the representation requires less than the full amount deposited, the remainder is remitted to the client. (See Rule 1.5 cmt. [4] obligating the return of any unearned portion of an advance fee payment.) The fourth use of the term "retainer" involves a nonrefundable prepayment for services to be rendered.

Comment [6A] discusses advance-fee payments, including the "true" or "classic" retainer, which ensures the lawyer's availability and precludes adverse representation. Continuing, the comment notes that

[w]hat is often called a retainer is in fact an advance payment to ensure that fees are paid when they are subsequently earned, on either a flat fee or hourly basis. A flat fee is a fee of a set amount for performance of agreed work, which may or may not be paid in advance but is not deemed earned until the work is performed. An earned upon receipt fee [as to which see Rule 1.5(d)(3) and section 1.5:430 of the treatise] is a flat fee paid in advance that is deemed earned upon payment regardless of the amount of future work performed.

Ohio Rule 1.5 cmt. [6A]. See generally ABA, Annotated Model Rules of Professional Conduct 71-72 (5th ed. 2003) (commentary).

Retainers to secure availability have been approved, particularly where this potentially entails forgoing employment for a competitor or opponent of the client. Cuyahoga County Bar Ass'n v. Okocha, 83 Ohio St.3d 3, 697 N.E.2d 594 (1998); Columbus Bar Ass'n v. Klos, 81 Ohio St.3d 486, 692 N.E.2d 565 (1998). But where there is "no employment opportunity to lose," charging a "lost opportunity" fee because of the inability to represent any other party in this termination-of-marriage case resulted in a clearly excessive fee, for "once Guldman [the client] had consulted respondent, respondent was ethically foreclosed from any other representation in the case because of the parties' adverse interests and the fact that Guldman's husband had his own lawyer." Columbus Bar Ass'n v. Halliburton-Cohen, 106 Ohio St.3d 98, 2005 Ohio 3956, 832 N.E.2d 42, at ¶¶ 6, 16.

Retainers for security for fees and expenses ("advance payment to ensure that fees are paid when they are subsequently earned," in the language of Comment [6A]) also have been approved. Okocha; Klos. However, failure to return the unspent portion of the retainer fee when the agreement so requires can constitute charging an excessive fee. Toledo Bar Ass'n v. Lubitsky, 63 Ohio St.3d 669, 590 N.E.2d 746 (1992). Accord Office of Disciplinary Counsel v. Treneff, 98 Ohio St.3d 348, 2003 Ohio 1011, 785 N.E.2d 434. Such behavior with respect to retainer fees was also found to violate former OH DR 9-102(B)(4), see Cleveland Bar Ass'n v. Glatki, 88 Ohio St.3d 381, 726 N.E.2d 993 (2000) (failure to return unearned portion of retainer upon request by client); accord Greene County Bar Ass'n v. Fodal, 100 Ohio St.3d 310, 2003 Ohio 5852, 798 N.E.2d 1082, and former OH DR 9-102(A), which required that all funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, be paid into a separate bank account containing no funds belonging to the lawyer or firm. See Office of Disciplinary Counsel v. Zingarelli, 89 Ohio St.3d 210, 729 N.E.2d 1167 (2000), where the client paid the lawyer a retainer, which the lawyer deposited in his office account containing personal and other business funds. The Court held:

Since the agreed-upon fee had not yet been earned and was therefore refundable at the time respondent made the deposit, respondent violated DR 9-102(A) by commingling [the client's] money with his own. Accordingly, we hold that harm to the client is not a necessary element for there to be a violation of DR 9-102(A).

Id. at 219, 729 N.E.2d at 1175. See Ohio Rule 1.15(a) and section 1.15:200.

With respect to the first meaning of "retainer" discussed above, the Ohio Supreme Court has held that a retainer charged simply for agreeing to undertake representation, coupled with a separate fee for services rendered, constitutes an improper, excessive fee. Cuyahoga County Bar Ass'n v. Okocha, 83 Ohio St.3d 3, 697 N.E.2d 594 (1998). See section 1.5:430.

1.5:430 Nonrefundable Fees

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 2.126 (1996).

