Rule 1.5. FEES AND EXPENSES

(a)

A lawyer shall not make an agreement for, charge, or collect an illegal or

clearly excessive fee. A fee is clearly excessive when, after a review of the facts, a lawyer

of ordinary prudence would be left with a definite and firm conviction that the fee is in

excess of a reasonable fee. The factors to be considered in determining the

reasonableness of a fee include the following:

(1)

the time and labor required, the novelty and difficulty of the questions

involved, and the skill requisite to perform the legal service properly;

(2)

the likelihood, if apparent to the client, that the acceptance of the

particular employment will preclude other employment by the lawyer;

(3)

the fee customarily charged in the locality for similar legal services;

(4)

the amount involved and the results obtained;

(5)

the time limitations imposed by the client or by the circumstances;

(6)

the nature and length of the professional relationship with the client;

(7)

the experience, reputation, and ability of the lawyer or lawyers

performing the services;

(8)

whether the fee is fixed or contingent.

(b)

The nature and scope of the representation and the basis or rate of the fee

and expenses for which the client will be responsible shall be communicated to the client,

preferably in writing, before or within a reasonable time after commencing the

representation, unless the lawyer will charge a client whom the lawyer has regularly

represented on the same basis as previously charged. Any change in the basis or rate

of the fee or expenses is subject to division (a) of this rule and shall promptly be

communicated to the client, preferably in writing.

e client,

preferably in writing, before or within a reasonable time after commencing the

representation, unless the lawyer will charge a client whom the lawyer has regularly

represented on the same basis as previously charged. Any change in the basis or rate

of the fee or expenses is subject to division (a) of this rule and shall promptly be

communicated to the client, preferably in writing.

(c)

A fee may be contingent on the outcome of the matter for which the service

is rendered, except in a matter in which a contingent fee is prohibited by division (d) of

this rule or other law.

(1)

Each contingent fee agreement shall be in a writing signed by the

client and the lawyer and shall state the method by which the fee is to be

determined, including the percentage or percentages that shall accrue to the

lawyer in the event of settlement, trial, or appeal; litigation and other expenses to

be deducted from the recovery; and whether such expenses are to be deducted

before or after the contingent fee is calculated. The agreement shall clearly notify

the client of any expenses for which the client will be liable whether or not the client

is the prevailing party.

(2)

If the lawyer becomes entitled to compensation under the contingent

fee agreement and the lawyer will be disbursing funds, the lawyer shall prepare a

closing statement and shall provide the client with that statement at the time of or

prior to the receipt of compensation under the agreement. The closing statement

shall specify the manner in which the compensation was determined under the

agreement, any costs and expenses deducted by the lawyer from the judgment or

settlement involved, and, if applicable, the actual division of the lawyer’s fees with

a lawyer not in the same firm, as required in division (e)(3) of this rule. The closing

statement shall be signed by the client and lawyer.

ing statement

shall specify the manner in which the compensation was determined under the

agreement, any costs and expenses deducted by the lawyer from the judgment or

settlement involved, and, if applicable, the actual division of the lawyer’s fees with

a lawyer not in the same firm, as required in division (e)(3) of this rule. The closing

statement shall be signed by the client and lawyer.

(d)

A lawyer shall not enter into an arrangement for, charge, or collect any of

the following:

(1)

any fee in a domestic relations matter, the payment or amount of

which is contingent upon the securing of a divorce or upon the amount of spousal

or child support, or property settlement in lieu thereof;

(2)

a contingent fee for representing a defendant in a criminal case;

(3)

a fee denominated as “earned upon receipt,” “nonrefundable,” or in

any similar terms, unless the client is simultaneously advised in writing that if the

lawyer does not complete the representation for any reason, the client may be

entitled to a refund of all or part of the fee based upon the value of the

representation pursuant to division (a) of this rule.

