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Know the Limits on Attorney Fees

Attorneys can’t always get what they want in attorney fees. There are statutory limitations, fees subject to court approval, and fee agreements that violate public policy.

Statutory Limitations on Fees. In many instances the ability to negotiate attorney fees is prohibited or limited by statute. For example:

  • Probate proceedings. Attorney fees in a probate proceeding are strictly statutory and don’t arise from contract. See Prob C §§10800, 10810, 13660. An attorney can’t charge more than the statutorily-permitted amount, but may agree to charge or receive less than that amount.
  • Indigent defendants. Attorney fees for counsel assigned to represent indigent criminal defendants are set by the trial court (Pen C §987.2) or by the court of appeals in appellate matters (Pen C §1241).
  • Judicial foreclosures. Attorney fees in judicial foreclosure matters are set by the trial court, regardless of any contrary provision in the mortgage or deed of trust. CCP §730.
  • Workers’ compensation. Attorney fees for representation in Workers’ Compensation Appeals Board matters are set by the Appeals Board (Lab C §5801) and by a court or Appeals Board in third-party matters (Lab C §3860(f)). But fee agreements for a reasonable amount will be enforced if the amount agreed on coincides with the Appeals Board’s determination of a reasonable fee. Lab C §4906.
  • Contingent fees under federal law. An attorney-client agreement with a plaintiff under the Federal Tort Claims Act calling for a contingent fee in excess of 20 percent of any compromise, award, or settlement, or more than 25 percent of any judgment is not only void, but is an offense punishable by a fine of $2000, or 1 year in jail. 28 USC §2678. See also 42 USC §406 (maximum fee for representing plaintiff in Social Security Administration proceedings is 25 percent of past due benefits; attempt to collect fee in excess of maximum is misdemeanor).
  • Contingent fees in medical malpractice cases. Maximum fee limits have been set under Bus & P C §6146.

This is just a sampling—many statutes limit attorney fees. When you take on a matter in an unfamiliar area of law, investigate possible limitations on the ability to negotiate fees.

Fees Subject to Court Approval. Court approval of fee agreements is required in some instances. For example:

  • fees for the compromise of the claim of a minor or a person with a disability (Prob C §3601(a));
  • fees for representing a special administrator (Prob C §8547); and
  • fee agreement in workers’ compensation third-party actions (Lab C §3860(f)).

Agreements Violating Public Policy or Ethical Standards. Attorney-client fee agreements that are contrary to public policy, even if not explicitly in violation of an ethical canon or rule, won’t be enforced. Similarly, fee agreements that violate California Rules of Professional Conduct aren’t enforceable. The Rules include prohibitions against charging an unconscionable fee (Cal Rules of Prof Cond 4–200), agreeing to share fees between an attorney and a nonattorney (Cal Rules of Prof Cond 1–320), and nonrefundable retainer fees that fail to meet the classification of a “true retainer fee which is paid solely for the purpose of ensuring the availability of the [Bar] member for the matter” (Cal Rules of Prof Cond 3–700(D)(2)).

For guidance on drafting an enforceable fee agreement, including sample form agreements, turn to CEB’s California Client Communications Manual: Sample Letters and Forms, chap 3 and Fee Agreement Forms Manual. Also view CEB’s On Demand program Attorney Fee Agreements to learn effective techniques for avoiding fee disputes, including the use of the State Bar fee agreement forms and the drafting of fee agreements.

Check out these other CEBblog™ posts on drafting fee agreements.

© The Regents of the University of California, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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