When Reasonableness Is Measured

Rule 1.5(a) forbids a lawyer to make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses, and the three verbs name three moments in the life of a fee.¹ The lawyer makes an agreement when the engagement letter is signed, charges when the bill goes out, and collects when payment arrives. The eight factors explain what makes a fee reasonable. This unit asks when the fee is tested, because the facts those factors measure do not stay still: a claim that looked doubtful at signing may settle in three weeks, and a stock interest taken as payment may multiply in value.

Two rules answer the question, and they work together. A fee agreement is judged on what the lawyer and client knew when they made it, not on how the matter later turned out. And the duty to avoid an unreasonable fee does not end at signing, so a fee that was fair when agreed must be reevaluated when later events change the circumstances. One test joins the two: did the later development fall inside the risk the parties priced at signing, or outside it? An outcome inside that risk belongs to the bargain, and the lawyer keeps its benefit even when hindsight makes the price look generous. A change outside that risk reopens the question whether collecting the agreed fee is still reasonable.

Judged at the Agreement

The first rule fixes the test at signing, because Rule 1.5(a) forbids a lawyer to make an agreement for an unreasonable fee.² The New Hampshire Supreme Court states the timing rule directly: the fairness of a fee agreement is determined with reference to the time when the agreement was made.³ The same passage adds that no rigid, precise measure of reasonableness exists, because the weight of each factor depends on the circumstances of the particular case.⁴

Timing matters because a fee agreement prices uncertainty. A lawyer who takes a contingent fee risks recovering nothing, and the percentage compensates for that risk of loss.⁵ Whether the compensation is appropriate depends on the facts as the lawyer and client knew them when they signed.⁶ A reviewer who looks back from a win sees what hindsight always suggests: that the litigation was simple and the chances of success were good. The evaluator should avoid that unfair vantage.⁷ Nor should the reviewer measure the fee against what hourly billing would have produced, or against the hours the lawyer happened to work. A contingent fee is judged on its own terms, and the degree of risk the lawyer assumed at the outset is ordinarily the crucial factor.⁸

The signing-time inquiry also takes in how the bargain was struck. In the New Hampshire dispute over McCabe's fee agreement, the court observed that the parties could fully appreciate the agreement's implications and decide whether to retain McCabe. The contract preceded the representation and, apparently, followed considerable preliminary discussion and negotiation. Quoting an earlier decision, the court added that this was not a case where one party took advantage of another's ignorance, exerted superior bargaining power, or disguised unfair terms in small print.⁹

Bar questions on this point usually report a contingent fee, a fast result, and a large sum, and then ask whether the fee is reasonable. Speed and size tempt the examinee to answer no. The question is really asking what the lawyer and client knew on the day they signed.

Hypothetical Illustration

A motorist is injured when a delivery truck runs a red light. Before the motorist hires anyone, the truck's insurer writes to confirm that its driver was at fault and that the policy limits comfortably exceed the likely damages. The lawyer, who has handled many such claims, signs a one-third contingent agreement, and the claim settles three weeks later. A second motorist is injured when a car crosses the center line, but the other driver blames a sudden brake failure, the only witness gives conflicting accounts, and the limitation period is nearly over. A different lawyer signs the same one-third agreement, and that claim also settles in three weeks after the other driver's insurer unexpectedly concedes fault. The first fee is likely unreasonable, because at signing the lawyer faced almost no risk of nonpayment. The second fee is reasonable, because at signing a recovery of nothing was a real possibility.

Both matters ended in three weeks and both lawyers took one-third, so neither speed nor percentage separates them. The risk visible at signing does. A comment to the Restatement of the Law Governing Lawyers explains that a contingent fee may be unreasonable when there was a high likelihood of substantial recovery by trial or settlement, so that the lawyer bore little risk of nonpayment.¹⁰ The first lawyer fits that description: the percentage pays for a risk of nonpayment that, on what the lawyer knew, barely existed. The second lawyer faced a genuine chance of recovering nothing, so the same percentage fairly paid for it, and the insurer's surprise concession was luck that cannot shrink the risk after the fact. A reviewer who set the second lawyer's fee beside the few hours the matter finally consumed would be reasoning from hindsight in disguise, since total hours are known only when the matter ends.

