N.M. R. Prof'l. Cond. 16-105
N.M. R. Prof'l. Cond. 16-105
Committee commentary. -
Reasonableness of Fee and Expenses
[1] Paragraph A requires that lawyers charge fees that are reasonable under the circumstances. The factors specified in Subparagraphs (1) through (8) are not exclusive. Nor will each factor be relevant in each instance. Paragraph A also requires that expenses for which the client will be charged must be reasonable. A lawyer may seek reimbursement for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges, either by charging a reasonable amount to which the client has agreed in advance or by charging an amount that reasonably reflects the cost incurred by the lawyer.
Basis or Rate of Fee
[2] When the lawyer has regularly represented a client, the lawyer and client ordinarily will have evolved an understanding concerning the basis or rate of the fee and the expenses for which the client will be responsible. In a new client-lawyer relationship, however, an understanding as to fees and expenses must be promptly established. Before any substantial services are rendered, the lawyer must furnish the client with at least a simple memorandum or copy of the lawyer's customary fee arrangements that states the scope of the legal representation to be provided, the basis, rate, or total amount of the fee, and whether, and to what extent, the client will be responsible for any costs, expenses, or disbursements in the course of the representation. A written statement concerning the terms of the engagement reduces the possibility of misunderstanding.
[3] For a single-session legal consultation, the requirement of a writing may be satisfied by providing the client with a written receipt showing how much was paid for the consultation, and stating, if appropriate, that there is no ongoing representation.
[4] Contingent fees, like any other fees, are subject to the reasonableness standard of Paragraph A of this rule. In determining whether a particular contingent fee is reasonable, or whether it is reasonable to charge any form of contingent fee, a lawyer must consider the factors that are relevant under the circumstances. Applicable law may impose limitations on contingent fees, such as a ceiling on the percentage allowable, or may require a lawyer to offer clients an alternative basis for the fee. Applicable law also may apply to situations other than a contingent fee, for example, government regulations regarding fees in certain tax matters.
Terms of Payment
[5] A lawyer may require advance payment of a fee, but is obliged to return any unearned portion. See Rule 16-116(D) NMRA of the Rules of Professional Conduct. A lawyer may accept property in payment for services, such as an ownership interest in an enterprise, providing this does not involve acquisition of a proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 16-108(A) NMRA of the Rules of Professional Conduct. However, a fee paid in property instead of money may be subject to the requirements of Rule 16-108(A) because such fees often have the essential qualities of a business transaction with the client.
[6] An agreement may not be made whose terms might induce the lawyer improperly to curtail services for the client or perform them in a way contrary to the client's interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client. Otherwise, the client might have to bargain for further assistance in the midst of a proceeding or transaction. However, it is proper to define the extent of services in light of the client's ability to pay. A lawyer should not exploit a fee arrangement based primarily on hourly charges by using wasteful procedures.
Prohibited Contingent Fees
[7] Paragraph E prohibits a lawyer from charging a contingent fee in a domestic relations matter when payment is contingent upon the securing of a divorce or upon the amount of alimony or support or property settlement to be obtained. This provision does not preclude a contract for a contingent fee for legal representation in connection with the recovery of post-judgment balances due under support, alimony or other financial orders because such contracts do not implicate the same policy concerns.
Division of Fee
[8] 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 F permits the lawyers to divide a fee either on the basis of the proportion of services they render or if each lawyer assumes responsibility for the representation as a whole. In addition, the client must agree to the arrangement, including the share that each lawyer is to receive, and the agreement must be confirmed in writing. Contingent fee agreements must be in a writing signed by the client and must otherwise comply with Paragraph D of this rule. Joint responsibility for the representation entails financial and ethical responsibility for the representation as if the lawyers were associated in a partnership. A lawyer should only refer a matter to a lawyer whom the referring lawyer reasonably believes is competent to handle the matter. See Rule 16-101 NMRA of the Rules of Professional Conduct.
[9] Paragraph F does not prohibit or regulate division of fees to be received in the future for work done when lawyers were previously associated in a law firm.
Disputes over Fees
[10] If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the bar, the lawyer must comply with the procedure when it is mandatory, and, even when it is voluntary, the lawyer should conscientiously consider submitting to it. Laws 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.
[Adopted by Supreme Court Order No. 08-8300-029, effective November 3, 2008; as amended by Supreme Court Order No. 15-8300-007, effective December 31, 2015.]
