By Anne Rudolph
California Rule of Professional Conduct 1.5 prohibits an attorney from charging an unconscionable or illegal fee.
Rule 1.5(b) provides that whether a fee is “unconscionable” shall be determined on the basis of all the facts and circumstances existing at the time the agreement is entered into (except where the parties contemplate that the fee will be affected by later events). The factors to be considered in determining the unconscionability of a fee include, without limitation, the following:
(1) whether the lawyer engaged in fraud or overreaching in negotiating or setting the fee;
(2) whether the lawyer has failed to disclose material facts;
(3) the amount of the fee in proportion to the value of the services performed;
(4) the relative sophistication of the lawyer and the client;
(5) the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(6) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(7) the amount involved and the results obtained;
(8) the time limitations imposed by the client or by the circumstances;
(9) the nature and length of the professional relationship with the client;
(10) the experience, reputation, and ability of the lawyer or lawyers performing the services;
(11) whether the fee is fixed or contingent;
(12) the time and labor required; and
(13) whether the client gave informed consent to the fee.
Every other state besides California has adopted either an “unreasonable fee” standard or an “excessive fee” standard for prohibited fees in its rules of professional responsibility. California is the only state that bases its standard for prohibited fees for attorney discipline on the higher standard of “unconscionability.”
“Unconscionability” has been the standard in California for over 90 years. In Herrscher v. State Bar (1934) 4 Cal.2d 399, 402-403, the Supreme Court discussed the public policy rationale for determining when an attorney should be subject to discipline over a fee.
“In the few cases where discipline has been enforced against an attorney for charging excessive fees, there has usually been present some element of fraud or overreaching on the attorney’s part, or failure on the attorney’s part to disclose the true facts, so that the fee charged, under the circumstances, constituted a practical appropriation of the client’s funds under the guise of retaining them as fees.
Generally speaking, neither the Board of Governors nor this court can, or should, attempt to evaluate an attorney’s services in a quasi-criminal proceeding such as this, where there has been no failure to disclose to the client the true facts or no overreaching or fraud on the part of the attorney. It is our opinion that the disciplinary machinery of the bar should not be put into operation merely on the complaint of a client that a fee charged is excessive, unless the other elements above mentioned are present. (Emphasis added.) (Citations omitted.)
Clients are protected from merely “unreasonable fees” by relief sought in civil court, or the statutory fee arbitration program. (Bus. & Prof. Code § 6200 et seq.) Under the statutory fee arbitration program, arbitration of disputes over legal fees is voluntary for a client but mandatory for an attorney when commenced by a client. Accordingly, California’s current approach to fee controversies is two-fold: (1) disputes over the reasonable amount of a fee may be handled through arbitration; and, (2) fee issues involving overreaching, illegality or fraud are appropriate for initiating a State Bar disciplinary proceeding.
While an attorney should not charge either an excessive or unreasonable fee or an unconscionable fee, it is only an “unconscionable” fee that could subject an attorney to disciplinary action by the State Bar.