While there is disagreement nationally on this issue, nonrefundable or earned-upon-receipt retainers unrelated to legal services to be performed or forgone, were prohibited under the former OHCPR, e.g., Cuyahoga County Bar Ass'n v. Okocha, 83 Ohio St.3d 3, 697 N.E.2d 594 (1998); see Lake County Bar Ass'n v. Ryan, 109 Ohio St.3d 301, 2006 Ohio 2422, 847 N.E.2d 430, at para. 22 (rejecting respondent's claim to have legitimately charged such retainers; "except for limited circumstances not present here, this practice was declared unethical years ago," citing Okocha). Accord Stark County Bar Ass'n v. Watterson, 103 Ohio St.3d 322, 2004 Ohio 4776, 815 N.E.2d 386 (citing Okocha; reiterating that such retainers are improper except in limited circumstances not present here; charging nonrefundable retainer on top of contingent fee is excessive).  (In the related fee litigation, the court of appeals affirmed a judgment for the client for the amount obtained in settlement, to which the lawyer asserted he was entitled; since the lawyer had been discharged or had withdrawn, his compensation was to be measured by the quantum meruit doctrine; and since the lawyer had chosen not to appear for trial ("'[appellant] will not be attending any trial in this matter'") and thus presented no evidence as to the reasonable value of the services rendered, he could not prove entitlement to any of the settlement proceeds. Watterson v. King, 166 Ohio App.3d 704, 2006 Ohio 2305, 852 N.E.2d 1278 (Stark).)

Nonrefundable fees are now controlled by the provisions of Ohio Rule 1.5(d)(3). Pursuant to division (d)(3), fees so denominated are still prohibited, but with a caveat -- "[a] lawyer shall not enter into an arrangement for, charge, or collect" such fees

unless the client is simultaneously advised in writing that if the lawyer does not complete the representation for any reason, the client may be entitled to a refund of all or part of the fee based on the value of the representation pursuant to division (a) of this rule.

Comment [6A] elaborates as follows:

The reasonableness requirement and the application of the factors in division (a) may mean that a client is entitled to a refund of an advance fee payment even though it has been denominated "nonrefundable," "earned upon receipt," or in similar terms that imply the client would never receive a refund. So that a client is not misled by the use of such terms, division (d)(3) requires certain minimum disclosures that must be included in the written fee agreement.

Rule 1.5 cmt. [6A].

Comment [4] states that "[a] lawyer may require advance payment of a fee, but is obliged to return any unearned portion." While it can be argued that this "obligation" and the fact that the client "may" be entitled to a refund of such fees under Rule 1.5(d)(3) and Comment [6A] are inconsistent, we think they are compatible and should be so read. Thus, to the extent an advance payment is "unearned" by the client (applying the tests of 1.5(a)(1)-(8)), to that same extent the client will be entitled to a refund, tested by the very same factors. To summarize,

• "Nonrefundable," etc., advance-fee payments are permitted only if accompanied by the written disclosure specified in division (d)(3); and

• A refund to the client to whom such disclosure has been made would depend upon "application of the factors set forth in division (a)." In other words, the nonrefundable fee must be tested against the eight factors in division (a) used to determine its reasonableness; to the extent the nonrefundable fee is wanting in this regard -- i.e., not fully "earned" -- the client then will be entitled to a refund, which the lawyer is "obliged" to return. Rules 1.5 cmts. [4] & [6A].

1.5:500 Communication Regarding Fees

• Primary Ohio References: Ohio Rule 1.5(b)
• Background References: ABA Model Rule 1.5(b)
• Ohio Commentary: Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 2.128
• Commentary: ABA/BNA §41.110, ALI-LGL § 38, Wolfram § 9.2.1

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility § 2.128 (1996).

Fee disputes often can be avoided if the lawyer and client have a clear understanding of the fee arrangement at the outset. To this end, a full explanation of the proposed fee arrangement and the reasons for it is now required by Ohio Rule 1.5(b) Under 1.5(b), the lawyer "shall" communicate to the client, preferably in writing, at or within a reasonable time after the engagement,

[t]he nature and scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible . . . .

This need not be done where

the lawyer will charge a client whom the lawyer has regularly represented on the same basis as previously charged.

Any change in the basis or rate of the fee or expenses is subject to division (a) and must promptly be communicated to the client, preferably in writing. Id.

The Rule 1.5(b) communication obligation can be satisfied, according to Comment [2], "with at least a simple memorandum or copy of the lawyer's customary fee arrangements that states that the general nature of the legal services to be provided, the basis, rate or total amount of the fee and whether and to what extent the client will be responsible for any costs, expenses or disbursements in the course of the representation." Rule 1.5 cmt. [2]. The client must agree in advance before the lawyer can seek reimbursement for the reasonable cost of nonlegal services auxiliary to the representation (such as copying) performed in-house. Id.

