RI-50
May 29, 1990
SYLLABUS
It is not improper for a lawyer or law firm to agree with a client that the fee for a particular legal task be a fixed amount.
References: MRPC 1.1, 1.5, 1.7.
TEXT
One of a law firm's corporate clients has requested that the firm, as well as several other firms performing work for that corporate client, consider providing services for the defense of workers' compensation cases on a flat fee basis. A single specified dollar amount would be paid to the law firm for all work on a case, from its onset up to and including trial. Any expenses would be paid by the corporation without limitation and in addition to the fee. The law firm asks whether the proposal is prohibited by ethics rules.
Upon review of the proposal and MRPC 1.1, 1.5, and 1.7, the Committee concludes that the Rules do not prohibit the arrangement described. It is not improper for a lawyer to agree with a client that the fee for a particular legal task be a fixed amount. A flat fee is advantageous to the client, since a set fee is more easily budgeted and the client's budget is more easily controlled. A flat fee requires a lawyer to balance those instances in which the fee is likely to result in a higher fee than the lawyer would receive under another fee arrangement, against those instances in which the lawyer's services would exceed the flat fee rate.
In the case presented, the client corporation has had a continuing relationship with the law firm and has been represented in a number of workers' compensation cases. This experience along with the fact that the corporate client appears to be a sophisticated business client, would render the client particularly capable of making a flat fee purchasing decision. Although the Rules do not require sophistication as a prerequisite to making a fee structure decision, the client's sophistication would make it more likely that the lawyer and the client would be evenly matched in any fee negotiation.
The law firm, on the other hand, is experienced in handling workers' compensation matters and a current relationship with the corporate client. Thus the parties are particularly evenly matched with regard to their knowledge and skill in negotiating and reaching a mutually agreeable fee arrangement.
MRPC 1.5 imposes certain requirements relating to client communication and client consent in the establishment of fees. Those requirements are intended to protect clients and provide guidance to lawyers in evaluating a reasonable fee charge. MRPC 1.5 is also intended to protect clients from "clearly excessive" fees.
Nothing in MRPC 1.5 prohibits negotiations over the structure or amount of fees from taking place. A client should be free to propose fee arrangements that leave certain risks implicit in those arrangements with the client. The lawyer is free to accept or reject those proposals as well as the legal work that goes with them. For further discussion of MRPC 1.5 and fee issues, see Dubin and Schwartz, Michigan Rules of Professional Conduct and Disciplinary Procedure, Institute of Continuing Legal Education, Ann Arbor, Michigan, 1989, pp. 1-29.
Neither MRPC 1.1, requiring a lawyer to provide competent representation, nor MRPC 1.7, requiring a lawyer to avoid conflicts of interest, would prevent a lawyer from agreeing to the proposed fee arrangement. If a lawyer believes a fee proposal is so low that it would prevent the lawyer from providing competent representation as required by the individual case, or would result in a conflict between the lawyer's own financial interests and those of the client in handling the individual case, the lawyer has an obligation to reject the fee proposal and the representation, unless the client and the lawyer can agree to another fee arrangement. The proposal by itself does not mandate such rejection. Once a lawyer has accepted a client and a task, the lawyer's ethical obligations under MRPC 1.1 and 1.7 are the same, regardless of the fee arrangement.