Editor's Note:
State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
|
How must an attorney bill for work on two or more matters at the same time? What are the ethical considerations involved?
Where an attorney has performed work on more than one matter at the same time, the attorney is required to satisfy the requirements of Business and Professions Code section 6148, rule 4-200 of the California Rules of Professional Conduct, and the requirements mandated by the attorney's fiduciary duties to both clients. Accordingly, an attorney may not bill a full hourly rate to more than one client for the same time period, or bill one client a multiple of that hourly fee for the same time period, unless the attorney has: disclosed this billing practice at the outset of the relationship; obtained client consent; and made sure that the fee charged to each client is not "unconscionable" as that term is defined under rule 4-200 of the California Rules of Professional Conduct.
Rule 4-200 of the California Rules of Professional Conduct.
Business and Professions Code section 6148.
Attorney A represents Asbestos Company #1, which has been named as a defendant in four asbestosis cases filed in county superior court by four different plaintiffs. Attorney A's fee agreement with Company #1 provides that Attorney A shall bill Company #1 by the hour for services rendered. Attorney A has worked for Company #1 for over ten years and has handled numerous matters on its behalf. Attorney A's fee agreement does not address the issue of work done for other clients simultaneously.
The court set a status conference in each of the four cases involving Company #1 for April 1st. Attorney A appeared in court on behalf of Company #1 for each conference. Attorney A spent a total of four hours in court on April 1st attending the status conferences. Attorney A inquires whether four hours may be ethically billed to each file.
Attorney A has also just been retained to represent Company #2, Company #3, and Company #4. Attorney A's fee agreement with these companies is identical to the fee agreement with Company #1. The lawyer has complied with her ethical requirements with respect to any potential conflict of interest in the multiple representations. All of the companies are named defendants in a personal injury case in county superior court. Attorney A charges each client an hourly rate for services rendered.
Attorney A attended a status conference on April 2d representing all four defendants. Attorney A was in court a total of two hours that day. May Attorney A ethically bill each client for two hours of courtroom time?
Attorney A's fee agreements with all of Attorney A's clients provide that Attorney A will be paid hourly for time spent flying to court appearances and depositions out-of-state. On April 3rd, Attorney A flew to New York to attend the deposition of Company #1's CEO. The flight took six hours. Attorney A brought along work relating to a case for Company #2, on which Attorney A spent five hours. May Attorney A ethically bill six hours to Company #1, and five hours to Company #2, for the time spent on the airplane?
All three of the hypotheticals involve situations that could result in the charging of an improper fee if careful steps are not taken. In analyzing these hypotheticals, there are two primary issues which must be addressed: (1) whether a client has given informed consent to the terms of the fee agreement; and (2) assuming that a client has consented, whether the fee is unconscionable under rule 4-200 of the California Rules of Professional Conduct (hereinafter "rule 4-200"). Either the lack of client consent or the finding of unconscionability of the fee would independently result in that fee being unethical if an attorney has billed for work performed on two or more client matters at the same time.
The relationship of attorney to client is of the highest fiduciary character. (Neel v. Magana, Olney, Cathcart & Gelfand (1971) 6 Cal.3d 176 [98 Cal.Rptr. 837]; McDaniel v. Gile (1991) 230 Cal.App.3d 363, 373 [281 Cal.Rptr. 242, 247]; Cline v. Zappettini (1955) 131 Cal.App.2d 723 [281 P.2d 35].) As such, it is well settled that attorney fee agreements must be fair, reasonable, and fully explained to the client. (Alderman v. Hamilton (1988) 205 Cal.App.3d 1033, 1037 [252 Cal.Rptr. 845].) Attorneys also have a "professional responsibility to make sure clients understand their billing procedures and rates." (Severson & Werson v. Bolinger (1991) 235 Cal.App.3d 1569, 1573 [1 Cal.Rptr.2d 531].) An attorney may not recover a fee in excess of that which was explained to the client, and to which the client has consented. (Ibid.)
Although Attorney A's contract provides that Attorney A may bill for travel time, the contract does not contain any discussion of how Attorney A shall account for travel time during which Attorney A also works for another client. Accordingly, it could be interpreted to mean that Attorney A may bill clients for time spent travelling or attending court, regardless of whether Attorney A also spends that same hour working on another client's matter. However, the contract may also be interpreted to mean that Attorney A's clients pay Attorney A's full rate for the exclusive use of a particular hour, but are entitled to share the cost of an hour shared with another of Attorney A's clients. This interpretation is bolstered by the nature of the fiduciary relationship between attorney and client, which places upon the attorney the burden of demonstrating that the contract was fair. (Cline v. Zappettini, supra, 131 Cal.App.2d 723.)
Where a contract is reasonably susceptible of either of two interpretations, it is ambiguous and ambiguities are construed against the drafting party. (Civ. Code, § 1654.) This is particularly true where the drafting party is an attorney. (Bartlett v. Pacific Nat. Bank (1952) 110 Cal.App.2d 683, 691 [244 P.2d 91].) When a lawyer does not fully disclose that the lawyer will be billing the same time on more than one matter or for more than one client, the lawyer cannot ethically engage in such billing practices. Thus, Attorney A may not bill two clients a full hourly fee for the same hour unless Attorney A has made it clear in the fee agreement that Attorney A intends to do so, and each client has consented. This is consistent both with general contract law, and with an attorney's fiduciary obligations to the client to make sure that the fee agreement is fair and reasonable.
