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PA Bulletin, Doc. No. 20-1066




[ 204 PA. CODE CH. 81 ]

Proposed Amendments to the Pennsylvania Rules of Professional Conduct Regarding Fees

[50 Pa.B. 4013]
[Saturday, August 8, 2020]

 Notice is hereby given that the Disciplinary Board of the Supreme Court of Pennsylvania (''Board'') plans to recommend to the Supreme Court of Pennsylvania that it adopt an amendment to Pennsylvania Rule of Professional Conduct (''RPC'') 1.5 relating to fees, as set forth in Annex A. This proposed rule amendment adds commentary related to duties of successor counsel in contingent fee matters.

 RPC 1.5 governs a lawyer's ethical duties related to fees, with the commentary providing guidance as to the basis or rate of fee, terms of payment, division of fee, and disputes over fees. Although the commentary contemplates the situation where a single billing to a client covers the fee of two or more lawyers who are not in the same firm and who are simultaneously representing a client, most often in contingent fee matters, the commentary does not address the circumstance of a successor counsel from one firm replacing counsel from a different firm in a contingent fee matter, where the services of that predecessor counsel are terminated by the client, without cause.

 This particular scenario may be a common experience for practitioners. The American Bar Association addressed this circumstance in its June 18, 2019 Formal Opinion 487 (''Fee Division with Client's Prior Counsel''). The opinion addresses the successor counsel's duties after taking over the contingent fee matter and underscores the successor counsel's critical duty to advise the client in writing of the predecessor counsel's potential claim on a recovery. Other concomitant duties are discussed pertaining to potential conflicts of interest if the successor counsel negotiates with the predecessor counsel on the client's behalf, and handling disputed funds. The Board's review of the opinion leads us to conclude that guidance on this subject matter would be helpful to Pennsylvania practitioners.

 The Board's proposed amendment to Comment [5] of RPC 1.5 describes the successor counsel/predecessor counsel scenario, reminds successor counsel of his or her duties pursuant to subdivisions (b) and (c) of RPC 1.5, as well as duties set forth in RPC 1.7 and 1.15(f), and references Formal Opinion 487.

 Just as in any contingent fee matter, the successor counsel must comply with RPC 1.5(b) describing the rate or basis of the fee and with RPC 1.5(c)'s requirement of a written fee agreement stating the method by which the fee is determined. These rules are designed to ensure that the client has a clear understanding of the total legal fee. A contingent fee agreement that fails to mention that some portion of the fee may be due to or claimed by the predecessor counsel in the circumstances described herein is inconsistent with the requirements of RPC 1.5(b) and (c).

 If the successor counsel will be involved in negotiating fees with the predecessor counsel on the client's behalf, RPC 1.7 requires the successor counsel to advise the client of the personal conflict of interest inherent in such a situation and to obtain appropriate informed consent to waive the conflict. If a disagreement arises concerning the amount of the predecessor counsel's fees from the proceeds obtained by the successor counsel, the successor counsel must hold such disputed portion of the funds in trust, pending resolution in accordance with RPC 1.15(f).

 Interested persons are invited to submit written comment regarding the proposed amendments by mail to the Executive Office, The Disciplinary Board of the Supreme Court of Pennsylvania, 601 Commonwealth Avenue, Suite 5600, PO Box 62625, Harrisburg, PA 17106-2625, by facsimile at 717-231-3381, or by email address on or before October 7, 2020.

By the Disciplinary Board of the
Supreme Court of Pennsylvania

Executive Director

Annex A






§ 81.4. Rules of Professional Conduct.

 The following are the Rules of Professional Conduct:


Rule 1.5. Fees.

 (a) A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee. The factors to be considered in determining the propriety of a fee include the following:

 (1) whether the fee is fixed or contingent;

 (2) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

 (3) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

 (4) the fee customarily charged in the locality for similar legal services;

 (5) the amount involved and the results obtained;

 (6) the time limitations imposed by the client or by the circumstances;

 (7) the nature and length of the professional relationship with the client; and

 (8) the experience, reputation, and ability of the lawyer or lawyers performing the services.

 (b) When the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, in writing, before or within a reasonable time after commencing the representation.

 (c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

 (d) A lawyer shall not enter into an arrangement for, charge, or collect:

 (1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support; or

 (2) a contingent fee for representing a defendant in a criminal case.

 (e) A lawyer shall not divide a fee for legal services with another lawyer who is not in the same firm unless:

 (1) the client is advised of and does not object to the participation of all the lawyers involved; and,

 (2) the total fee of the lawyers is not illegal or clearly excessive for all legal services they rendered the client.


*  *  *  *  *

Division of Fee

 (4) A division of fee is a single billing to a client covering the fee of two or more lawyers who are not in the same firm. A division of fee facilitates association of more than one lawyer in a matter in which neither alone could serve the client as well, and most often is used when the fee is contingent and the division is between a referring lawyer and a trial specialist. Paragraph (e) permits the lawyers to divide a fee if the total fee is not illegal or excessive and the client is advised and does not object. It does not require disclosure to the client of the share that each lawyer is to receive.

Successor Counsel in Contingency Fee Matters

(5) Unlike the situation in (4), which addresses division of fee between lawyers from different firms who are simultaneously representing a client, there may arise a situation where a client enters a contingent fee agreement with one lawyer (''predecessor counsel''), terminates that lawyer's services without cause, and enters a new contingent fee agreement with a different lawyer (''successor counsel''). In such a situation, and pursuant to a lawyer's duties as set forth in paragraphs (b) and (c), successor counsel must notify the client, in writing, that some portion of the fee may be due to or claimed by predecessor counsel for services performed prior to the termination, and should discuss with the client the effect of that claim on successor counsel's proposed fee agreement. If successor counsel will be involved in negotiating fees with predecessor counsel on the client's behalf, successor counsel must advise the client of the personal conflict of interest inherent in such a situation, and must obtain appropriate informed consent to waive the conflict as set forth in Rule 1.7. If a dispute arises regarding distribution of the recovery, successor counsel must hold the disputed portion of the funds in trust pending resolution, in accordance with Rule 1.15(f). See ABA Formal Opinion 487 (June 18, 2019) (relating to successive contingent fee agreements). While part II.A of Formal Opinion 487 would require the client's written informed consent, Rule 1.7 does not require a writing. However, written consent may benefit both the client and successor counsel for the reasons set forth in Explanatory Comment [20] to Rule 1.7.

Disputes over Fees

[(5)] (6)If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the bar, the lawyer should conscientiously consider submitting to it. Law may prescribe a procedure for determining a lawyer's fee, for example, in representation of an executor or administrator, a class or a person entitled to a reasonable fee as part of the measure of damages. The lawyer entitled to such a fee and a lawyer representing another party concerned with the fee should comply with the prescribed procedure.

[(6)] (7)It is Disciplinary Board policy that allegations of excessive fees charged are initially referred to Fee Dispute Committees for resolution.

[Pa.B. Doc. No. 20-1066. Filed for public inspection August 7, 2020, 9:00 a.m.]

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