End-of-life notice: American Legal Ethics Library
As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.
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Arkansas Legal Ethics
1.5:100 Comparative Analysis of Arkansas Rule
- Primary Arkansas References: AR Rule 1.5
- Background References: ABA Model Rule 1.5, Other Jurisdictions
The Arkansas Rule deviates in two ways from the Model Rule.
1) Arkansas inserted the following sentence at the beginning of the Comment: –This rule is designed to prohibit only unreasonably high fees and is not to be construed as prohibiting free services, reduced fees or pro bono legal services. ”
2) In 1989 Arkansas added the last half of Rule 1.5(d)(1), permitting an attorney to earn a contingency fee upon collection of accumulated support payments in arrears.
The comparison accepted by the Arkansas Supreme Court is identical to the comparison in the Model Rules.
1.5:200 A Lawyer's Claim to Compensation
- Primary Arkansas References: AR Rule 1.5
- Background References: ABA Model Rule 1.5, Other Jurisdictions
- Commentary: ABA/BNA § 41:101, ALI-LGL §§ 50-54, Wolfram §§ 9.1-9.6
The typical contractual relationship includes a provision for the fees to be paid by the client to the attorney for the services rendered. Ethical standards require that the fee be reasonable in light of the designated factors. The attorney has a cause of action against the client for breach of that contractual provision. However, both the client and the attorney may seek to have the fees paid by the opposing party.
Arkansas has no case law on this topic, but general principles of contract law would provide a recovery based on quantum meruit or unjust enrichment for the reasonable value of the legal services provided.
1.5:230 Fees on Termination [see 1.16:600]
The case law on the determination of attorney fees when the attorney withdraws from representation or is discharged by the client prior to the conclusion of the matter is found in 1.16:600.
EC 2-23 stated that the attorney should generally not sue a client for an unpaid fee, unless it was necessary to prevent fraud or gross imposition by the client. But attorneys are ethically permitted to sue a client for breach of contract. See, for example, Harper v. Shackleford, 41 Ark. App. 116, 850 S.W.2d 15 (1993) (attorney sued former divorce client for $14,786 in attorney fees).
Legal fees may be paid in property, provided the property has an established value and its acquisition does not constitute a proprietary interest in the cause of action contrary to Rule 1.8(j). The burden is on the attorney to establish its fairness. United States v. 9.41 acres located in Sebastian County, Ark., 725 F.Supp. 421 (W.D. Ark. 1989); Duvall v. Laws, Swain & Murdoch, P.A., 32 Ark. App. 99, 797 S.W.2d 474 (1990) (transfer of land to attorney was an absolute conveyance for fees, not an equitable mortgage).
Attorneys are ethically permitted to accept credit card payments for attorney fees, provided the fee is not increased to offset any service charges. Resolution of the Arkansas Bar Association, January 21, 1978. Interest may be charged on unpaid and delinquent attorney fees, provided the client is given prior and timely notice of the intent to assess a delinquent service charge.
The statutes and cases on attorney liens are collected in 1.8:1130.
Arkansas has no case law or authority on this topic, but the Arkansas version of the Uniform Arbitration Act permits parties to agree to submit to arbitration any existing controversy. Ar. Code §16-18-201. In addition, attorneys and clients may agree in advance to turn to arbitration to resolve any disputes that might arise out of contracts.
An award of attorney fees may be set aside if the attorney acted unethically. See City of Little Rock v. Cash, 277 Ark. 494, 644 S.W.2d 229 (1982) (attorney who simultaneously challenged a municipal tax and represented the city in another action lost a fee of $316,000 because of his conflict of interest, despite his good faith and the statutory authorization for the fee). See also American-Canadian Oil & Drilling Corp. v. Aldridge & Stroud, Inc., 237 Ark. 407, 373 S.W.2d 148 (1963). Likewise, attorneys who fail to pay the annual license fee to the Supreme Court are automatically suspended as Arkansas attorneys and forfeit their right to seek court assistance in collecting attorneys' fees. Widmer v. Widmer, 288 Ark. 381, 705 S.W.2d 878 (1986).
