LEGAL FEES

By H. Gosh


Did you hear about the Lawyer that died and found himself before St. Peter, reviewing his book of life? The Attorney, woeful and mourning, cries to St. Peter – “Why? Why? Why did you take me now? I have a successful law practice; I’ve just made partner; and I’ve got my whole life ahead of me.” St Peter responds – “Your whole life? Don’t you think you’ve spent enough time on earth – time to make room for the younger folks – give them a chance.” The Lawyer says – “Time enough – what do you mean? I’m only 42.” St. Peter, dumbfounded, says “42? According to your time sheets, you’re 147 years old”.

Now, I bet your wondering why I’m starting this editorial off with a joke – it’s because, the legal fees charged by the Owl (Fairbanks) are NO JOKE! - $3,000 + for filing a summons and complaint? $3000 + for filing a motion? Come on, not even the proverbial Philadelphia Lawyer charges that much – not even the partners of the largest law firms in the world charge that much, even if they add in a good solid $500 dinner while they “consult” about your case.

Did you know that the American Bar Association, in its Rule DR 3-102. Dividing Legal Fees with a Non-Lawyer states that: “(A) A lawyer or law firm shall not share legal fees with a non-lawyer, except under some very clear circumstances.” Did you know that The Utah Bar Association Ethics Advisory Opinion Committee, in its Opinion No. 100 states:

“If a collection agency recovers attorneys' fees from a debtor which exceed the actual cost of legal services for a particular matter, the agency profits from the services of the attorney. Such an arrangement violates Rule 5.4 of the Rules of Professional Conduct, which prohibits lawyers from sharing fees for legal services with non-lawyers.”

“Rule 5.4 of the Rules of Professional Conduct prohibits lawyers from sharing fees for legal services with non-lawyers ‘to protect a lawyer's professional independence of judgment.’ We perceive no difference between ‘sharing’ fees for legal services and ‘profiting’ from them. In either case, a non-lawyer has the potential power to wield influence over the handling of the legal matter which is inconsistent with the lawyer's obligation to exercise independent professional judgment.

This conclusion is supported by National Treasury Employees' Union v. United States Department of Treasury, in which the court was confronted with a factual situation very similar to the arrangements between the Owl and its attorneys. Two salaried lawyers employed full time by the union provided legal services to a union member under a prepaid plan. The union member prevailed, and the union sought recovery of its attorneys' fees based upon the market value of the legal services rendered rather than the actual cost of legal services incurred by the union. The union admitted, however, that the fees would be paid to the union, not to its attorneys. The court refused to award the union more than the actual cost of legal services, concluding that the union could not profit from the provision of legal services under the ABA version of Utah's Rule 5.4.

This opinion is also consistent with ethics advisory opinions of other jurisdictions. In 1986, Idaho considered the retention of attorneys' fees by collection agencies and concluded that a lawyer could not contract with a collection agency to accept only a retainer fee allowing the agency to keep any attorneys' fees in excess of the retainer. Arizona has decreed that there "may not be, under any guise, any division of fees between a lawyer and a collection agency. Whatever is charged for legal services must go to the lawyer. A Philadelphia opinion concluded that since the collection service comprises non-lawyers, an arrangement pursuant to which a lawyer received a percentage of the agency's fee violated the code's prohibition against sharing legal fees with a non-lawyer.

If an attorney is paid a monthly retainer, then the actual cost of services for a particular matter must be calculated and only that amount, including expenses ordinarily associated with legal services, are recoverable by the agency as attorneys' fee.

Rule 4-505 of the Utah Code of Judicial Administration, which governs the award of attorneys' fees in the trial courts of the State of Utah provides in pertinent part as follows:

(1) Affidavits in support of an award of attorneys' fees must be filed with the court and set forth specifically the legal basis for the award, the nature of the work performed by the attorney, the number of hours spent to prosecute the claim to judgment, or the time spent in pursuing the matter to the stage for which attorneys' fees are claimed, and affirm the reasonableness of the fees for comparable legal services.

I have quoted from the American Bar Association, because that entity is nationwide, and from The Utah Bar Association, because we all know who nests there. However, this provision is found in the Code of Ethics of every Bar Association in the 52 States.

Now, if you take the above information and apply it to the legal fees charged by your servicer, you will see that there is a very large problem.

What can you do about it? CHALLENGE IT!!! Plain and simple – CHALLENGE IT.

The attorneys providing the services for the Owl must, and I repeat must, produce their time sheets, validating why a process that normally encompasses approximately 30 minutes of time is costing over $3,000. Also, as you can see, if they agreed to a fee sharing agreement with the Owl, they are in violation of their State Bar Association Code of Ethics, and the American Bar Association Code of Ethics – and the appropriate Bar Associations will need to know about it.