(e)

Lawyers who are not in the same firm may divide fees only if all of the

following apply:

(1)

the division of fees is in proportion to the services performed by each

lawyer or each lawyer assumes joint responsibility for the representation and

agrees to be available for consultation with the client;

(2)

the client has given written consent after full disclosure of the identity

of each lawyer, that the fees will be divided, and that the division of fees will be in

proportion to the services to be performed by each lawyer or that each lawyer will

assume joint responsibility for the representation;

(3)

except where court approval of the fee division is obtained, the

written closing statement in a case involving a contingent fee shall be signed by

the client and each lawyer and shall comply with the terms of division (c)(2) of this

rule;

es will be in

proportion to the services to be performed by each lawyer or that each lawyer will

assume joint responsibility for the representation;

(3)

except where court approval of the fee division is obtained, the

written closing statement in a case involving a contingent fee shall be signed by

the client and each lawyer and shall comply with the terms of division (c)(2) of this

rule;

(4)

the total fee is reasonable.

(f)

In cases of a dispute between lawyers arising under this rule, fees shall be

divided in accordance with the mediation or arbitration provided by a local bar association.

When a local bar association is not available or does not have procedures to resolve fee

disputes between lawyers, the dispute shall be referred to the Ohio State Bar Association

for mediation or arbitration.

Comment

Reasonableness of Fee

[1]

Division (a) requires that lawyers charge fees that are reasonable under the

circumstances. The factors specified in divisions (a)(1) through (8) are not exclusive. Nor will

each factor be relevant in each instance.

Nature and Scope of Representation; Basis or Rate of Fee and Expenses

[2]

The detail and specificity of the communication required by division (b) will

depend on the nature of the client-lawyer relationship, the work to be performed, and the basis of

the rate or fee. A writing that confirms the nature and scope of the client-lawyer relationship and

the fees to be charged is the preferred means of communicating this information to the client and

can clarify the relationship and reduce the possibility of a misunderstanding. When the lawyer has

regularly represented a client, they ordinarily will have evolved an understanding concerning the

basis or rate of the fee and the expenses for which the client will be responsible. In a new client-lawyer relationship, however, an understanding as to fees and expenses must be established

promptly

can clarify the relationship and reduce the possibility of a misunderstanding. When the lawyer has

regularly represented a client, they ordinarily will have evolved an understanding concerning the

basis or rate of the fee and the expenses for which the client will be responsible. In a new client-lawyer relationship, however, an understanding as to fees and expenses must be established

promptly. Unless the situation involves a regularly represented client, the lawyer should furnish

the client with at least a simple memorandum or copy of the lawyer’s customary fee arrangements

that states the general nature of the legal services to be provided, the basis, rate or total amount of

the fee, and whether and to what extent the client will be responsible for any costs, expenses, or

disbursements in the course of the representation. So long as the client agrees in advance, a lawyer

may seek reimbursement for the reasonable cost of services performed in-house, such as copying.

[3]

Contingent fees, like any other fees, are subject to the reasonableness standard of

division (a) of this rule. In determining whether a particular contingent fee is reasonable, or

whether it is reasonable to charge any form of contingent fee, a lawyer must consider the factors

that are relevant under the circumstances. Applicable law may impose limitations on contingent

fees, such as a ceiling on the percentage allowable, or may require a lawyer to offer clients an

alternative basis for the fee. Applicable law also may apply to situations other than a contingent

fee, for example, government regulations regarding fees in certain tax matters.

Terms of Payment

ctors

that are relevant under the circumstances. Applicable law may impose limitations on contingent

fees, such as a ceiling on the percentage allowable, or may require a lawyer to offer clients an

alternative basis for the fee. Applicable law also may apply to situations other than a contingent

fee, for example, government regulations regarding fees in certain tax matters.

Terms of Payment

[4]

A lawyer may require advance payment of a fee, but is obliged to return any

unearned portion. See Rule 1.16(e). A lawyer may accept property in payment for services, such

as an ownership interest in an enterprise, providing this does not involve acquisition of a

proprietary interest in the cause of action or subject matter of the litigation contrary to Rule 1.8 (i).

However, a fee paid in property instead of money may be subject to the requirements of Rule 1.8(a)

because such fees often have the essential qualities of a business transaction with the client.