1.5:300 Attorney-Fee Awards (Fee Shifting)
- Primary Arkansas References: AR Rule 1.5
- Background References: ABA Model Rule 1.5, Other Jurisdictions
- Commentary: ABA/BNA § 41:301, Wolfram § 16.6
Arkansas long followed the –American rule” that each litigant must pay his own attorney fees. Fee shifting is not permitted unless expressly authorized by statute. State v. McLeod, 318 Ark. 781, 888 S.W. 2d 639 (1994); Transportation Properties, Inc. v. Central Glass & Mirror of Northwest Arkansas, Inc., 38 Ark. App. 60, 827 S.W. 2d 667 (1992); City of Little Rock v. Quinn, 35 Ark. App. 77, 811 S.W. 2d 6 (1991). The traditional justification for the rule is that a party should not be discouraged from bringing or defending an action by the threat of having to pay the attorney fees of the opposing party. Jacobson v. Poindexter, 42 Ark. 97 (1883); Lewallen v. Bethune, 267 Ark. 976, 593 S.W. 2d 64 (Ark. App. 1980). For example, attorney fees are not an element of damages in personal injury cases, Bowen v. Saxton, 255 Ark. 298, 499 S.W. 2d 867 (1973), landlord-tenant disputes, Brady v. Alken, Inc., 273 Ark. 147, 617 S.W. 2d 358 (1981), or mortgage foreclosures. American Exchange Trust Co. v. Trumann Special School District, 183 Ark. 1041, 40 S.W. 2d 770 (1931). Compare Ark. National Bank v. Stuckey, 121 Ark. 302, 181 S.W. 913 (1915) (fees authorized by mortgage). Although the Uniform Commercial Code allows payment of reasonable attorney fees to the prevailing side when –not prohibited by law, ”the Supreme Court continued to apply the general American rule. Harper v. Wheatley Implement Co., 278 Ark. 27, 643 S.W. 2d 537 (1982). Even if the parties have contracted for the recovery of attorney fees, such an award is not permitted. White v. Associates Comm. Corp., 20 Ark. App. 140, 725 S.W. 2d 7 (1987).
Likewise, a victorious defendant has no claim to the recovery of attorney fees. Romer v. Leyner, 224 Ark. 884, 277 S.W. 2d 66 (1955). Allowing recovery of fees would be, in the eyes of the Arkansas Supreme Court, a penalty on the right to litigate. Romer v. Leyner, 224 Ark. 884, 277 S.W. 2d 66 (1955). The term –úw ”or expenses as ordinarily used does not include attorney fees. Arkansas Department of Human Services v. Kislter, 320 Ark. 501, 898 S.W. 2d 32 (1995); State v. McLeod, 318 Ark. 781, 888 S.W. 2d 639 (1994); Lewallen v. Bethune, 267 Ark. 976, 986, 593 S.W. 2d 64 (Ark. App. 1980). The trial judge may not use the category of costs to alter the long-standing American rule. As frequently stated, attorney fees may be recoverable as costs only if allowed by a statute, a rule of court, or some agreement expressly authorizing the taxing of fees. City of Hot Springs v. Creviston, 288 Ark. 286, 713 S.W. 2d 230 (1986); Lewallen v. Bethune, 267 Ark. 976, 986, 593 S.W. 2d 64 (Ark. App. 1980).
This long-standing adoption of the American rule has recently been altered. In Damron v. University Estates, Phase II, Inc., 295 Ark. 533, 750 S.W. 2d 402 (1988) the Supreme Court upheld an agreement between a property owners' association and individual owners that permitted attorney fees to be recovered in disputes. In Griffin v. First National Bank of Crossett, 318 Ark. 848, 888 S.W. 2d 306 (1994), the Supreme Court upheld a provision for attorney fees in a guaranty agreement. The court expressly reversed prior law and authorized attorney fee provisions to be inserted in leases, contracts, and other agreements. To be upheld, the award of fees must be reasonable and must be based, at least in part, on whether the actions of the party seeking the fees were meritorious and successful.