The same anchor appears in Attorney Grievance Commission of Maryland v. Chapman. The Commission argued that the fees were unreasonable because no legal services were provided, and the court was not persuaded. Significant work had been done to pursue loan modifications, and whether that work required legal talent or skill was not the issue. The fees were not unreasonable in light of the work anticipated when the fee was set, or in light of the efforts actually undertaken.¹¹ The court tested the price against what the engagement was expected to involve when the fee was set, together with what the lawyer then did.

The signing-time view tells a reviewer when to look. It does not end the inquiry, because Rule 1.5(a) also forbids charging and collecting an unreasonable fee, so a fair agreement does not license the lawyer to collect whatever it later produces.¹² The next subsection takes up that continuing duty.

A Continuing Duty

The second and third verbs of Rule 1.5(a) reach past the day of signing.¹⁴ A bill goes out, and payment comes in, weeks or years after the engagement letter, and each of those acts is a fresh occasion on which the rule can be violated. A lawyer who could collect whatever a fair agreement later produced would leave the verbs for charging and collecting with nothing to do. A continuing duty closes that gap by asking the reasonableness question again when events change the picture.

In Holmes v. Loveless, a joint venture argued that an attorney's ethical obligation to avoid charging an excessive fee is continuous throughout the life of the agreement. The court acknowledged that Cotton v. Kronenberg did not address the excessive fee prohibition of RPC 1.5(a), but it found that a quoted passage provided persuasive support for the argument.¹⁵ The passage attributes the point to Professor Hazard's work on ethics: a fee agreement that may seem fair to a client when it is signed "must be reevaluated under the applicable rules when subsequent events alter the circumstances of the relationship." Its example is a client who offers a lawyer an interest in a fledgling company in exchange for representation. If the value of that share unexpectedly increases greatly, the fee may become unreasonably large in proportion to the work performed.¹⁶

The equity example shows why the duty has to follow the fee. A fee paid in company stock is a bet on a value that neither side can know at signing, so the agreement is fair only against the range of values the parties could foresee. When the value rises unexpectedly and by a great deal, the share may be out of proportion to the work. A lawyer who could keep that windfall by pointing to a fair signing would be using the agreement as the means of collecting an unreasonable fee, which is why the rule bars charging and collecting and not only agreeing.

The authority here calls for some care. Holmes itself noted that Cotton did not address the excessive fee prohibition, and it described the quoted passage as persuasive support for the joint venture's argument. The version of RPC 1.5(a) it set out says only that a lawyer's fee shall be reasonable.¹⁷ The Model Rule's explicit verbs, charge and collect, give the same idea a more direct textual footing.¹⁸

The reevaluation does not reopen every fee that turns out larger than anyone predicted.

The equity example differs on exactly that hinge. The value of the fledgling-company share rose unexpectedly, past any figure the parties could have weighed, so the later result no longer measures a risk anyone priced. The treatment of contingent fees draws the same line. A reviewer should avoid hindsight, which makes every won case look easy, and should judge the fee on the facts known when the agreement was signed.¹⁹ Yet if the risk of loss was never substantial, or the ultimate recovery proves astronomically high, a contingent fee may be inappropriate or should be measured by a smaller percentage. The Restatement comment gives two examples: a high likelihood of substantial recovery that left the lawyer little risk of nonpayment, and a recovery likely to be so large that the fee would clearly exceed the sum appropriate to pay for services performed and risks assumed.²⁰ The first point protects a lawyer from having a foreseeable success recast as a windfall. The second reaches a recovery so far past anything priced that the percentage no longer pays for the services and the risks.

Bar questions on this point usually say the agreement was reasonable when signed and then report a later change. One wrong answer treats the signing as the end of the analysis, which ignores that Rule 1.5(a) also forbids charging and collecting. The opposite wrong answer treats any large payoff as proof of an unreasonable fee. The deciding question is whether the later event falls outside the risk the parties priced. If it does, the lawyer must reevaluate the fee and may not collect an amount that has become unreasonable in proportion to the work.