[5]

An agreement may not be made whose terms might induce the lawyer improperly

to curtail services for the client or perform them in a way contrary to the client’s interest. For

example, a lawyer should not enter into an agreement whereby services are to be provided only up

to a stated amount when it is foreseeable that more extensive services probably will be required,

unless the situation is adequately explained to the client. Otherwise, the client might have to

bargain for further assistance in the midst of a proceeding or transaction. However, it is proper to

define the extent of services in light of the client’s ability to pay. A lawyer should not exploit a

fee arrangement based primarily on hourly charges by using wasteful procedures.

[5A]

If all funds held by the lawyer are not disbursed at the time the closing statement

required by division (c)(2) is prepared, the lawyer’s obligation with regard to those funds is

governed by Rule 1.15.

Prohibited Contingent Fees

rvices in light of the client’s ability to pay. A lawyer should not exploit a

fee arrangement based primarily on hourly charges by using wasteful procedures.

[5A]

If all funds held by the lawyer are not disbursed at the time the closing statement

required by division (c)(2) is prepared, the lawyer’s obligation with regard to those funds is

governed by Rule 1.15.

Prohibited Contingent Fees

[6]

Division (d) prohibits a lawyer from charging a contingent fee in a domestic

relations matter when payment is contingent upon the securing of a divorce or upon the amount of

spousal or child support or property settlement to be obtained. This provision does not preclude a

contract for a contingent fee for legal representation in connection with the recovery of postjudgment balances due under support or other financial orders because such contracts do not

implicate the same policy concerns.

Retainer

[6A]

Advance fee payments are of at least four types. The “true” or “classic” retainer is

a fee paid in advance solely to ensure the lawyer’s availability to represent the client and precludes

the lawyer from taking adverse representation. What is often called a retainer is in fact an advance

payment to ensure that fees are paid when they are subsequently earned, on either a flat fee or

hourly fee basis. A flat fee is a fee of a set amount for performance of agreed work, which may or

may not be paid in advance but is not deemed earned until the work is performed. An earned upon

receipt fee is a flat fee paid in advance that is deemed earned upon payment regardless of the

amount of future work performed. When a fee is earned affects whether it must be placed in the

attorney’s trust account, see Rule 1.15, and may have significance under other laws such as tax

and bankruptcy

may not be paid in advance but is not deemed earned until the work is performed. An earned upon

receipt fee is a flat fee paid in advance that is deemed earned upon payment regardless of the

amount of future work performed. When a fee is earned affects whether it must be placed in the

attorney’s trust account, see Rule 1.15, and may have significance under other laws such as tax

and bankruptcy. The reasonableness requirement and the application of the factors in division (a)

may mean that a client is entitled to a refund of an advance fee payment even though it has been

denominated “nonrefundable,” “earned upon receipt,” or in similar terms that imply the client

would never receive a refund. So that a client is not misled by the use of such terms, division

(d)(3) requires certain minimum disclosures that must be included in the written fee agreement.

This does not mean the client will always be entitled to a refund upon early termination of the

representation [e.g., factor (a)(2) might justify the entire fee], nor does it determine how any refund

should be calculated (e.g., hours worked times a reasonable hourly rate, quantum meruit,

percentage of the work completed, etc.), but merely requires that the client be advised of the

possibility of a refund based upon application of the factors set forth in division (a). In order to be

able to demonstrate the reasonableness of the fee in the event of early termination of the

representation, it is advisable that lawyers maintain contemporaneous time records for any

representation undertaken on a flat fee basis.

Division of Fee

requires that the client be advised of the

possibility of a refund based upon application of the factors set forth in division (a). In order to be

able to demonstrate the reasonableness of the fee in the event of early termination of the

representation, it is advisable that lawyers maintain contemporaneous time records for any

representation undertaken on a flat fee basis.

Division of Fee

[7]

A division of fee is a single billing to a client covering the fee of two or more

lawyers who are not in the same firm. A division of fee facilitates association of more than one

lawyer in a matter in which neither alone could serve the client as well, and most often is used

when the fee is contingent and the division is between a referring lawyer and a trial lawyer.