Arkansas has acknowledged the exception that attorney fees will be allowed as an additional element of damages on a –recognized ground of equity,” but the limits of this exception have not been clearly defined. Lewallen v. Bethune, 267 Ark. 976, 593 S.W. 2d 64 (Ark. App. 1980). It is well established that a chancellor may award attorney fees in civil contempt proceedings. Osborne v. Power, 322 Ark. 229, 908 S.W. 2d 340 (1995) (award of $3500 in fees for violation of injunction in Christmas lights nuisance action). For example, when the defendant ignored an injunction to cease the discharge of petroleum wastes onto the plaintiff's property, the plaintiff was reimbursed for the fees incurred by his attorneys' initiating a Rule to Show Cause and prosecuting a contempt of court hearing. C.R.T., Inc. v. Brown, 269 Ark. 114, 602 S.W. 2d 409 (1980) (fees based on hours worked by plaintiff's attorneys). Contempt proceedings originating out of divorce, child custody, and other family law disputes frequently involve attorney fees. Smith v. Smith, 28 Ark. App. 56, 770 S.W. 2d 205 (1980); Payne v. White, 1 Ark. App. 271, 614 S.W. 2d 684 (1981). Another example of this exception is that fees may be awarded to a plaintiff who successfully brings an action against a trustee for breach of his trust. Hosey v. Burgess, 319 Ark. 183, 890 S.W. 2d 262 (1995); Liles v. Liles, 289 Ark. 159, 711 S.W. 2d 447 (1986).
When many persons have a common interest in a monetary fund and one acting for the benefit of all brings a suit for the preservation of the fund and retains counsel at his own cost, the court of equity will order a reasonable fee to be paid out of the fund created, augmented or salvaged for the benefit of others. Millsap v. Lane, 288 Ark. 439, 706 S.W. 2d 379 (1986). The common fund principle has been utilized in cases involving the recoupment of public funds, Crittenden County v. Williford, 283 Ark. 289, 675 S.W. 2d 631 (1984) (taxpayer's suit against a sheriff for a recovery of misappropriated funds), tax refunds, Pledger v. Bosnick, 306 Ark. 45, 811 S.W. 2d 286 (1991) (attorneys preserved a common fund for income tax refunds); American Trucking Assoc. v. Gray, 295 Ark. 43, 746 S.W. 2d 377 (1988) (truck registration taxes), utility refunds, Powell v. Henry, 267 Ark. 484, 592 S.W. 2d 107 (1980), savings and loan association investments, Marlin v. Marsh, 189 Ark. 1157, 76 S.W. 2d 965 (1934), partition, Gardner v. McAuley, 105 Ark. 439, 151 S.W. 997 (1912) and receivership proceedings. Valley Oil Co. v. Ready, 131 Ark. 531, 199 S.W. 915 (1917).
A variation of the common fund exception is the substantial benefit. Even in the absence of any pecuniary recovery, a successful plaintiff may be awarded fees if the litigation produced a –a substantial benefit” to the class or to the corporation in a derivative action. Millsap v. Lane, 288 Ark. 439, 706 S.W. 2d 378 (1986); Hall v. Staha, 303 Ark. 673, 800 S.W. 2d 396 (1990) (stockholders' derivative action). See Hall v. Staha, 314 Ark. 71, 858 S.W. 2d 672 (1993) (remand for determination of reasonable attorney fee).