Note that the general reference in Comment [2] to "whether and to what extent" the client will be responsible for expenses is, with respect to the specific category of litigation expenses, presumably trumped by Rule 1.8(e)(1), which provides that any litigation expenses advanced by the lawyer are ultimately to be borne by the client unless made contingent on the outcome of the litigation. See section 1.8:610.

While a written agreement is not required for other than contingency-fee arrangements, reducing the terms of the required notice to a writing, is recommended. As stated in Comment [2]:

The detail and specificity of the communication required by division (b) will depend on the nature of the client-lawyer relationship, the work to be performed, and the basis of the rate or fee. A writing that confirms the nature and scope of the client-lawyer relationship and the fees to be charged is the preferred means of communicating this information to the client and can clarify the relationship and reduce the possibility of a misunderstanding.

Ohio Rule 1.5 cmt. [2]. See section 1.5:610 for a discussion of the writing requirement for contingency-fee arrangements. To the extent compensation for the representation is to be paid by a third party, this must be fully disclosed to and consented to by the client. See Ohio Rule 1.7 cmt. [23]. Fee-sharing arrangements with lawyers in different firms also require written disclosure of the terms to the client and the client's consent. Rule 1.5(e)(2). See section 1.5:800.

The absence of a written fee agreement does not render the fee contract unenforceable as a matter of contract law. For example, in Cannell v. Rhodes, 31 Ohio App.3d 183, 509 N.E.2d 963 (Cuyahoga 1986), the Eighth District Court of Appeals rejected a client's claim that an oral contract for interest on attorney fees was unenforceable because it was not in writing. The new Rules likewise impose no ethical requirement of a written contract, provided the lawyer has complied with the notice provisions of Rule 1.5(b). Note, however, that in at least one place the comments refer to matters "that must be included in the written fee agreement." Ohio Rule 1.5 cmt. [6A]. Despite this language in Comment [6A], it is clear that Rule 1.5(b) does not impose a written fee-agreement requirement – rather, the lawyer must communicate to the client the matters set forth in division (b), "preferably in writing."

The failure to have a written fee agreement may nevertheless have evidentiary implications, should a fee dispute arise. In Akron Bar Ass'n v. Naumoff, 62 Ohio St.3d 72, 578 N.E.2d 452 (1991), the Court found that an attorney had charged and collected an excessive fee when he collected one-third of a settlement, based on an alleged contingent-fee agreement that had not been reduced to writing. (The case involved a nontort claim to which the ORC 4705.15 writing requirement did not apply.) The original agreement between the attorney and client called for fees to be charged on an hourly basis. The attorney claimed to have discussed the change to a contingent-fee arrangement with the seventy-five year old client. The client denied having been informed of the change. Because the contingent-fee arrangement was not in writing and the hourly-rate arrangement was, the Court recognized the latter as the fee arrangement between the attorney and the client. The $14,700 collected by the attorney, therefore, was clearly in excess of the $2,400 calculated under the hourly-rate contract.

Even if the fee agreement is in writing, care in drafting is still required. In Columbus Bar Ass'n v. Klos, 81 Ohio St.3d 486, 692 N.E.2d 565 (1998), the Ohio Supreme Court relied on the general ambiguity of the contract as one of the factors leading to a conclusion that the contract called for an excessive fee in violation of former OH DR 2-106. See also Cleveland Bar Ass'n Op. (unnumbered) (June 3, 1999) (attorney, as fiduciary, has burden of proof when contract ambiguity arises).

The contract or notice should also make clear the parties' responsibilities with respect to expenses. See section 1.8:600. If a lawyer contemplates incurring extraordinary expenses, the lawyer should inform the client to secure the client's consent or allow the client to seek other counsel. Columbus Bar Ass'n v. Zauderer, 80 Ohio St.3d 435, 687 N.E.2d 410 (1997). Under Rule 1.5(b), a lawyer would now be obligated to inform the client of any such contemplated extraordinary expenses.

1.5:600 Contingent Fees

• Primary Ohio References: Ohio Rule 1.5(c), ORC 4705.15
• Background References: ABA Model Rule 1.5(c)
• Ohio Commentary: Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 2.137, 2.139, 2.142-2.144
• Commentary: ABA/BNA § 41:901, ALI-LGL § 35, Wolfam §9.4

The material in this section is, in part, excerpted and adapted from Arthur F. Greenbaum, Lawyer's Guide to the Ohio Code of Professional Responsibility §§ 2.137, 2.139, 2.142 (1996).

Contingency-fee agreements have long been recognized as acceptable fee arrangements for many types of civil litigation. As defined by statute, contingent-fee agreements make compensation to attorneys for legal services contingent "in whole or in part, upon a judg