Division (e) permits the lawyers to divide a fee either on the basis of the proportion of services

they render or if each lawyer assumes responsibility for the representation as a whole. Within a

reasonable time after disclosure of the identity of each lawyer, the client must give written approval

that the fee will be divided and that the division of fees is in proportion to the services performed

by each lawyer or that each lawyer assumes joint responsibility for the representation. Except

where court approval of the fee division is obtained, closing statements must be in a writing signed

by the client and each lawyer and must otherwise comply with division (c) of this rule. Joint

responsibility for the representation entails financial and ethical responsibility for the

representation as if the lawyers were associated in a partnership. A lawyer should only refer a

matter to a lawyer whom the referring lawyer reasonably believes is competent to handle the

matter. See Rules 1.1 and 1.17.

[8]

Division (e) does not prohibit or regulate division of fees to be received in the future

for work done when lawyers were previously associated in a law firm.

Disputes over Fees

ation as if the lawyers were associated in a partnership. A lawyer should only refer a

matter to a lawyer whom the referring lawyer reasonably believes is competent to handle the

matter. See Rules 1.1 and 1.17.

[8]

Division (e) does not prohibit or regulate division of fees to be received in the future

for work done when lawyers were previously associated in a law firm.

Disputes over Fees

[9]

If a procedure has been established for resolution of fee disputes between a client

and a lawyer, such as an arbitration or mediation procedure established by a local bar association,

the Ohio State Bar Association, or the Supreme Court of Ohio, the lawyer must comply with the

procedure when it is mandatory, and, even when it is voluntary, the lawyer should conscientiously

consider submitting to it. Law may prescribe a procedure for determining a lawyer’s fee, for

example, in representation of an executor or administrator, a class or a person entitled to a

reasonable fee as part of the measure of damages. The lawyer entitled to such a fee and a lawyer

representing another party concerned with the fee should comply with the prescribed procedure.

[10]

A procedure has been established for resolution of fee disputes between lawyers

who are sharing a fee pursuant to division (e) of this rule. This involves use of an arbitration or

mediation procedure established by a local bar association or the Ohio State Bar Association. The

lawyer must comply with the procedure. A dispute between lawyers who are splitting a fee shall

not delay disbursement to the client. See Rule 1.15.

Comparison to former Ohio Code of Professional Responsibility

Rule 1.5 replaces DR 2-106 and DR 2-107; makes provisions of EC 2-18 and EC 2-19

mandatory, as opposed to aspirational, with substantive modifications; and makes the provisions

of R.C. 4705.15 mandatory, with technical modifications.

tween lawyers who are splitting a fee shall

not delay disbursement to the client. See Rule 1.15.

Comparison to former Ohio Code of Professional Responsibility

Rule 1.5 replaces DR 2-106 and DR 2-107; makes provisions of EC 2-18 and EC 2-19

mandatory, as opposed to aspirational, with substantive modifications; and makes the provisions

of R.C. 4705.15 mandatory, with technical modifications.

Rule 1.5(a) adopts the language contained in DR 2-106(A) and (B), which prohibits illegal

or clearly excessive fees and establishes standards for determining the reasonableness of fees.

Eliminated from Rule 1.5(a) is language regarding expenses.

Rule 1.5(b) expands on EC 2-18 by mandating that the nature and scope of the

representation and the arrangements for fees and expenses shall promptly be communicated to the

client, preferably in writing, to avoid potential disputes, unless the situation involves a regularly

represented client who will be represented on the same basis as in the other matters for which the

lawyer is regularly engaged.

Rule 1.5(c)(1) also expands on EC 2-18 and R.C. 4705.15(B) by requiring that all

contingent fee agreements shall be reduced to a writing signed by the client and the lawyer. Rule

1.5(c)(2) directs that a closing statement shall be prepared and signed by both the lawyer and the

client in matters involving contingent fees. It closely parallels the current R.C. 4705.15(C).

