More and more “solution-oriented” law firms use contract attorneys these days, which raises its own set of problems. How are these attorneys supposed to be treated for billing purposes? May a firm that uses contract lawyers pay those attorneys a set hourly fee, then mark up the fee in their own billing statements to clients?
Or, as the Professional Ethics Committee for the State Bar phrased the question: “May a law firm hire a lawyer who is not an associate, partner, or shareholder of the law firm to provide legal services for a client of the firm and then bill the client a higher fee for the work done by that lawyer than the amount to be paid to the lawyer by the firm?”
In true lawyerly fashion, the answer is that it depends. According to Ethics Opinion No. 577, it depends on whether the lawyer is “in” the firm or not. In determining whether a lawyer is “in” the firm, factors that may be considered include: receipt of firm communications; inclusion in firm events, work location, length and history of association with the firm; whether the firm and the lawyer identify or hold the lawyer out as being in the firm to clients and to the public; and the lawyer’s access to firm resources, including computer data and applications, client files, and confidential information. Examples include lawyers often referred to as of counsel, senior attorneys, and part-time lawyers. For lawyers “in” the firm, a firm may establish an hourly rate that is more than the firm pays those lawyers.
For lawyers not “in” the firm, the firm must bill the outside lawyer’s fees as an expense, without markup, or somehow make a clear presentation of the bill to the client showing no markup based on the attorney’s time. If the firm bills a client a different amount than what it pays the lawyer, that is considered an impermissible division of fees under Disciplinary Rule 1.04(f) unless these criteria are met: the fees are proportional to the services performed or there is joint responsibility for the representation, there is written client consent to the fee division, and the total fee is not unconscionable under Rule 1.04(a). Additionally, the firm may not incorporate the “non-firm” lawyer’s name, work, and time into its own bill unless it does so in a way that identifies the non-firm lawyer as a lawyer who is not in the firm.
Just when you thought it was safe to go back into the water . . .
Mike Farris
(214) 979-0100
mfarris@tiptonjoneslaw.com