Formerly, an Arkansas statute limited fees payable to an attorney appointed to represent an indigent criminal defendant to $350 ($1000 in first degree murder cases). In Arnold v. Kemp, 306 Ark. 294, 813 S.W. 2d 770 (1991), the Arkansas Supreme Court concluded that the limited fees violated both the federal and state constitutions. See Michael T. Jackson, Note, The Right to Adequately Compensated Counsel, 45 ARK. L. REV. 771, 789-793 (1992). In subsequently approving the award to the defense attorneys, the Court rejected the argument that appointed attorneys are to be compensated on the same basis that they would be by private clients. State v. Independence County, 312 Ark. 472, 850 S.W.2d 842 (1993). The trial court is to award just compensation, to consider the factors of Rule 1.5 "conservatively applied", and to recognize that attorneys and the bar have some ethical responsibility to provide legal services to indigent criminal defendants. The trial court may also consider, to some undefined extent, the civility, professionalism and attitude toward the court of the attorney. See Lanes v. State, 53 Ark. App. 266, 922 S.W. 2d 349 (1996).
The American rule has been modified by statute in a variety of substantive areas. See the statutes and cases collected in Howard W. Brill, THE ARKANSAS LAW OF DAMAGES, chapter 11 (3rd ed. 1996). The most frequently utilized are:
Exception: Breach of Contract
The burden is on the prevailing party to request fees from the trial court. Crockett & Brown, P.A. v. Courson, 312 Ark. 363, 849 S.W. 2d 938 (1993). A prevailing party is a party "in whose favor the verdict compels a judgment". Cumberland Financial Group, Ltd. v. Brown Chemical Co., 34 Ark. App. 269, 810 S.W. 2d 49 (1991). Fees may be awarded even though the party does not prevail on all counts or theories and does not obtain the total victory sought in the complaint. Gill v. Transcriptions, Inc., 319 Ark. 485, 892 S.W. 2d 258 (1995). In light of the trial court's superior knowledge of the issues and the legal services rendered, only upon a finding of abuse of discretion will the appellate court reverse the trial court's decision to grant, Gill v. Transcriptions, Inc., 319 Ark. 485, 892 S.W. 2d 258 (1995); Marsh & McLennan of Arkansas v. Herget, 321 Ark. 180, 900 S.W. 2d 195 (1995) (defendant employee who prevailed on counterclaim that restrictive covenant was unenforceable awarded fee of $106,536), or deny attorney fees. P.A.M. Transport, Inc. v. Arkansas Blue Cross and Blue Shield, 315 Ark. 234, 868 S.W. 2d 33 (1993). Fees may be awarded to a prevailing defendant, Marsh & McLennan of Arkansas v. Herget, 321 Ark. 180, 900 S.W. 2d 195 (1995), and to a party whose attorney did not charge the client. See Mason v. Jackson, 323 Ark. 252, 914 S.W. 2d 728 (1996). The statute does not authorize appellate courts to award attorney fees. 215 Club v. Devore, 311 Ark. 309, 843 S.W. 2d 317 (1992); Mosley Machinery Co., Inc. v. Gray Supply Co., 310 Ark. 448, 837 S.W. 2d 462 (1992).
The provision has been applied to contracts for legal services, Lockley v. Easley, 302 Ark. 13, 786 S.W. 2d 573 (1990), insurance coverage, Barnett v. Arkansas Transport Co., Inc., 303 Ark. 491, 798 S.W. 2d 79 (1990), construction services, Woodhaven Homes, Inc. v. Kennedy Sheet Metal Co., 304 Ark. 415, 803 S.W. 2d 508 (1991) (no fees in an action for the value of materials supplied), oil and gas leases, Sunbelt Exploration Co. v. Stephens Prod. Co., 320 Ark. 298, 896 S.W. 2d 867 (1995), covenants in warranty deeds, Murchie v. Hinton, 41 Ark. App. 84, 848 S.W. 2d 436 (1993), sales agency agreements, Chrisco v. Sun Industries, Inc., 304 Ark. 227, 800 S.W. 2d 717 (1990), the sale of a business, Gill v. Transcriptions, Inc., 319 Ark. 485, 892 S.W. 2d 258 (1995), and employment contracts. Crain Industries, Inc. v. Cass, 305 Ark. 566, 810 S.W. 2d 910 (1991); City of Fort Smith v. Driggers, 305 Ark. 409, 808 S.W. 2d 748 (1991) (action by police officer for back pay and promotion); ERC Mortgage Group, Inc. v. Luper, 32 Ark. App. 19, 795 S.W. 2d 362, (1990); City of Fayetteville v. Bibb, 30 Ark. App. 31, 781 S.W. 2d 493 (1989).