.ANNOTATIONS The 2015 amendment, approved by Supreme Court Order No. 15-8300-007, effective December 31, 2015, required a lawyer to provide the basis or rate of fees in writing, provided an exception for fees for indigent representation, and revised the committee commentary; deleted Paragraph B and added new Paragraphs B and C; redesignated the subsequent paragraphs accordingly; in Paragraph D, after "Paragraph", deleted "D" and added "E"; and in the committee commentary, added Paragraph 3 and redesignated the subsequent paragraphs accordingly. The 2008 amendment, approved by Supreme Court Order No. 08-8300-29, effective November 3, 2008, in Paragraph A, deleted the sentence "A lawyer's fee shall be reasonable.", and added the first sentence; in Paragraph B, deleted "When the lawyer has not regularly represented the client"; added "The scope of the representation and" and "and expenses for which the client shall be responsible"; added the exception at the end of the first sentence; and added the last sentence; in Paragraph C, added the phrase "signed by the client" in the second sentence and added the third sentence; in Subparagraph (1) of Paragraph E, changed "services performed by each lawyer or, by written agreement with the client, each lawyer" to "services performed by each lawyer or each lawyer"; and in Subparagraph (2) of Paragraph E, deleted "is advised of and does not object to the participation of all the lawyers involved" and added "agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing". Multiplier applied to a lodestar attorney fee. - To the extent a lodestar value does not take into account the factors that justify a multiplier, the district court has discretion to apply a multiplier factor to a lodestar fee awarded in an action under the Unfair Practices Act, Sections 57-12-1 et seq. NMSA 1978. Atherton v. Gopin, 2012-NMCA-023, 272 P.3d 700. Where plaintiff recovered $5,200.00 plus attorney fees in an action under the Unfair Practices Act, Sections 57-12-1 et seq. NMSA 1978; plaintiff calculated attorney fees of $35,759.10; and the court awarded plaintiff attorney fees of $39,608.40 based on the lodestar method, the court had discretion to apply a multiplier factor to the lodestar fee to the extent a lodestar value did not take into account the factors that justify a multiplier. Atherton v. Gopin, 2012-NMCA-023, 272 P.3d 700. A flat fee for future legal services cannot be considered as earned when paid and must be held in trust until earned. In re Yalkut, 2008-NMSC-009, 143 N.M. 387, 176 P.3d 1119. Non-refundable unearned fees are unreasonable. - Where attorney accepted a flat fee from a client in the form of real property and transferred a portion of that nonmonetary fee to a third party before he had earned it so that he was unable to refund the unearned portion when requested, the property was an unreasonable fee in violation of Rule 16-105(A) NMRA, because non-refundable, unearned fees are unreasonable. An attorney may accept a nonmonetary fee, but regardless of the form it takes any fee must be reasonable and must be refundable until it is fully earned. In re Montclare, 2016-NMSC-023. Enforcement of rule. - While it is not within the jurisdiction of the disciplinary board or the office of disciplinary counsel to regulate fees charged by attorneys, it is within their jurisdiction to enforce the Rules of Professional Conduct; therefore, when the fee charged by an attorney is illegal or grossly excessive, it is appropriate for the disciplinary board to take action. In re Jones, 1995-NMSC-010, 119 N.M. 229, 889 P.2d 837. Attorney has burden of proving value of services rendered by him and for which he claims payment or credit. Van Orman v. Nelson, 1967-NMSC-069, 78 N.M. 11, 427 P.2d 896, rev'd on other grounds, 1969-NMSC-035, 80 N.M. 119, 452 P.2d 188. Contingency fee arrangement of 331/3% of recovery is not excessively unreasonable or unconscionable in taking an appeal when the parties deal at arm's length, the risk is great, the fee arrangement is clear and unambiguous and it is supported by expert testimony that the percentage is reasonable. Citizens Bank v. C & H Constr. & Paving Co., 1979-NMCA-106, 93 N.M. 422, 600 P.2d 1212. Unwritten fee agreement. - Unwritten contingency fee contracts will not be enforced because they violate the Rules of Professional Conduct, and an attorney's recovery in such cases will be limited to a reasonable fee under the circumstances. United States v. 36.06 Acres of Land, 70 F. Supp. 2d 1272 (D.N.M. 1999 ). Attempt to collect fees awarded and fees due under contingency agreement. - The fees awarded to an attorney by a federal judge in a civil rights action were far in excess of what he could have collected from his client under the terms of a contingency agreement, and represented complete payment for his services. The attorney's subsequent efforts to collect amounted to a clearly excessive double fee and violated this rule. In re Atencio, 1987-NMSC-084, 106 N.M. 334, 742 P.2d 1039. Abandonment of client warrants suspension. - If an attorney abandons his client and the client's case, despite his having been paid a substantial fee, he violates this rule and the violation warrants suspension. In re Chowning, 1983-NMSC-085, 100 N.M. 375, 671 P.2d 36 (1983). Six-month suspension and other penalties were warranted since attorney accepted one-half of the fee and failed to represent the client, allowing default to be entered against the client. In re Trujillo, 1990-NMSC-062, 110 N.M. 180, 793 P.2d 