In a major victory for p/i clients and foes of the standard contingency fee, the Arizona Supreme Court adopted new Rules of Professional Conduct earlier this month that include fee provisions significantly different from those recommended by the ABA’s Ethics 2000 Commission and incorporated in the ABA’s New Model Rules of Professional Conduct. The new AZ Rules, were adopted on June 6, 2003, and will be effective as of December 01, 2003.
As I have argued here, the Ethics 2000 process constituted concerted action to restrain competition over contingency fee levels. The changes made by the ABA and Ethics 2000 in Rule 1.5 of the Model Rules “make it clear that the ABA has capitulated to defenders of the ‘standard’ contingency fee. The approved Rule changes reverse recent attempts within the ABA, and by client advocates across the nation, to apply traditional ethical and fiduciary duties to the use of contingency fees.”
The most dramatic improvement in the new Arizona version of Rule 1.5 is its change to the traditional 8th factor to be considered in determining the reasonableness of a fee. Rule 1.5(a)(8) no longer has the cryptic phrase “whether the fee is fixed or contingent.” As of Dec. 1, 2003, the factor to be considered is “the degree of risk assumed by the lawyer.” Combined with factor (1)’s consideration of “the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly,” it is now clear in Arizona that the reasonableness of a contingency fee will depend on how much risk the lawyer assumed of working extensive hours without adequate pay, and how much skill and exertion it will take to perform the task. That makes applying a “standard” fee to each client unethical.
In addition, the new AZ Rule restores the clause “including consideration of the degree of risk assumed by the lawyer at the outset of the representation” to a new Commentary section , which discusses the reasonableness standard as applied to contingency fees. The final version of Ethics 2000’s proposal removed the clause, which had been part of previous drafts.
- Arizona also refused to follow Ethics 2000’s gutting of the current Commentary section  — which is now renumbered as section . The ABA deleted the statement that “When there is doubt whether a contingent fee is consistent with the client’s best interest, the lawyer should offer the client alternative bases for the fee and explain their implications.” The Arizona version keeps the sentence, which supported the obigations outlined in the landmark ABA Formal Ethics Opinion 94-389 [described here], except for changing the word “offer” to “discuss with.”
Thanks to the example of the Arizona Supreme Court, States that are “uncomfortable” with the ABA’s changes to Model Rule 1.5 now have a model to use to spur competition and client choice over the level and use of contingency fees. Lawyers, clients and consumer advocates who were disappointed and appalled by the Ethics 2000 conspiracy to defend the standard contingency fee should let the rule-making bodies in their own states know about the Arizona alternative.
The Arizona choice is in stark contrast to the path taken by North Carolina’s Supreme Court earlier this year, when it became the first state to consider the Ethics 2000 model rules and act upon the proposals. A black-line version of the North Carolina Rules (effective as of March 1, 2003) can be found here. NC seems to have joined the contingency fee conspiracy.
from Jackie Cliente: The ABA showed its disdain for the average client, when the House of Delegates rejected a proposal by Ethics 2000 that clients be given a written statement of the hourly or flat fee that would be charged by their lawyer (despite an exemption for fees likely to total less than $500). The new Arizona Rule 1.5 (b) does include the requirement of a written statement of the basis or rate of the fee to be charged.