If the action is basically within the scope of the statute, fees may be awarded for legal services performed on tort or other issues that are incidental to the contract claim. For example, a plaintiff who prevailed on a foreclosure action could claim fees as well for defeating the defendant's counterclaim that was based in tort. Kinkead v. Union National Bank, 51 Ark. App. 4, 907 S.W. 2d 154 (1995). Similarly, fees may be awarded in equitable actions to perform, Childs v. Adams, 322 Ark. 424, 909 S.W. 2d 641 (1995), or to cancel a contract. Sunbelt Exploration Co. v. Stephens Prod. Co., 320 Ark. 298, 896 S.W. 2d 867 (1995). However, the statute is not applicable to claims or causes of actions which may arise out of a contract, but which essentially raise other theories, such as fraud, Wheeler Motor Co. v. Roth, 315 Ark. 318, 867 S.W. 2d 446 (1993) (restitution action rested in deceit); Stein v. Lukas, 308 Ark. 74, 823 S.W. 2d 832 (1992) (no fees in fraud action, even though arising out of a contract), or conversion, Security Pacific Housing Services, Inc. v. Friddle, 315 Ark. 178, 866 S.W. 2d 375 (1993) (recovery was primarily based on conversion, not contract, theory; award o attorney fees reversed); Mercedes-Benz Credit Corp. v. Morgan, 312 Ark. 225, 850 S.W. 2d 297 (1993), or which seek other remedies, such as interpleader, Construction Machinery of Arkansas v. Roberts, 307 Ark. 252, 819 S.W. 2d 268 (1991), or reinstatement to municipal employment. City of Little Rock v. Quinn, 35 Ark. App. 77, 811 S.W. 2d 6 (1991) (no fees to a police officer who successfully challenged his discharge by the Civil Service Commission). The statute does not authorize fees in a "quasi-contract" action, for such an action is a judicial creation to prevent unjust enrichment. Friends of Children, Inc. v. Marcus, 46 Ark. App. 57, 876 S.W. 2d 603 (1994). Likewise, the statute does not authorize fees when more specific statutes do not, as for example, in actions seeking liens for labor or materials furnished, Transportation Properties, Inc. v. Central Glass & Mirror of Northwest Arkansas, Inc., 38 Ark. App. 60, 827 S.W. 2d 667 (1992) (no fees in an action for lien for materials and labor furnished), or actions alleging the failure of an insurer to make payments.
Exception: Workers' Compensation
Exception: Family Law
The court's power to award fees in such proceedings is not limited by the statute. A court of equity has inherent power to grant fees in matters not specifically covered by the statute, including contempt proceedings. Paulson v. Paulson, 8 Ark. App. 306, 652 S.W. 2d 46 (1983). Accordingly, fees may be appropriate in actions to compel compliance with orders for child support, Feazell v. Feazell, 225 Ark. 611, 284 S.W. 2d 117 (1955), child custody, Gavin v. Gavin, 319 Ark. 270, 890 S.W. 2d 592 (1995); Finkbeiner v. Finkbeiner, 226 Ark. 165, 288 S.W. 2d 586 (1956) (fee granted to the wife, even when custody was temporarily removed from her), and visitation. Payne v. White, 1 Ark. App. 271, 614 S.W. 2d 684 (1981). The statutes authorize attorney fees to be assessed against putative fathers in paternity actions. Ar. Code §9-10-109.
When attorney fees are authorized by statute and must be set by the court, the court is not required to base the fees on the amount set in a contract between the attorney and client. See Farm Bureau Mut. Ins. Co. v. David, 324 Ark. 387, 921 S.W. 2d 930 (1996); Southall v. Farm Bureau Mut. Ins. Co., 283 Ark. 335, 676 S.W. 2d 228 (1984).