862. Promise to probate upon death of clients. - Attorney defrauded his clients when he suggested that if they would each pay him $1,000 plus tax, he would probate their estates at the time of their deaths. In re Gallegos, 1986-NMSC-058, 104 N.M. 496, 723 P.2d 967. Excessive fee since no services provided. - By accepting a $5,000 retainer and taking no discernible action apart from filing a complaint, the attorney charged a clearly excessive fee in violation of this rule. While the fee agreement provided for a reasonable fee for the services to be performed, even a minimal fee becomes excessive when no service is provided. In re Roberts-Hohl, 1994-NMSC-004, 116 N.M. 700, 866 P.2d 1167. Any fee is excessive when absolutely no services are provided. In re Jones, 1995-NMSC-010, 119 N.M. 229, 889 P.2d 837. Indefinite suspension warranted where excessive fee involved. In re Quintana, 1985-NMSC-101, 103 N.M. 458, 709 P.2d 180; In re Martinez, 1988-NMSC-033, 107 N.M. 171, 754 P.2d 842. An attorney who collected a fee to represent a client in a criminal matter and who failed to return the fee even though the charge was dismissed without any action by the lawyer, who subsequently contended, knowingly and dishonestly, that he was entitled to the fee in disciplinary proceedings, and who forged a physician's signature on a fitness to practice law form on an application to the Arizona bar, was suspended indefinitely. In re Cherryhomes, 1993-NMSC-044, 115 N.M. 734, 858 P.2d 401. Indefinite suspension was warranted because of attorney's violation of this rule and other rules, such as Rule 16-101 NMRA , by failing to provide competent representation; Rule 16-302 NMRA, by failing to expedite litigation; Rule 16-303(A)(1) NMRA, by making an untrue statement of material fact to a tribunal; Rule 16-304(D) NMRA, by failing to comply with a discovery request; Rule 16-505(A) NMRA, by practicing law in a jurisdiction where doing so violates regulations; and Rule 16-804(C),(D) and (H) NMRA, by engaging in conduct involving dishonesty, deceit, and misrepresentation, by engaging in conduct prejudicial to the administration of justice, and by engaging in conduct that adversely reflects upon his fitness to practice law. In re Righter, 1999-NMSC-009, 126 N.M. 730, 975 P.2d 343. Actions deemed violations of this rule. In re Horton, 1983-NMSC-003, 100 N.M. 13, 665 P.2d 275; In re Martinez, 1988-NMSC-033, 107 N.M. 171, 754 P.2d 842; In re Tapia, 1990-NMSC-092, 110 N.M 693, 799 P.2d 129; In re Hamar, 1997-NMSC-048, 123 N.M. 795, 945 P.2d 1013; In re Chavez, 2000-NMSC-015, 129 N.M. 035, 1 P.3d 417. Law reviews. - For article, "Ethics and the Settlement of Civil Rights Cases: Can Attorneys Keep Their Virtue and Their Fees?", see 16 N.M.L. Rev. 283 (1986). Am. Jur. 2d, A.L.R. and C.J.S. references. - 7 Am. Jur. 2d Attorneys at Law §§ 237 to 314. Division of fees or compensation between cooperating attorneys, 73 A.L.R.2d 991. Attorney's splitting fees with other attorney or layman as ground for disciplinary proceeding, 6 A.L.R.3d 1446. What constitutes contract between husband or wife and third person promotive of divorce or separation, 93 A.L.R.3d 523. Validity, construction, and effect of contract providing for contingent fee to defendant's attorney, 9 A.L.R.4th 191. Attorney's charging excessive fee as ground for disciplinary action, 11 A.L.R.4th 133. Validity of statute or rule providing for arbitration of fee disputes between attorneys and their clients, 17 A.L.R.4th 993. Attorney's charging lien as including services rendered or disbursements made in other than instant action or proceeding, 23 A.L.R.4th 336. Attorney's retaining lien as affected by action to collect legal fees, 45 A.L.R.4th 198. Attorneys' fees: cost of services provided by paralegals or the like as compensable element of award in state court, 73 A.L.R.4th 938. Validity and construction of agreement between attorney and client to arbitrate disputes arising between them, 26 A.L.R.5th 107. Divorce and separation: Attorney's contingent fee contracts as marital property subject to distribution, 44 A.L.R.5th 671. Alimony or child-support awards as subject to attorneys' liens, 49 A.L.R. 5th 595. Circumstances under which attorney retains right to compensation notwithstanding voluntary withdrawal from case, 53 A.L.R.5th 287. Limitation to quantum meruit recovery, where attorney employed under contingent-fee contract is discharge without cause, 56 A.L.R.5th 1. Method of calculating attorneys' fees awarded in common-fund or common-benefit cases-state cases, 56 A.L.R.5th 107. Construction and application of "common fund" doctrine in allocating attorneys' fees among multiple attorneys whose efforts were unequal in benefiting multiple claimants, 42 A.L.R. Fed. 134. Legal services provided by law students as basis for award of attorneys' fees or other litigation costs in action under Freedom of Information Act (5 USCS § 552(a)(4)(E), 73 A.L.R. Fed. 732. Effect of contingent fee contract on fee award authorized by federal statute, 76 A.L.R. Fed. 347. Award of attorneys' fees in excess of $75 per hour under Equal Access to Justice Act (EAJA) provision (28 USCS § 2412(d)(A)(2)(ii) ) authorizing higher award - cases involving social security law, 113 A.L.R. Fed. 267. Award of attorney's fees in excess of $75 per hour under Equal Access to Justice Act (EAJA) (28 USCS § 2412(d)(2)(A)(ii) authorizing higher awards - cases involving law other than social security law, 119 A.L.R. Fed. 1 7A C.J.S. Attorney and Client §§ 281, 283, 294.