f/k/a . . . the archives

February 24, 2009

foxes guarding the golden eggs [ALF #2]

Filed under: lawyer news or ethics,viewpoint — David Giacalone @ 2:13 pm

- note: this is #2 in our ALF series on American Legal Fees; click for #1 and #3 and #4-

.. .. ALF-Esq & Prof. Yabut discuss self-regulation .. ..

ALF: But, Yabut, why can’t the Melmac Bar & Grill sponsor the Feline Protection League?  You know how important cats are to us.

Yabut:  For snacks and meals, you mean.

ALF: Our motto remains: “we always serve you first.”

The f/k/a Gang has been writing about the lax, self-regulated lawyer discipline system since we started this weblog in the Spring of 2003. [See Should Lawyers Control Lawyer Discipline?, June 22, 2003, and links on our Lawyer Disciplinary System Page.]  Sleepy Bar watchdogs often seem to be enabling their lupine kin rather than protecting the sheep. Like the legal reform group HALT, we believe our nation should:

“Replace the failed system of self-regulation — lawyers policing lawyers — with disciplinary panels on which non-lawyers have a majority voice.” [see our post HALT Suggests a "Better Way to Discipline Lawyers" (June 25, 2003)]

For more, see HALT’s 29-page (pdf) paper “Consumers of Legal Services: Unprotected and Underserved,” which notes: “The system of attorney self-regulation is an abject failure and lawyers’ so-called ‘Rules of Professional Responsibility’ do not require attorneys to provide even the most basic consumer information to prospective clients.”  HALT urges the broader consumer advocacy community to join their efforts to help achieve “Simple, Affordable, Accountable Justice for All.”

Foxes in the Chicken Coop:   We’ve spent 6 years complaining about bar associations that act like mercantile guilds, by protecting lawyers from competition rather than clients from greedy lawyers. There is, in fact, no better reason to junk the self-regulatory system utilized by the legal profession than its utter failure to take its ban on unreasonable fees seriously.  In most jurisdictions, the rule against excessive fees has devolved in practice into merely a ban on outright felonious, fraudulent, or otherwise dishonest billing practices (e.g., billing for phantom hours, charging more than one hourly-fee client for a particular interval of time, keeping unearned retainers), rather than telling a lawyer “You’ve charged this client far more than your services of worth.”  As demonstrated by their reactions to opinions expressed at this weblog, many lawyers have convinced themselves that any fee a mentally-competent client agrees to is by definition “fair” and they should be able to charge whatever the market will bear.

Except for judicial review in million-dollar cases, the monitoring of excessive fees by the legal profession has been basically delegated to Lawyer-Client Fee Dispute programs.  When HALT reviewed such programs state-by-state in 2007, and issued Fee Dispute Report Cards, it found:

“The most pervasive complaint about lawyers is that their fees are too high for the work done. But in evaluating the programs established to settle these disputes between clients and lawyers, our Report Card found a system plagued by an appalling pattern of biased procedures, insufficient resources and little enforcement.” And,

“By allowing lawyers to refuse participation in the fee arbitration process, hiding information from the public about the system, placing roadblocks in front of consumers wishing to resolve a fee dispute, stacking arbitration panels with attorneys and refusing to assist clients in recouping their money, fee arbitration programs across the country are routinely failing to provide a much-needed service to American legal consumers. Until there is meaningful reform, the legal profession has only itself to blame for the widespread public belief that lawyer fees are out of control and going unregulated.”

If self-regulation isn’t to blame, how else can we explain:

  • So Little Guidance from the Bar or Bar Counsel on How to Avoid Hourly-Billing Excesses and Abuse: You have to look pretty hard to find actual, practical discussion from bar associations or official bar sources on how lawyers and firms can properly use hourly billing.  (One exception, which itself could use some amplification, is the 1996 Statement of Principles from the ABA Task Force on Lawyer Business Ethics).  As a result, far too many lawyers seem to have forgotten that:

–  Hours Expended x Hourly Rate is meant to be the maximum fee that a lawyer can charge under an hourly billing agreement.  The figure is not automatic or set in stone but,  as the ABA Statement of Billing Principles says: “The lawyer is expected to use professional judgment in determining whether the number of hours spent on a matter is reasonable under the circumstances of the engagement” — e.g., making appropriate reductions for time that is not used in an efficient, cost-effective manner.