Exception: Other Provisions
2) probate; Ar. Code §28-48-108(d)
3) trade secrets; Ar. Code §4-75-607
4) small damage claims to motor vehicles; Ar. Code § 27-53-402
5) securities violations; Ar. Code §23-42-106(a)
6) usury; Ar. Code §4-57-108
7) promissory notes; Ar. Code §4-56-101
8) Freedom of Information Act; Ar. Code §25-19-107
9) frivolous litigation; Ar. Code §16-22-309
1.5:340 Financing Litigation [see 1.8:600]
Arkansas Rule of Civil Procedure 54(e) establishes a procedure for presenting claims for attorney fees. Generally, the claim must be presented by motion and filed within 14 days after entry of judgment. The court may require disclosure of any agreement between the attorney and client regarding fees to be paid. The rule is not applicable to fees recoverable as an element of damages, such as those sought under the terms of a contract. Such claims are typically asserted in the pleadings and may involve issues for the jury. The rule covers situations where a statute provides for fees to be awarded by a judge, such as fees awarded to the prevailing party in a breach of contract action. The rule is not applicable to fees awarded as sanctions for violations of the civil procedure rules.
A party seeking attorney fees should initially claim them in the prayer for relief in the complaint. A timely motion for fees after the verdict and prior to the entry of judgment may be sufficient in some instances. An adversary hearing challenging the authority for fees, the documentation and evidence of time and labor, the necessity of the legal work, and the amount of fees is typical. Even if attorney fees are not authorized by case law or statute, the opposing party must properly raise the objection. A party who fails to object to an award of attorney fees at the trial court level is barred from raising that argument on appeal. Kolb v. Morgan, 313 Ark. 274, 854 S.W. 2d 719 (1993); Dempsey v. Merchants Nat'l Bank of Fort Smith, 292 Ark. 207, 729 S.W. 2d 150 (1987).
1.5:400 Reasonableness of a Fee Agreement
- Primary Arkansas References: AR Rule 1.5(a)
- Background References: ABA Model Rule 1.5(a), Other Jurisdictions
- Commentary: ABA/BNA § 41:301, ALI-LGL § 46, Wolfram § 9.3.1
The statutes and the case law typically speak of reasonable attorney fees, but no precise formula is available to determine reasonableness. Warner Holdings, Ltd. v. Abrego, 285 Ark. 434, 688 S.W. 2d 724 (1985). If fees are authorized by statute, the trial court has broad discretion as to the amount. Caldwell v. Jenkins, 42 Ark. App. 157, 856 S.W. 2d 37 (1993). The Supreme Court has emphasized that numerous factors must be examined to determine the reasonableness of the fee. See Love v. United States Fid. & Guar. Co., 263 Ark. 925, 568 S.W. 2d 746 (1978). In particular the court has referred, with approval, to the eight objective elements first set out in the Code of Professional Responsibility and now embodied in Rule 1.5(a) of Professional Conduct. Northwestern National Life Ins. Co. v. Heslip, 309 Ark. 319, 832 S.W. 2d 463 (1992); Sutton v. Ryder Truck Rental, Inc., 305 Ark. 231, 807 S.W. 2d 905 (1991) (breach of an equipment lease); Equitable Life Assur. Soc. v. Rummell, 257 Ark. 90, 514 S.W. 2d 224 (1974) (insurance); Paulson v. Paulson, 8 Ark. App. 306, 652 S.W. 2d 46 (1983) (domestic relations); First Nat'l Bank of Brinkley v. Nash, 2 Ark. App. 135, 617 S.W. 2d 24 (1981) (promissory note). Although the time spent in performing legal service is not the controlling factor, an hourly fee multiplied by the number of hours is a convenient starting place for determining whether a fee is reasonable. Love v. United States Fid. & Guar. Co., 263 Ark. 925, 568 S.W.2d 746 (1978).
