Effective November 1, 2018, the State Bar of California has amended California Rules of Professional Conduct 1.15 (former Rule 4-100) to establish new rules on handling flat fees. Under Cal Rules of Prof Cond 1.15(a), all funds received or held by a lawyer or law firm for the benefit of a client must be kept in a trust account. But there are a couple of exceptions.
Among the several alternatives to the traditional hourly fee arrangement, contingency fees have been commonly used for decades. Under a contingent fee agreement, the attorney and client agree that the attorney will receive a particular percentage of the client’s recovery or of the savings obtained for the client as a fee for legal services, if there is a recovery. The attorney takes on the risk with the potential for significant reward. Not surprisingly, there are statutory requirements for these types of agreements—and failing to comply with them is risky, too.
When, in a noncontingent matter, a third party is paying all or some of the attorney fees for your client, do you know how to deal with the issues that can arise? Short answer: Address them upfront in your fee agreement. Here are sample provisions to get you started.
Common scenario: You do some work for a client and then pass off the client to another attorney, agreeing to split the attorney fees. Later you want to get your share of the fees. The Rules of Professional Conduct require that you get the client’s written consent to any fee-splitting agreement. Did you get the client’s consent right away, or are you now at the mercy of the other attorney?
Last week on CEBblog™, we discussed the consequences of a defendant rejecting a settlement offer under CCP §998 and then getting creamed at trial. But §998 is an equal opportunity statute with consequences for plaintiffs too.