Stricter Disciplinary Thresholds

Rule 1.5(a) of the Model Rules draws the line with one word: a lawyer may not make an agreement for, charge, or collect an unreasonable fee.¹ Other jurisdictions draw the disciplinary line further out. Some require a fee to be clearly excessive before the lawyer is sanctioned, and others require it to be unconscionable. The three words form a ladder, and each rung demands a wider gap between the fee charged and the value of the services. An unreasonable fee is one that the reasonableness factors do not support. A clearly excessive fee departs from a reasonable one so far that a prudent lawyer would be firmly convinced of it. An unconscionable fee is so far out of proportion that no one could sensibly defend it. Where a stricter threshold governs, a price that careful lawyers could honestly dispute may be unreasonable without being disciplinable.

The two subsections below take up the upper rungs. On an exam, apply the wording of the jurisdiction the facts name. When the facts name none, apply the Model Rule's “unreasonable” standard.

Clearly Excessive Fees

The older Model Code of Professional Responsibility (DR 2-106(B)) defined a clearly excessive fee through the eyes of an imagined peer. After a review of the facts, would a lawyer of ordinary prudence be left with a definite and firm conviction that the fee is in excess of a reasonable fee?² The same test, under the label clearly excessive, governed the Arizona discipline case discussed below. It comes with the familiar guide factors for reasonableness, such as the time and labor required, the novelty and difficulty of the questions, and the likelihood that the work will preclude other employment.³

The test has two parts, and each narrows the circumstances in which a lawyer is sanctioned. The yardstick is a lawyer of ordinary prudence, so neither a client's anger nor an enforcer's private view of what legal work should cost sets the line. The required conviction must be definite and firm, and it forms only when the facts leave little room for honest disagreement. A price that careful lawyers could defend in different ways therefore falls short. Discipline is also a heavier consequence than losing part of a fee, which makes a demanding threshold a sensible place to set the bar.

Florida's Rule 4-1.5(a) restates the ordinary-prudence test and then adds two features.⁴ First, the fee or cost must exceed a reasonable amount to such a degree that it amounts to clear overreaching or an unconscionable demand. Second, a fee is clearly excessive whenever the lawyer sought or secured it by intentional misrepresentation or fraud upon the client, a nonclient party, or any court, as to either entitlement to the fee or its amount. The second feature exists because a fee obtained by lying is wrong whatever its size. A test that measured only the distance between the fee and the value of the work would let a lawyer who deceives a client into paying a modest sum escape, since the sum itself might sit within a reasonable range. The first feature's wording also shows how close this standard sits to the unconscionable formulation in the next subsection.

re Zang shows the standard at its clearest. A draft for $1,295.05 in med-pay benefits had been tendered in error. The client, Drummond, had no med-pay coverage, and the lawyer had made no effort to obtain the benefits. The firm still took a one-third contingency fee on the money. The Arizona Supreme Court held that the excessive-fee conclusion followed “inescapably from one simple fact”: Zang & Whitmer did nothing to earn a fee from either the med-pay or the property damage settlements. The court also concluded that Zang must have known the draft was for med-pay and had been tendered in error.⁵ Compare the lawyer in the hypothetical above. In Zang, the services side of the comparison is empty, so no market survey is needed and a lawyer of ordinary prudence reaches the firm conviction at once. The high-rate lawyer's price can be argued either way among prudent lawyers, and that disagreement keeps it on the fee-dispute side of the line.

On the MPRE, the controlling text is the Model Rule's own standard, under which a lawyer may not make an agreement for, charge, or collect an unreasonable fee.⁶ A question that uses the phrase clearly excessive points to a jurisdiction or an older code that requires more before discipline follows. A fee can therefore be unreasonable without being clearly excessive. When the facts name no jurisdiction, the Model Rule's standard governs.

Unconscionable Fees

Rule 1.5(a) forbids an “unreasonable” fee, but a jurisdiction may set the disciplinary line well beyond mere unreasonableness, and “unconscionable” is the strictest word in common use.⁸ In In re Kutner, the Illinois Supreme Court found persuasive the reasoning of California and Washington decisions. California asks whether a fee is “so exorbitant and wholly disproportionate to the services performed as to shock the conscience,” and gross overcharge of that kind may warrant discipline. Washington defines an unconscionable fee as an amount that, under the circumstances, neither lawyer nor client can sensibly argue to be otherwise. The Illinois court then held that where an unconscionable fee is fixed in an attorney-client agreement, the matter is subject to action by the Attorney Registration and Disciplinary Commission.⁹

The two tests ask different questions. The ordinary-prudence test asks what a prudent lawyer would conclude about the fee. The unconscionable test asks whether anyone could defend the fee at all. A price that careful lawyers could argue about in good faith never qualifies, however much the client resents it. What remains is a gap between the fee and the services so wide that the services visibly cannot account for the price. That explains why the inquiry compares the fee with the work done: disproportion is the only evidence that can show a fee to be beyond sensible argument.

The fee in that scene would be indefensible even if the lawyer's rent and staff were expensive, and the next case shows why the lawyer's own costs and earnings stay out of the comparison. In Shaffer v. Superior Court, the question was whether the lawyer's profit margin bears on whether her fees were unconscionable. California's Rule 4-200 prohibits contracting for, charging, or collecting an unconscionable fee and itself describes how that is determined. The court found nothing in the rule suggesting that the lawyer's profit margin is relevant.¹⁰ The relevant question was whether the client got what he paid for, meaning services worth, as measured in the marketplace, the $215 to $250 per hour the lawyer charged. A tribunal answers that by analyzing the quality and necessity of the services and comparing their cost with what other attorneys in the community of similar experience and ability would charge. If the market would have charged fees not disproportionately dissimilar, the court found it difficult to see how the fees could be considered unconscionable.¹¹

The court supported this market yardstick with Copeland v. Marshall, which rejected a cost-plus approach to fee awards in public interest litigation and stated that the reasonable hourly rate is the one prevailing in the community for similar work.¹² A client buys services and not the lawyer's cost structure, so the price is compared with the value delivered.

The two decisions answer different questions about the same standard. Kutner supplies the threshold, which is disproportion so great that no sensible argument remains. Shaffer supplies the yardstick, which is the fee measured against the services and the market and never against the lawyer's earnings. A lawyer with thin margins gains no defense by pointing to them if the price is wholly out of line with what comparable lawyers charge. A highly profitable lawyer commits no violation if the rates match the market and the work was needed and well done. On the MPRE, a stem that dwells on large profits is offering a distraction, and the analysis returns to the services and the market. When the facts name no jurisdiction, the Model Rule's “unreasonable” standard still controls.¹³