You have asked this Committee to review your fee agreement in order to determine whether it poses any ethical problems.
Your agreement has several provisions outlining you and your partner's hourly rates; costs that may be incurred and will be payable by the client in addition to hourly fees and a provision agreeing that you may ask your client to execute a judgment note for unpaid fees and/or costs that are agreed to be due and owing. Furthermore, it delineates a non-refundable retainer and agreement by both parties to be bound by the decision of the Bar Association's fee disputes committee for disputes regarding fees in excess of the non-refundable retainer. Your agreement also has a provision that when a client agrees that fees are due and owing, but you must sue to collect those fees, the client agrees to pay as reimbursement for your costs 331/3% of the amount recovered by your suit against your client to recover these fees.
Rule of Professional Conduct 1.5b mandates that the basis or rate of a fee be transmitted to the client in writing. Rule 1.8(a) (1-3) provides in part that:
(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
1) the transaction and terms on which the lawyer acquires the interest are fully disclosed and transmitted in writing to the client in a manner which can be reasonable understood by the client;
2) the client is advised and is given a reasonable opportunity to seek the advise of independent counsel in the transaction; and
3) the client consents in writing thereto.
The Committee notes that your agreement addresses many important issues that can arise in an attorney/client relationship. However, the provisions regarding signing of a judgment note, agreement to pay a fixed percentage as reimbursement of your costs, and the submission of certain disputes to arbitration by the fee disputes committee all give rise to pecuniary interests adverse to the client which trigger the disclosure and consent requirements of Rule 1.8(a) (1-3). These are particularly sensitive areas in both domestic and creditor/debtor cases where the client may be in a very poor financial situation to begin with.
Even though the Comment to Rule 1.5 (the Committee notes that the Comments to the Rules of Professional Conduct have not been adopted by the Pennsylvania Supreme Court), suggests that an attorney consider use of an alternative dispute resolution program such as the fee disputes committee, many ethics opinions from other jurisdiction have held that such mandatory arbitration agreements are only enforceable if in fact the clients have actual independent counsel to aid them in understanding the agreements they are signing. The Committee has considered this point, but feels that compliance with the Rule 1.8 is sufficient and that the obtaining of independent counsel by the client prior to signing the agreement is not necessary.
Mandatory arbitration agreements have previously been discussed by this Committee in Opinion 88-2 which finds them ethically permissible provided that the requirements of Rule 1.8 (a) (1-3) are met.
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