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from changing to the “unreasonable fee” standard. The downsides of such a change would
include potential unjustified public expectations that a disciplinary proceeding is an effective
forum for addressing routine disputes concerning the amount of a lawyer’s fee. Finally, with
respect to the unconscionable fee standard, the Commission recommends adding two factors,
proposed paragraphs (b)(1) and (b)(2), to those factors that should be considered in
determining the unconscionability of a fee. Both factors are derived from considerations
In addition to retaining the “unconscionable fee” standard, proposed rule 1.5 adds three
substantive paragraphs not found in the current rule. First, paragraph (c), which is derived from
ABA Model Rule 1.5(d), identifies two types of contingent fee arrangements that are prohibited:
contingent fees in certain family law matters; and contingent fees in criminal matters. Although
there are other kinds of contingent fee cases that might be prohibited, these two types of
contingent fee arrangements have traditionally been viewed as implicating important
constitutional rights or public policy. Second, paragraph (d) prohibits denominating a fee as
“earned on receipt” or “nonrefundable” except in the case of a true retainer, i.e., where a fee is
paid to assure the availability of a lawyer for a particular matter or for a defined period of time.
(See T & R Foods, Inc. v. Rose (1996) 47 Cal.App.4th Supp. 1.) Paragraph (d) is intended to
increase protection for clients by recognizing that except for the specific circumstances
identified, a fee is not earned until services have been provided. Paragraph (e) expressly
provides that a flat fee is permissible only if the lawyer provides the agreed upon services. In
part, these new provisions implement a basic concept of contract law; namely that, except for
true retainers, an advance fee is never earned unless and until a lawyer provides the agreed
upon services for which the lawyer was retained.
Three comments are included in the proposed rule. Comment [1] is derived from Model Rule 1.5
Comment [6] and explains that some contingent fee arrangements related to family law matters
are permitted. Specifically, the comment recognizes that certain post-judgment contingent fee
arrangements are permitted because they do not implicate the policies underlying the
prohibition. Comment [2] provides a cross-reference to the rule governing termination of
employment, including a lawyer’s voluntary withdrawal from representation. This
cross-reference is intended to enhance client protection by helping assure that lawyers comply
with the obligation to refund unearned fees when a representation ends. Comment [3] provides
a cross-reference to the fee splitting rule. In many other jurisdictions, the provision that governs
fee divisions among lawyers is found in a lettered paragraph in the jurisdiction’s counterpart to
Model Rule 1.5. In California, the provision addressing division of fees is contained in a
separate, standalone rule. Providing a cross-reference facilitates compliance.
Post-Public Comment Revisions
After consideration of comments received in response to the initial 90-day public comment, for
brevity and clarity the Commission has replaced the phrase “enter into an arrangement for” in
paragraph (c) with “make an agreement.” The Commission also revised the language in
paragraph (e) to refine the definition of a flat fee by removing language that was identified in the
public comments as creating a possible ambiguity. Public comments seemed to suggest that
this rule was being perceived as governing the placement of an advance fee (e.g., whether to
hold such fees in a client trust account or other law firm account). The Commission added a
new Comment [2] to make clear that the placement issue is governed by proposed rule 1.15(a)
and (b). Other comments were renumbered accordingly. Lastly, the Commission added a new
Comment [5] to provide a reference to the State Bar Act provisions that require some fee
agreements to be in writing.