In setting fees, the courts may also consider political implications, the complexity of litigation and the impact that fees would have on attorneys' willingness to accept certain cases. Powell v. Henry, 267 Ark. 484, 592 S.W.2d 107 (1980). Judges should apply their own experience and knowledge. Robinson v. Champion, 251 Ark. 817, 475 S.W.2d 677 (1972). In short, the court is to consider all circumstances involved when determining the reasonableness of the fees. New Hampshire Ins. Co. v. Quilantan, 269 Ark. 359, 601 S.W.2d 836 (1980). Trial judges have significant discretion in determining the reasonableness of fees. Absent an abuse of that discretion, the appellate courts are reluctant to reverse. Schmidt v. Schmidt, 268 Ark. 382, 596 S.W.2d 690 (1980). The court may consider the attorney's estimate of the value of his own legal services and the estimate of other attorneys who are familiar with the relevant facts. Kinkead v. Union National Bank, 51 Ark. App. 4, 907 S.W. 2d 154 (1995). Because the trial court is in a superior position to evaluate the nature of the proceedings, the difficulty of the matters and the quality of the legal services, the award will only by set aside on a showing of abuse of discretion. Caldwell v. Jenkins, 42 Ark. App. 157, 856 S.W. 2d 37 (1993).
Federal courts have followed the lodestar approach to setting attorney fees when fees are authorized. The party seeking fees must offer evidence demonstrating the hours worked and the hourly fee claims. Smith v. Quality Ford, Inc., 324 Ark. 272, 920 S.W. 2d 497 (1996) (Title VII claim). The court sets an appropriate hourly fee, based on prevailing rates in the legal community for the type of services provided, and then multiplies that hourly fee by the number of hours of legal work involved. Finally, the court makes an upward or downward adjustment in the total award, reflecting such factors as the benefits gained, the significance of the action, and the impact of the litigation in the community. James B. Speed III, Attorney's Fees Awards in Federal Court: An Arkansas Study, 39 Ark. L. Rev. 99, 108-120 (1985); Little Rock School District v. Pulaski County Special School District No. 1, 959 F.2d 716 (8th Cir. 1992) (award of attorney fees of $1,110,544 in Little Rock school consolidation case).
Excessive legal fees are unethical. Even a reasonable award of attorney fees may be disallowed if the attorney violated ethical rules in his representation of the client. See 1.5:260.
Attorneys may be professionally disciplined for charging fees that are inconsistent with the standards of Rule 1.5(a). See Arens v. Committee on Professional Conduct, 307 Ark. 308, 820 S.W.2d 263 (1991) (attorneys cautioned for charging a fee that was not "reasonably commensurate with the circumstances"). The federal statute on mail fraud (28 U.S.C. §1341) has been applied against attorneys who send fraudulent bills through the mail. See In re Petition for Reinstatement of Lee, 305 Ark. 196, 806 S.W. 2d 382 (1991).
The traditional retainer fee, sometimes called a general retainer, can perhaps be described as a non-refundable fee in which the client has in effect purchased the loyalty of the attorney and some services for a specified period of time. However a special retainer, by which the client pays in advance for legal services for a particular matter, should not be considered non-refundable. See John M. A. DiPippa, Lawyers, Clients, and Money, 18 U. ARK. LITTLE ROCK L.J. 85, 106-110 (1995). A reasonable retainer for services to be performed becomes unreasonable when the services are not provided. Arens v. Comm. on Prof. Conduct, 307 Ark. 308, 820 S.W. 2d 263 (1991). Rule 1.16(d) provides that upon termination of representation, a lawyer shall refund "any advance payment of fee that has not been earned." See also Ark. R. Civ. P. 64. See 1.16:610.
