Roman A. Shaul
Be Careful When Changing The Fee Arrangement with Your Client
Most lawyers have had that case that looks so simple on the front end, but gets very complicated when you start trying to parse out things. Invariably, the lawyer says to herself, "I should have asked for a better rate for this mess." In some situations, you still can ask for a better rate. Sometimes you should not.
Fee arrangements are contracts and generally governed by the law of contracts. See Restatement (Third) of The Law Governing Lawyers § 18 (2000) ("Restatement"). Contracts can normally be modified by mutual consent of the parties, however, based on the fiduciary nature of the lawyer-client relationship, modifications of existing fee agreements are suspect. See Comment 17 to ABA Model Rule of Professional Conduct 1.8 ("relationship between lawyer and client is a fiduciary one"). "The courts are generally in accord that once the initial contract has been formed and the fiduciary relationship of client and lawyer has begun, any change in the contract will be regarded with great suspicion." Charles W. Wolfram, Modern Legal Ethics § 9.2.1, at 503 (1986) (citing cases). "Thus, an agreement that is not made roughly contemporaneously with the formation of the client-lawyer relationship will have to bear an extra burden of justification." Geoffrey C. Hazard & W. William Hodes, The Law of Lawyering §8.11 at 8-26 (3d ed. 2001).
The modification of existing fee agreements is permissible under the Alabama Rules of Professional Conduct. To do this, the lawyer must show that any change is reasonable under the circumstances at the time of the modification and that the new agreement is communicated to and accepted by the client. Annual, or scheduled, incremental increases to a lawyer's regular hourly billing rate is generally permissible if such practice is communicated clearly to and accepted by the client at the commencement of the client-lawyer relationship and any periodic increases are reasonable under the circumstances.
Modifications sought by a lawyer that change the basic nature of a fee arrangement or significantly increase the lawyer's compensation absent an unanticipated change in circumstances ordinarily will be unreasonable. Changes in fee arrangements that involve a lawyer acquiring an interest in a client's...