– Having multiple partners and associates billing their full hourly rates for attending a meeting or court session where they have virtually no active role is unacceptable.  In addition, as the ABA Statement of Billing Principles says, “If the primary purpose of participation in a meeting or project by a less experienced lawyer in a law firm is to train such lawyer, then the lawyer’s time should not be billed to the client.”

– Excessive time spent reviewing and rewriting the work of other lawyers suggests that the original work was not adequately done and should not be billed at regular rates, if at all.

update: See our valedictory post “understanding and reducing legal fees” (Feb. 28, 2009)

  • Never sanctioning nor threatening to sanction a firm for imposing excessive hourly-billing quotas on its attorneys, despite the incentives created by such quotas to over-produce and pad bills, and the devastating impact on the lives of lawyers and on their ability to put the client’s interests first. See Sanction This (Firm)! (March 1, 2004).  As that post points out, when the ABA’s Ad Hoc Committee on Billable Hours produced a Model Diet meant as a “best practices” summary for law firms, its suggestion of “2300 Creditable Hours for Lawyers” per year would actually mean as much as 60 hours at work per week for associate attorneys.
  • Allowing the Standard Contingency Fee — charging every client the same percentage fee [one-third or more] or fee structure — to continue.  Virtually every client is charged the same “standard fee” [one third or 40% or more], no matter how easy and lucrative a particular case may be, although its use is contrary to the history and rationale for the contingency fee, and often results in excessive fees not justified by the risk taken by the lawyer of working without reasonable compensation; see our post on ethical duties when using contingency fees.

Indeed, in 1994, a courageous panel of the American Bar Association challenged the use of standard contingency fees and percentages not related to the level of risk taken by the lawyer in Formal Ethics Opinion 94-389: Contingent Fees ($$ download; discussed in detail here).  The ethics committee noted that  the principles were often “honored in the breech,” and called for the Bar to “redouble its efforts to assure that the ethical obligations associated with entering into a contingent fee arrangement are fully understood and observed.”  Instead, the personal injury bar used the ABA’s Ethics 2000 revisions to the model rules to undo Op. 94-389, by eliminating all phrases in official commentary to the rules that directly support the reasoning of the 1994 Opinion and adding wording that could be used to support standard contingency fees.  (See my 2002 Open Letter to the FTC)

 

In 2007, the Ohio Bar’s new ethics rules were promulgated, and they continue to ban the advertising of discount fees as being “misleading.” Comment to Rule 7.1 See our post we need more low-fee lawyers (even in Ohio)” (March 22, 2006)

  • Failure to discipline lawyers who engage in coercive boycotts aimed at forcing states (and taxpayers) to pay higher fees to assigned counsel — conduct that in fact violates antitrust laws. (see, e.g., our prior post)

  • Overlooking Fiduciary Obligations:  When it comes to setting fees, you’d never know that lawyers were fiduciaries, with special obligations (far beyond arm’s length marketplace relationships) to fully inform clients and treat them fairly.  For example, many lawyers argue that their fiduciary duties toward the client do not kick in before the retainer is signed.  Very few “counselors at law” feel any obligation at all to advise clients about the existence of less-expensive options, such as unbundling, mediation, or pro se resources on court websites.  (see prior posts “fees and the lawyer fiduciary,” and  “the lawyer’s fiduciary duty to disclose“).

The United Kingdom and Australia have taken the regulation of lawyers away from the bar. (see this post, and this)  America’s legal consumers should also be able to trust that our watchdogs are protecting us chickens and our eggs rather than the foxes at the Bar.

p.s. Consumers need to protect themselves with information.  When it comes to fees, you may want to check out our last piece of legal punditry here at f/k/a: “understanding and reducing attorney fees” (February 28, 2009)

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