Monday, January 17, 2011

It it ain't broke, fix it!

One of the purported rationales for the State Bar's decision to rewrite the disciplinary rules is that the ABA model rules have been modified since the Texas rules were implemented. If that's the case, shouldn't the Texas rules more closely mirror the model ABA rules?

Over the past few years I've read countless articles in ABA publications pronouncing the (premature) death of the billable hour. Article after article touts the benefits to clients of "value billing."
Additional ways to price legal fees include value billing and success-based fees. It always makes sense to talk about fees in terms of value. What separates you from your competitor is not simply that you will each do quality legal work, but that you provide a unique understanding of the value this service provides your client. Hourly billing can be the antithesis of value-based services. What is it worth to your client to avoid expensive litigation? What is it worth to your client to operate a business free from worry about meeting legal deadlines and having compliance issues handled in a timely and accurate manner? By providing a value added service you become a trusted advisor focused on your client’s business success, rather than a service provider sending monthly invoices. It is hard to quantify the value of prevention. But any client who has been through costly litigation should have an understanding of the value that a strong partnership with a legal advisor can bring.
That's from a 2005 article in Law Practice TODAY written by Wendy Werner entitled "Alternative billing practices beyond the billable hour."

Sound familiar? Clients come to criminal defense attorneys because they have a problem that needs solving. They need someone who's familiar with the law, the venue and the court. They come in looking for someone who can help them resolve their problem in a way they, and their loved ones, can live with.

Unlike civil attorneys, we don't charge the same amount to every client for drafting routine motions that only require headings, names and dates to be changed. We don't charge clients for the myriad of phone calls we receive and make regarding their cases. We don't charge the trips to the county jail on weekends or at night. We charge for our ability to handle their case and our knowledge of the facts, law and science involved.

We counsel our clients about what to expect as their case moves along. We put together grand jury and pretrial diversion packets when necessary. We negotiate for plea arrangements when that is in our clients' best interest. We stand beside our clients and fight like hell when the state tries to take away their liberty. We are hand-holders, teachers and orators.

In Comment No. 5 to ABA Model Rule 1.05 (the analogue to proposed rule 1.04 in Texas), the authors note that any fee arrangement must not be one that might cause the attorney to curtail services to the client:
An agreement may not be made whose terms might induce the lawyer improperly to curtail services for the client or perform them in a way contrary to the client's interest. For example, a lawyer should not enter into an agreement whereby services are to be provided only up to a stated amount when it is foreseeable that more extensive services probably will be required, unless the situation is adequately explained to the client. Otherwise, the client might have to bargain for further assistance in the midst of a proceeding or transaction. However, it is proper to define the extent of services in light of the client's ability to pay. A lawyer should not exploit a fee arrangement based primarily on hourly charges by using wasteful procedures.
As I have stated before, it is the flat fee arrangement that allows criminal defense attorneys to provide our clients with the best representation we can. According to the comment above, fee agreements should not be written in such a way that limits services when it is "foreseeable" that more is required. It is foreseeable that every criminal case may go to trial. Do away with the flat fee and clients will be forced to pay even more money to a defense attorney as a deposit against future expenses in every representation.

How does that benefit someone accused of a criminal offense? Most of our clients struggle to pay us the fee we quote. Do away with the flat fee and who will be able to afford to put down even more?

Strangely enough, the comments affixed to the proposed change in Texas doesn't contain the language I've quoted above. It would seem to me that if you want the Texas rules to mirror the ABA's rules you would include the same or, at least, similar, commentary.

ABA Model Rule 1.15(c) reads:
A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred.
Comment No. 3 to the ABA Model Rule reads:
Lawyers often receive funds from which the lawyer's fee will be paid. The lawyer is not required to remit to the client funds that the lawyer reasonably believes represent fees owed. However, a lawyer may not hold funds to coerce a client into accepting the lawyer's contention. The disputed portion of the funds must be kept in a trust account and the lawyer should suggest means for prompt resolution of the dispute, such as arbitration. The undisputed portion of the funds shall be promptly distributed.
The ABA recognizes that not all representation is billed by the hour. According to the ABA commentary, a flat fee is reasonable when the lawyer believes the fee charged to be reasonable for the services to be rendered. There is nothing in the commentary to indicate that a flat fee is unearned.

However, the proposal for Texas Rule 1.15(d) - the analogue - reads:

A lawyer shall deposit unearned fees and advanced expenses into a client trust account, to be withdrawn by the lawyer only as fees are earned or expenses are incurred.

And comment No. 12 to the proposed makes it clear that the State Bar has flat fees in its sights:

Paragraph (d) addresses unearned fees. Fee agreements sometimes state that the fee is a flat fee, advance fee, nonrefundable retainer, or some other kind of fee. But without regard to the label, if the fee is a prepayment for services, paragraph (d) requires a lawyer to deposit the fee into a trust account until it is earned. Applicable law, not these Rules, determines when a fee is earned.

See the difference? The proposed change calls a flat fee an unearned fee which requires that an attorney hold that fee in trust until such time as it is earned. What does the State Bar want? Do they want us to bill our clients by the appearance -- thus dragging out cases needlessly or forcing clients to plead because they can't afford continued representation?

There is nothing inherently evil about a flat fee. Insurance companies have flat fee arrangements with some of the attorneys who handle their cases. The State Bar doesn't seem to have a problem with State Farm agreeing to pay a law firm a flat fee in exchange for that firm defending their insured over a car wreck. Of course State Farm will pay that fee after the case is resolved, regardless of the outcome. Just try collecting the balance of a fee after a client has been convicted and sent to prison.

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