Sunday, January 6, 2019

Texas Bar issues opinion on whether attorney can renegotiate a flat fee

Long time readers of this blog might remember that I have published a couple of short articles on flat fees. (See here and here, for example.)  One issue related to flat fees that is interesting is whether an attorney should have the right to renegotiate the fee if it turns out that he or she miscalculated the amount of time the legal services would take.  Obviously, you would think that once the fee agreement is set, the attorney can't unilaterally change it to force the client to pay more.  The main reason a client would agree to a flat fee is the fact they know ahead of time how much the total fee will be.

This puts an attorney in a difficult position when it turns out the amount of work the fee pays for turns out to be a lot more than expected.  The attorney could ask the client to pay more, but what if the client refuses?  After all, they have a contract that says the services would be provided for the agreed amount and therefore have the right to expect the work will be done regardless of how much work it is.  In a case like that, the lawyer miscalculated and would suffer the consequences of his/her mistake.  Like I said, I guess there is nothing that says that the lawyer can't ask the client to pay more, but if the client refuses, the lawyer has to suck it up -- do the work diligently, competently and completely even if it means taking a financial loss.

So the question I would ask is whether it would be ethical for the lawyer to include in the initial contract a clause allowing the lawyer to recalculate or at least to force the client to agree to renegotiate the fee under certain conditions.

A few months ago, the Texas Bar issued an Ethics Opinion partially addressing the issue.  It concludes as follows:
A lawyer may renegotiate his fixed, flat fee for representing a client in a litigation matter after the litigation is underway if modification of the fee agreement is fair under the circumstances. The burden of proving fairness is the lawyer’s and will depend upon factors such as the length of the lawyer-client relationship, whether the reason for the renegotiation could have been anticipated at the outset of the representation, and the client’s level of sophistication. Before seeking to renegotiate a fixed fee, the lawyer should be mindful of the risks that the lawyer voluntarily assumed when proposing or agreeing to that fee—including the possibility that the fixed fee might not be adequate to compensate the lawyer when compared to other fee arrangements.
Notice that the opinion refers to "renegotiating the fee" not to including something in the initial contract.  Does that mean that the opinion considers it ethical for an attorney to seek to renegotiate with the client, or that it would be ethical for the attorney to change the terms of the original agreement?   It is not clear, but it seems to me it is talking about whether it is ethical to ask the client to renegotiate, and it concludes that it would be depending on certain factors.

But, to me, that does not really answer some of the other important questions.  Let's say it is ethical for the attorney to ask, what happens if the client refuses to agree to the new proposed fee?  Can the attorney force the client to accept new terms?  Does the fact that the attorney can ask a client to renegotiate the terms of the contract, make the new terms themselves part of the contract?    My guess is that these questions would need to be addressed in the original contract and the client would have to agree to the terms ahead of time.

Also notice that the opinion seems to be limited to litigation.  Why is that?  What if a client asks me to prepare a will and I agree to do it for a flat fee of $100, which is my hourly fee, because I think it won't take me more than an hour.  Later I realize it will take me a lot longer than that. If the language of the opinion is limited to litigation, I'd have to suck it up, which a litigator wouldn't.  Why the difference?  What makes their time or work more valuable than mine?

You can read the full opinion (which is very short) here.

No comments:

Post a Comment