In accordance with these concepts, the attorney has a separate obligation to the client created by the fiduciary nature of the attorney-client relationship. The fiduciary relationship requires the attorney to disclose fully to the client all facts which materially affect the client's rights and interests. (Neel v. Magana, Olney, Cathcart & Gelfand, supra, 6 Cal.3d at pp. 188-189.) As such, an attorney who works on two matters simultaneously is not required to divide that time equally. However, the attorney who fails to do so must fully and timely disclose the nature of her billing practices to her client. Failure to apprise the client of billing practices exposes the attorney to the charge of benefitting at the expense of her client, a practice which clearly violates the attorney's fiduciary duty. Where the billing practices have been fully disclosed, and the client has consented to the fee arrangement, billing in conformance with a disclosed fee agreement does not expose the attorney to liability for misconduct.
This is in accord with the requirements of Business and Professions Code section 6148, which provides that a written fee contract must contain "any basis for compensation including, but not limited to, hourly rates, statutory fees or flat fees, and other standard rates, fees and charges . . . ." (Emphasis added.)1
The fee charged to a client by an attorney is usually left to agreement between the parties. (Estate of Baum (1989) 209 Cal.App.3d 744 [257 Cal.Rptr. 566]; Berk v. Twentynine Palms Rancho, Inc. (1962) 201 Cal.App.2d 625 [20 Cal.Rptr. 144].) Accordingly, the fee agreement, which must be fair, reasonable, and fully explained (Alderman v. Hamilton, supra, 205 Cal.App.3d 1033), must be examined as to its fairness as of the time it was made, not in hindsight. (Cetenko v. United California Bank (1982) 30 Cal.3d 528 [179 Cal.Rptr. 902].)
The application of these standards to the above hypotheticals reveals a number of consistent themes. First, an attorney may charge a client only for that work the attorney actually does for the client.2 When a lawyer's fee is based on the time spent on a client's matter, the attorney may ethically charge the client only for that time. Thus, when the attorney spends four hours in court on April 1st on behalf of a single client, the attorney may ethically charge the client four hours, and only four hours. Any charge in excess of that amount would constitute a fee for work not actually performed, which has been held by the California Supreme Court to be unethical. (Bushman v. State Bar (1974) 11 Cal.3d 558 [113 Cal.Rptr. 904] (fee unconscionable where it does not relate to the value of the legal services performed, and where the attorney cannot demonstrate that the work was actually performed).3)
The ethical considerations of fees charged are governed by rule 4- 200. Rule 4-200(A) mandates that "[a] member shall not enter into an agreement for, charge, or collect an illegal or unconscionable fee." Whether a fee is "unconscionable" is tested under rule 4- 200(B) which enumerates a number of factors.4 Significantly, rule 4-200(B)(11) states that one factor is the informed consent of the client to the fee. Accordingly, this discussion of unconscionability under rule 4-200 assumes that the client has provided informed consent to a fee which is based, in part, on a "double billing" practice. Other factors under rule 4-200(B) include the amount of the fee in proportion to the value of services performed, the sophistication of the attorney and the client, the difficulty of the issue involved and the skill required to perform the service, the likelihood that acceptance of the matter will preclude the attorney from accepting other employment, the amount involved and the results obtained, the time limitations imposed by circumstances or by the client, the nature and length of the attorney-client relationship, the experience, reputation, and ability of the attorney, whether the fee is fixed or contingent, and the time and labor required.
The California Supreme Court has defined an "unconscionable" fee as a fee which is "so exorbitant and wholly disproportionate to the services performed as to shock the conscience". (Tarver v. State Bar (1984) 37 Cal.3d 122, 134 [207 Cal.Rptr. 302, 309].) The court has also noted that, in most cases, an unconscionable fee involves fraud or overreaching by the attorney. (Bushman v. State Bar, supra, 11 Cal.3d at p. 563, citing Herrscher v. State Bar (1935) 4 Cal.2d 399.)5
The United States Supreme Court has also discussed, in civil rights cases, what constitutes a reasonable fee. The Supreme Court has specifically held that an attorney is not entitled to recover hours which are not reasonably expended, or which are excessive, redundant, otherwise unnecessary, or which are not properly billed to one's client. (Hensley v. Eckerhart (1983) 461 U.S. 424, 434 [103 S.Ct. 1933].) While Hensley was not an ethics opinion, it provides valuable guidance regarding proper billing practices. Hensley makes clear that a fee which does not "shock the conscience" because of the amount, is nevertheless unconscionable if it involves payment for work which was not done, or work which is either redundant, excessive, or unnecessary.