Rule 1.5(d) prohibits the use of a contingent fee arrangement when the contingency is

securing a divorce, spousal support, or property settlement in lieu of support. It finds its basis in

EC 2-19, which provides that “Because of the human relationships involved and the unique

character of the proceedings, contingent fee arrangements in domestic relations cases are rarely

justified.” Rule 1.5(d)(2) prohibits the use of contingent fee arrangements in criminal cases and

parallels DR 2-106(C).

vorce, spousal support, or property settlement in lieu of support. It finds its basis in

EC 2-19, which provides that “Because of the human relationships involved and the unique

character of the proceedings, contingent fee arrangements in domestic relations cases are rarely

justified.” Rule 1.5(d)(2) prohibits the use of contingent fee arrangements in criminal cases and

parallels DR 2-106(C).

Rule 1.5(d)(3) prohibits fee arrangements denominated as “earned upon receipt,”

“nonrefundable,” or other similar terms that imply the client may never be entitled to a refund,

unless the client is advised in writing that if the lawyer does not complete the representation for

any reason, the client may be entitled to a refund so the client is not misled by such terms. The

rationale for this rule is contained in Comment [6A].

Rule 1.5(e) deals with the division of fees among lawyers who are not in the same firm.

Rule 1.5(e)(1) restates the provisions of DR 2-107(A)(1), with the additional requirement that in

the event the division of fees is on the basis of joint responsibility, each lawyer must be available

for consultation with the client. Rule 1.5(e)(2) clarifies DR 2-107(A)(2) and Advisory Opinion

2003-3 of the Board of Commissioners on Grievances and Discipline regarding the matters that

must be disclosed in writing to the client.

Rule 1.5(e)(3) is a new provision directing that the closing statement contemplated by Rule

1.5(c)(2) must be signed by the client and all lawyers who are not in the same firm who will share

in the fees, except where the fee division is court-approved. Rule 1.5(e)(4) is a restatement of DR

2-107(A)(3) regarding the requirement that the total fee must be reasonable.

Rule 1.5(f) is a restatement of DR 2-107(B) requiring mandatory mediation or arbitration

regarding disputes between lawyers sharing a fee under this rule.

Comparison to ABA Model Rules of Professional Conduct

share

in the fees, except where the fee division is court-approved. Rule 1.5(e)(4) is a restatement of DR

2-107(A)(3) regarding the requirement that the total fee must be reasonable.

Rule 1.5(f) is a restatement of DR 2-107(B) requiring mandatory mediation or arbitration

regarding disputes between lawyers sharing a fee under this rule.

Comparison to ABA Model Rules of Professional Conduct

Model Rule 1.5 is amended to conform to Disciplinary Rules and ensure a better

understanding of the relationship between the client and the lawyers representing the client,

thereby reducing the likelihood of future disputes. Also, the comments are modified to bring them

into conformity with the proposed changes to Model Rule 1.5 and clarify certain aspects of fees

for the benefit of the bench, bar, and the public.

Although ABA Model Rule 1.5(a) directs that a lawyer shall not charge “unreasonable”

fees or expenses, the terminology in DR 2-106 (A) prohibiting “illegal or clearly excessive” fees

is more encompassing and better suited to use in Ohio. Charging an “illegal fee” differs from

charging an “unreasonable fee” and, accordingly, the existing Ohio language is retained.

Model Rule 1.5(c), while dealing with contingent fees, is expanded and clarified. The

closing statement provisions of the Model Rule are expanded to bring them in line with existing

R.C. 4705.15(C). Additionally, the Model Rule is divided into two parts, the first dealing with the

lawyer’s obligations at the commencement of the relationship and the second dealing with the

lawyer’s obligations at the time a fee is earned.

The provisions of Model Rule 1.5(d) are modified to add division (d)(3) and Comment

[6A] in light of the number of disciplinary cases involving “retainers.”

Model Rule 1.5(e) and Comment [7] dealing with division of fees are modified to bring

both the requirements of the rule and the commentary into line with existing practice in Ohio.