1.5:400 Reasonableness of a Fee Agreement
• Primary Pennsylvania References: PA Rule 1.5(a)
• Background References: ABA Model Rule 1.5(a), Other Jurisdictions
• Commentary: ABA/BNA § 41:301, ALI-LGL § 46, Wolfram § 9.3.1
1.5:410 Excessive Fees
PA-R 1.5(a) proscribes "clearly excessive" fees and provides eight factors to be used when determining whether a fee is unethically high. See PA-R 1.5(a)(1)-(8); see also Feingold v. Pucello (Super. Ct. 1995) (finding proposed contingency fee of 50% of recovery "breathtakingly high"). The court may exercise its equitable power to reduce the amount of fees charged when its determines that the fees are "blatantly unreasonable." PNC Bank v. Bolus (Super. Ct. 1995) (reducing fee charge of over $70,000 for filing one document with prothonotary to confess judgment on note).
1.5:420 "Retainer Fees:" Advance Payment, Engagement Fee, or Lump-Sum Fee
A "retainer" may refer to a payment that the lawyer (1) will hold and credit against legal costs that are incurred; (2) considers a "minimum fee" to be credited against legal services that are provided, but will also not be refunded if legal services are not rendered; and (3) expects to be an engagement fee that is "non-refundable" regardless of whether the lawyer performs legal services. Pa. Eth. Op. 95-100 (1995).
With respect to the advance payment retainer fee, the lawyer must return any portion that remains unearned after services are performed. PA-R 1.5 cmt. Because the Rules do not provide a clear position otherwise, there is no general prohibition against the deposit of an advance payment retainer fee into the lawyer's operating account. Rather, the "appropriate inquiry should be the expectations of the parties" when determining whether the lawyer should have placed the advance fee in escrow instead. Thus, a lawyer may deposit the advance fee in the lawyer's operating account if the client is provided with a written statement pursuant to PA-R 1.5(b) or a written agreement that discloses to the client how the fee will be held. Pa. Eth. Op. 95-100 (1995).
Similarly, absent a written statement satisfying PA-R 1.5(b) or a written agreement stating that the minimum fee is non-refundable, a minimum fee is treated as an advance payment retainer fee with respect to payment and deposit. Pa. Eth. Op. 95-100 (1995).
PA-R 1.5 does not contain an express prohibition of a "non-refundable" retainer. As a fee agreement, however, such a retainer may not be "illegal or clearly excessive" under PA-R 1.5(a). See Pa. Eth. Op. 95-100 (1995) (suggesting that, under certain circumstances, portion of non-refundable retainer must be returned to client to prevent retainer from being considered "clearly excessive" under PA-R 1.5(a)); see also Pa. Eth. Op. 93-201 (1994) (non-refundable retainer may be considered unreasonable fee if client terminates relationship before services are fully rendered). The lawyer must provide the client with a clear, written statement if the lawyer plans to deposit the non-refundable retainer in the lawyer's general operating account, rather than in escrow. Pa. Eth. Op. 95-100 (1995).