Recently, the California Court of Appeal examined the issue of unconscionability under both contract law and the California Rules of Professional Conduct in the context of a legal malpractice case. In Shaffer v. Superior Court (1995) 33 Cal.App. 4th 993 [39 Cal.Rptr. 2d 506], one of the plaintiff's allegations was that the defendant law firm had charged an unconscionable fee.6 The Shaffer court articulated the issue as follows:
[D]id plaintiff get what he paid for; did he get services from Shaffer [the attorney] which were worth, as measured in the market place, the $215 to $250 per hour which defendant charged him for her work? . . . If, in the legal marketplace, attorneys would have charged fees which are not disproportionaly dissimilar to those charged by defendant for those services, then it is difficult to see how such fees could be considered unconscionable under [r]ule 4-200. (Id. at p. 1002, italics in original.)
The Court of Appeal went on to hold that, in determining whether a fee is unconscionable, the attorney's profit margin or costs may not be taken into account. (Shaffer v. Superior Court, supra, 33 Cal.App.4th at p. 1003.)
When a lawyer has informed a client of the fee and obtained the client's consent, and the fee otherwise meets the requirements of the rule 4-200, the hypotheticals do not create situations which rise to the level of unconscionability. In each scenario, the work was actually performed and the time billed to each file does not exceed that which would have been expended but for fortuity of scheduling and/or representing multiple clients. However, these scenarios also underscore the importance of disclosure and consent.
One of the factors under rule 4-200 to be analyzed in determining whether a fee is unconscionable is the likelihood that the acceptance of the particular employment will preclude other employment by the member. Where an attorney is not precluded from working on other matters concurrently, a fee structure which anticipates such unavailability may well be held unconscionable. For example, attending a status conference on behalf of a single client precludes the attorney from scheduling a deposition or a hearing in a different courtroom for that same time period. However, it does not prevent the attorney from attending other status conferences set in the same courtroom on the same date. As such, if the attorney is able to work on multiple matters within that same time frame, the attorney is clearly allowed to do so. However, the attorney should not bill each of the clients as though the attorney worked exclusively on that client's file for that time frame, if in fact the attorney did not.
Similarly, travelling out of state on one client's behalf does not automatically preclude an attorney from working on other matters during the flight. If the attorney is in fact unavailable to other clients during that time frame, and the client's matter has monopolized the attorney's time during a given period, then the attorney may appropriately bill the client for the entire time spent on that matter. However, absent consent, where the attorney has chosen to spend a portion of that time meeting the needs of another client, then the first client has not monopolized that time, and should not be billed for the time devoted to someone else.
Although there are other factors set forth in rule 4-200 which enter into the unconscionability analysis, these other factors apply with equal validity whether an attorney is working on a single matter or multiple matters simultaneously. In either situation, the more difficult the task to be performed, the higher the fee which may be charged without being held unconscionable. (Cannon v. State Bar (1990) 51 Cal.3d 1103 [275 Cal.Rptr. 433].)
Where the amount of the fee appears significantly disproportionate to the result obtained, the fee may be held unconscionable. (Goldstone v. The State Bar of California (1931) 214 Cal. 490 [6 P.2d 513] (where the attorney did nothing more than go to an insurance carrier's office and identify the claimant, a fee equal to 35% of the benefits paid held unconscionable).) Because these factors apply in either case, a detailed discussion of these other factors does not further the analysis of unconscionability in the double billing situation. However, as is the case when an attorney works on a single matter, the attorney who seeks to bill a full hourly fee to more than one client for work performed in a single hour must consider all of the factors set forth in rule 4-200, not merely the ones discussed above.
In conclusion, an attorney may bill the attorney's full hourly fee to more than one client for the same time period, or bill one client a multiple of that hourly fee for the same time period, only where the attorney is able to do so without violating the fiduciary duty to all involved clients. The fiduciary duty requires that the attorney disclose this billing practice in clear, unambiguous terms, to each client, and obtain each client's consent in advance. In billing this time, the attorney must take care not to charge the clients an unconscionable fee.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of the State Bar of California. It is advisory only. It is not binding upon the courts, the State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
Moreover, California distinguishes between (1) a fee the court may reduce in a civil suit because the lawyer charged too much for the services rendered, and (2) a fee so exorbitantly out of proportion that it sinks to "unconscionability" disciplinable by the Bar. (Herrescher v. State Bar (1935) 4 Cal.2d 399, 402 - 403 [49 P.2d 832, 833-834] ("[w]e think the proper rule in such cases is that the mere fact that a fee is charged in excess of the reasonable value of the services rendered will not of itself warrant discipline of the attorney involved. Ordinarily, the propriety of the fee charged should be left to the civil courts in a proper action.").)
While California disciplines attorneys for "unconscionable" fees, jurisdictions applying DR 2-106(A) of the American Bar Association Model Code of Professional Responsibility do so for "clearly excessive" fees, and those applying rule 1.5(a) of the American Bar Association Model Rules of Professional Conduct do so for fees which are not "reasonable," all three standards contain similar factors for determining whether the standards were violated. The question of whether a fee is "reasonable" is a "legal concept that always depends upon a case by case assessment." (Hazard & Hodes, The Law of Lawyering (2d ed. 1990) §1.5:201, p. 106.)
| . |