17.08. Changing a Fee During the Course of Representation

A lawyer may seek to change the amount of the fee that the lawyer is charging or how expenses will be paid as litigation proceeds and the lawyer recognizes the difficulty or cost of the matter.  The only requirement set out in the Rules of Professional Conduct is that the lawyer communicate the change in fees or expenses to the client.[1] 

            There were questions about whether it was really sufficient for a lawyer to just give notice to a client before raising the fee.  In 2011, the ABA issued a Formal Opinion giving more guidance on the issue.  The Opinion notes that fee agreements and therefore fee modifications are contractual arrangements and are substantively governed by contract law – a contract can be modified with mutual consent of the parties.  Unlike ordinary contracts, however, attorney-client contracts are based in a fiduciary relationship.  Therfore, “any change in the contract with be regarded with great suspicion.”  The burden is ultimately on the lawyer to demonstrate that the change in fee is justified.  The reason the lawyer faces this burden is because the regotiation puts the client in a bad position – they may hesitate to reject the new fee or suggest changes because they would have to hire a new lawyer if the representation was terminated or assume that the fee increase is in the client’s best interest.  In addition, the belief is that the lawyer should have the forsight to recommend an appropriate fee at the beginning of the representation.[2]

Lulu Lawyer agrees to represent Paul Plaintiff in a case where Plaintiff was terminated from his job and then went to work for his former employer’s competitor for a fixed, flat fee.  After filing the lawsuit, the employer counterclaims, alleging that Plaintiff, during his employment, breached her nondisclosure agreement by sharing protected information with the new employer.  Lawyer now seeks to increase his fee for handling the matter.  Should he be allowed to do so? [Tex. Ethics Op. 679 (Sept. 2018)]

No.  In this situation it would not be fair to the client to allow the lawyer to renegotiate the fee.  Plaintiff here is not a long-established client and the expectation of the client is that the lawyer would complete the representation for the negotiated fee.  In addition, an increase here would not be reasonable becauase the lawyer should have anticipated that the employer might bring such a counterclaim.  This situation is to be distinguished from this scenario:  lawyer has a long-time client that the lawyer has represented in numerous collection actions.  Ordinarily the cases are settled or result in a summary judgment being granted to the lawyer’s client.  The lawyer handles these cases on a flat fee basis.  In one case a plaintiff files a class action lawsuit against the lawyer’s client which could include hundreds of borrowers, extensive discovery and take years to complete.  In this situation a renegotiated fee would be appropriate because this is a long-time client and the increased work was not anticipated at the time the flat fee was entered into.      Even when a change in fee would be justified as a matter of contract law, the ABA Opinion notes that other ethics rules are implicated.[3]  First, just like the original fee must be reasonable, a change in the fee must also be reasonable – with reasonableness assessed based on the circumstances that exist at the time the modification is made (Rule 1.5(a)).  In addition, the lawyer has an obligation to communicate with the client about the modification (Rule 1.4(b)):  “An explanation of the lawyer’s proposed modification of a fee arrangement, including the advice that the client need not agree to pay the modified fee to have the lawyer continue the representation, is necessary to enable the client to make an informed decision about the client’s ability and willingness to pay the modified fee for continued representation.”

[1] ABA Rule 1.5(b) (“Any change in the basis or rate of the fee or expenses shall also be communicated to the client.”)

[2] Restatement (Third) of Law Governing Lawyers § 18, commet e.

[3] ABA Formal Opinion 11-458 (Aug. 4, 2011).