The Board has been called upon to issue a formal ethical opinion on a situation of conflict between an attorney and client regarding attorney fees. Generally, fee disputes are beyond the scope of consideration in ethical matters because they are questions of law not ethics; however, ethics may be involved when attorney fees are excessive, illegal or improperly divided with another.
The question presented is both a legal and an ethical one. The facts appear to be that the attorney was contacted to collect a sum certain on breach of contract and cited an hourly rate for services. Later, the attorney was contacted by another official of the client company and advised that the contract provided for a 20% attorney fee and he was to collect the account and get his fee from the debtor.
Suit was filed, process issued, and garnishments and attachments were levied. The debtor, in order to secure a release of attachments and garnishments, agreed to pay the full amount of the debt claimed due and also the full percentage called for in the contract as attorney fees. The attorney remitted the entire amount of the account collected, but retained the full amount collected as attorney fee, and advised the client that his fee had been collected directly from the debtor. At this point, the client demanded, in addition to that remitted, the payment of the amount which had been collected as attorney fee, stating that the legal services would be compensated at an hourly rate.
The Board does not feel it should consider the question of whether the attorney fees were paid on a percentage or per diem basis; however, the disposition of the fund collected as attorney fee pursuant to the contract, can be an ethical matter. Had the court awarded the percentage attorney fee in accordance with the contract, upon representation of Plaintiff's attorney, any other disposition of such "attorney fees" so collected, other than as attorney's compensation, would have been a misrepresentation to the court and in contravention of Section DR 7-102(a)(5) and (7). Court process was utilized to effectuate settlement and the collection of the attorney fees in question, and, thus, we feel that such disciplinary rules do not apply. Further, DR 3-102 prohibits an attorney from dividing his fee with a layman.
It is the opinion of this Board that if the attorney collected a sum certain as his attorney fee, pursuant to the contract, it would be a violation of such disciplinary rules for him to divide his fee with a layman, including his client. In this instance, however, the client claimed there were some uncollected late charges due him and the attorney had agreed to remit such amount, deducting it from the collected attorney fee. This we deem to be permissible.
This opinion is restricted solely to the facts of this case, and the disposition of the funds collected as attorney fee pursuant to the terms of the contract between the debtor and the creditor.
This 12th day of May , 1981.
F. Evans Harvill
Joseph G. Cummings, Sr.
John R. Rucker
APPROVED AND ADOPTED BY THE BOARD