1.5:500 Communication Regarding Fees
- Primary Arkansas References: AR Rule 1.5(b)
- Background References: ABA Model Rule 1.5(b), Other Jurisdictions
- Commentary: ABA/BNA § 41:101, ALI-LGL § 50, Wolfram § 9.2.1
AR Rule 1.5(b) requires that the attorney explain to a new client the basis or rate of the fee and suggests that the communication be in writing. Case law has generally held that if the contract for legal services is entered into at the beginning of the relationship, the client has the burden of establishing that it is invalid or unreasonable. But if the contract is entered into after the commencement of that relationship, when the client may be hesitant to cancel the relationship, the attorney bears the burden.
1.5:600 Contingent Fees
- Primary Arkansas References: AR Rule 1.5(c)
- Background References: ABA Model Rule 1.5(c), Other Jurisdictions
- Commentary: ABA/BNA § 41:901, ALI-LGL §§ 46, 47, Wolfram § 9.4
AR Rule 1.5(c) requires contingent fee contracts to be in writing. With the exception of the two instances in AR Rule 1.5(d), contingent fees are permitted in all types of cases, allowed regardless of the economic status of the client, and may be employed in tandem with a fixed fee or hourly fee. A "reverse" contingent fee in civil cases may be based on the amount of money, if any, saved by the client, provided that the fee is reasonable in amount under the circumstances and the client, fully informed, consents. American Bar Association Formal Opinion 93-373. Any ambiguities in the contingent fee contract will be resolved against the attorney. See L. Scott Stafford, Where's My Percentage of the Recovery? Problems in Collecting A Contingent Legal Fee in Arkansas, ARKANSAS LAWYER (January 1992) 16.
Under Amendment 28 to the Arkansas Constitution, the Arkansas Supreme Court has the power to regulate the percentage or amount of contingency fees.
An attorney who is compelled to withdraw from a case because he must be a witness is entitled to share in a valid contingency fee agreement, provided the attorney did not foresee the necessity of his testimony when he entered the agreement. Aetna Casualty & Surety Co. v. Broadway Arms. Corp., 281 Ark. 128, 664 S.W.2d 463 (1984). An attorney who recognizes from the beginning the necessity, perhaps even merely the potential, of participating as a witness cannot share in a contingent fee. Mobley v. Harmon, 313 Ark. 361, 854 S.W.2d 348 (1993).
1.5:700 Unlawful Fees
- Primary Arkansas References: AR Rule 1.5(d)
- Background References: ABA Model Rule 1.5(d), Other Jurisdictions
- Commentary: ABA/BNA §§ 41:901, ALI-LGL § 48, Wolfram §§ 9.3.2; 9.4
Arkansas has no case law or authority on this topic.
Even prior to the adoption of Rule 1.5(d), Arkansas had held that contingent fees in domestic relations are void and unenforceable as violative of the public policy favoring reconciliation. McDearmon v. Gordon & Gremillion, 247 Ark. 318, 445 S.W.2d 488 (1969).
The 1989 Amendment to AR Rule 1.5(d) permits an attorney to earn a contingency fee based upon successful recovery of accumulated child support or spousal support. The attorney may not enter into such an agreement until after a final order or decree is entered. The Arkansas Supreme Court concluded that public policy would be indeed served if attorneys were given an incentive to assist parties in collecting such support arrearages.
1.5:800 Fee Splitting (Referral Fees)
- Primary Arkansas References: AR Rule 1.5(e)
- Background References: ABA Model Rule 1.5(e), Other Jurisdictions
- Commentary: ABA/BNA § 41:701, ALI-LGL § 59, Wolfram § 9.24
AR Rule 1.5(e) of the rule makes classic referral fees ethical for the first time. No longer is it necessary that the fee be divided in proportion to the services performed; the alternative requirement is that both lawyers accept joint responsibility for the representation in writing. The agreement, which is to be signed by the attorneys and the client, provides a legal basis for the client to sue either attorney for alleged malpractice committed by the other. In effect, the agreement says that the attorneys are treating themselves as ad hoc partners in a single firm for this particular representation for both malpractice litigation and disciplinary proceedings. Ark. Bar. Assn. Op. 92-01.