Bar News - June 23, 2006
Rewriting the Rules Ethics Proposal Offers Rule-Makers a Choice on Referral Fees
By: Dan Wise
The NH Supreme Court Advisory Committee on Rules is considering a proposal to comprehensively rewrite and update the New Hampshire Rules of Professional Conduct.
The effort to update NH lawyers’ rules of the road was undertaken by the NHBA Ethics Committee in 2001 in the wake of the ABA’s adoption of revised Model Rules of Professional Conduct (a project known as Ethics 2000) and is the first overhaul of NH’s ethics code since 1986.
The drafters, led by former NHBA Ethics Committee Chair Rolf N. Goodwin, have said that the Ethics Committee, acknowledging that legal practice has become much more multijurisdictional, attempts to follow the ABA’s model wherever possible, and only deviates from it when the Committee feels there is good reason for it.
Over the next few months, in a series titled, “Rewriting the Rules,” Bar News will highlight some of the proposed changes. The Advisory Committee on Rules has not indicated when it will take up the ethics code overhaul, or how it will solicit comment from the Bar and the public. However, the Rules Committee meets twice a year and it is not planning to take up the RPC proposal at its June meeting, so it will be at least six months before a public hearing is likely to be held on the proposal.
Each article will look at some of the more controversial elements or significant departures from the current rule section by section.
Rule 1.5 (a) Legal fees
The proposed NH RPC rewords the standard for fees, following the lead of the Ethics 2000 proposal, to forbid lawyers from charging an “unreasonable” fee and includes “expenses” in the standard. The current rule bars lawyers from charging or agreeing to charge a “clearly excessive” fee, and makes no mention of “expenses.” However, the list of factors to be used in determining what is considered “unreasonable” is exactly the same as in the current rule.
Rule 1.5 (b) Fee agreements in writing
The RPC drafters propose two options to the rule-makers: one requires that the fees, expenses and scope of representation shall be communicated “preferably” in writing or, that the scope, fees and expenses “shall be communicated to the client in writing…” except when “the lawyer will charge a regularly represented client on the same basis or rate. The second option provides an exemption for matters in which it is “reasonably foreseeable” that the total cost to a client shall not exceed a specific amount (unspecified by the Ethics Committee).
Rule 1.5 (f) Fee splitting
A key area that the new proposal addresses is the rule on referral fees [Rule 1.5 (f)]. The current rule allows fee division only if the client consents, the total fee is reasonable and “the division is made in reasonable proportion to the services performed or responsibility or risks assumed by each.” The Ethics Committee split on the question of allowing “pure” or “naked” referral fees that do not require “proportional” participation of the referring lawyer in the case in subsequent stages. Option 1 makes no substantive change in the current rule, while a second option “allows a division of fee with a forwarding lawyer, regardless of the work performed or responsibility assumed, provided that the client consents in writing to the division of fees and the total fee is not increased because of the fee division and is reasonable.” [Comment to Rule 1.5 (f), alternative 2].
In an article in the Spring 2006 edition of the NH Trial Bar News, attorneys Mark Abramson and Kevin Dugan advocate that the needs of clients are best addressed by allowing “pure” referral fees.
“Opponents of fee-splitting cannot dispute that the client is best served when there is a strong incentive to get the case in the most competent hands. Amorphous arguments alleging that referral fee ‘commercialization’ will irreparably harm the legal profession are no longer valid,” Abramson and Dugan write.
Rule 1.15 Safekeeping Property
This section of the proposal has language that may run counter to common practice in NH in the handling of flat fees. In Rule 1.15 (d), the Ethics Committee proposes that client fees paid in advance must be deposited in a trust account and only be withdrawn when “earned.” Michael Iacopino, then-president of the NH Criminal Defense Lawyers Association, discussed this proposed change with the Ethics Committee, but did not sway the drafters, who chose to follow the Ethics 2000 approach to this issue. Iacopino said many criminal defense attorneys charge a flat or minimum fee for a defense and the requirement to draw on those funds as “earned” would impose unnecessary bookkeeping burdens on attorneys.
For More Information
The Ethics Committee’s proposal to revise the NH Rules of Professional Conduct, in its entirety, and with the texts of the current RPC and the ABA Ethics 2000 proposal (as revised by the ABA in 2004) incorporated, is posted in the Legal Links/Ethics Opinions area of www.nhbar.org as “NHBA Ethics Committee Revision of NH Rules of Professional Conduct - Latest Version.” (Member password is not required to view this part of the site. The file is a 225-page PDF, so allow time for it to download.)
For more analysis, consult the NH Bar Journal article, “New Hampshire’s Rules of Professional Conduct Undergo a Complete Overhaul,” by Peter Beeson, Mitchell Simon and Elizabeth Baker, of the Devine Millimet law firm, published in the Spring 2006 issue. Beeson and Simon are members of the NHBA Ethics Committee.
Also, see “Pure Referral Fees : Insuring Client Confidence in Complex Personal Injury and Medical Malpractice Cases – Why Proposed Professional Conduct Rule 1.5 (f), Alternative 2 Should be Adopted,” by Mark A. Abramson and Kevin F. Dugan, of the Abramson, Brown & Dugan law firm, published in the Spring 2006 issue of the NH Trial Bar News. (See www.nhtla.org.)