Rule 1.5. Fees

(a) A lawyer shall not enter into an agreement for, charge, or collect an illegal or unreasonable fee or an unreasonable amount for expenses.  The factors to be considered in determining the reasonableness of a fee or expenses 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; and

     (8) whether the fee is fixed or contingent.

(b) When the lawyer has not regularly represented the client, the 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. 

(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 law or these rules.  A contingent fee agreement shall be in writing signed by the client 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 for which the client will be liable whether or not the client is the prevailing party, and whether such expenses are to be deducted before or after the contingent fee is calculated.  Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

(d) (1) A lawyer shall not enter into an arrangement for, charge, or collect any fee in a divorce or other domestic relations matter, which is contingent on:

a.  securing a divorce;

b.  establishing or modifying a child support, alimony, property division, or other financial order; or

c.  obtaining any specific non-financial relief.

     (2) However, a contingent fee arrangement is permissible, subject to 1.5(c) above, in domestic relations matters regarding:

a. enforcing a property division order or an accrued obligation for child support or alimony;

b.  enforcing any other financial order; or

c.  obtaining a property division of assets hidden during the divorce.

(e) A lawyer shall not enter into an arrangement to charge or collect a contingent fee for representing a defendant in a criminal case.

(f) A division of fee between lawyers who are not in the same firm may be made only if:

     (1) the division is made either:

a. in reasonable proportion to the services performed or responsibility or risks assumed by each, or

b.  based on an agreement with the referring lawyer;

     (2) in either case above, the client agrees in a writing signed by the client to the division of fees;

     (3) in either case, the total fee charged by all lawyers is not increased by the division of fees and is reasonable.

Ethics Committee Comment

The language used in Rule 1.5(a) is substantially the same as proposed ABA Model Rule 1.5(a) and changes the prior rule in two respects.  First, it replaces the prior rule’s standard prohibiting a “clearly excessive fees” with the ABA Model Rule standard of  an “unreasonable fee.”  This change reflects the fact that a “reasonableness” standard defines a lawyer’s obligation to the client with respect to other aspects of their relationship governed by the Rules of Professional Conduct.  See, for example, Rules 1.3(a), 1.4(a), 1.8(a), and 3.2.  There is no sound policy or other reason why the reasonableness standard  should not govern legal fees and expenses.  As the Statement of Purpose notes, “[t]he Rules of Professional Conduct are rules of reason.”  Whether a fee is reasonable is subject to independent determination.  Indeed, the eight factors listed in Rule 1.5(a) all bear on ascertaining the reasonableness of a fee, not whether the fee is “clearly excessive.”  See In Re Kelley’s Case, 137 N.H. 314, 320 (1993) (under prior rule 1.5(a) to determine whether fee is “clearly excessive,” a “generally accepted, reasonable fee” must first be determined); Restatement (Third) of the Law Governing Lawyers § 46 (proposed official draft 1998) (lawyer prohibited from charging a fee “larger than is reasonable under the circumstances”). 

Changing the standard under Rule 1.5(a) from “clearly excessive” to “unreasonable” raises the issue of the potential impact of a decision in a fee-shifting case that rejects a portion of the fee application as being unreasonable.  This raises a concern as to whether such a ruling would pave the way for a misconduct complaint under Rule 8.4(a) since “professional misconduct” is defined to include a violation or an attempt to violate the Rules of Professional Conduct.

The New Hampshire Supreme Court has stated that “legislative authorizations for the granting of attorney’s fees usually are based upon an intent to permit private parties to enforce a law as ‘private attorneys general’ and the realization that in many non-class action cases the verdict or damages often may be offset or even exceeded by the successful plaintiff’s attorney fees.”  Couture v. Mammoth Grocers, Inc., 117 N.H. 294, 295 (1977).  In reviewing awards under fee-shifting statutes, the Court has consistently looked to rule 1.5(a), or its predecessor, to determine whether an award is reasonable.  E.g., McCabe v. Arcidy, 138 N.H. 20 (1993); In Re Estate of Rolfe, 136 N.H. 294 (1992); City of Manchester v. Doucet, 133 N.H. 680 (1990); Couture v. Mammoth Grocers, Inc., supra.  But in doing so, the Court has made clear that fee agreements “do not dictate the amount of attorney’s fees recoverable” because the fee-shifting statute “allow[s] the court to exercise its discretion in determining a reasonable fee.”  Cheshire Toyota/Volvo, Inc. v. O’Sullivan, 132 N.H. 168, 171 (1989).  The Court has noted that the fee arrangement is “but one of a number of factors for a court to consider in determining a reasonable fee,” id., and that “[t]here can be no rigid, precise measure of reasonableness, however, because the weight accorded each factor depends on the circumstances of each particular case.”  McCabe, 138 N.H. at 29. 

Although unstated, the Court’s approach in fee-shifting cases also appears to reflect the notion that the amount of fees the adverse party should bear may well differ from the amount the client should reasonably be expected to pay.  In any event, none of the cases contains even a hint that a rejection of a portion of the application might raise the specter of a misconduct complaint.

Federal fee-shifting statutes serve the same general purpose as New Hampshire statutes:  to encourage attorneys to take cases that otherwise might not be economically feasible or attractive.  See generally The Civil Rights Attorneys Fees Awards Act of 1976, H.R. Rep. No. 94-1588, at 3 (1976).  But awards may not produce a windfall for attorneys.  See generally S. Rep. No. 94-1011, at 6 (1976).

The United States Supreme Court has recognized that “billing judgment” is as important in fee-shifting cases as in the private sector:  “‘Hours that are not properly billed to one’s client also are not properly billed to one’s adversary pursuant to statutory authority.’”  Hensley v. Eckerhart, 461 U.S. 424, 434 (1983) (quoting from Copeland v. Marshall, 641 F.2d 880, 891 (1980) ( en banc)).  Yet, the Hensley court stated that multiplying “reasonable hours times a reasonable rate” is only one consideration in determining a proper statutory award.  Id.  Courts also must consider whether the relief obtained is “significant,” and even if significant whether the relief “is limited in comparison to the scope of the litigation as a whole.”  Id. at 440.  Further, work on unsuccessful claims, even if reasonable, usually may not be considered, nor may an award be made where the documentation is inadequate.  Id. at 433-434.  Finally, the Court has made clear that in determining reasonableness “the most critical factor is the degree of success obtained.”  Id. at 436. 

Given the purposes of fee-shifting statutes, the New Hampshire Supreme Court has made clear that the determination of a reasonable fee is based on considerations that go beyond private fee agreements so the award reflects the policies served by such statutes.  Its approach is consistent with federal law.  For this reason, and in the absence of any reported decision in which a ruling in a fee-shifting case has been cited to support a misconduct complaint, there is only a minimal risk that adoption of an unreasonable standard would prejudice an attorney against whom a complaint of professional misconduct has been filed because a court had determined a portion of the fees was unreasonable.  That minimal risk must be weighed against the benefit to be gained by adopting an unreasonable standard.  Simply stated, the “clearly excessive” standard is indefensible.  A lawyer should not be able to collect a fee that is unreasonable or excessive.  Such a standard is neither fair to the client nor justifiable.   Moreover, to permit a lawyer to charge and collect an unreasonable or excessive fee is unseemly, reflects poorly on the legal profession, and does not serve the public interest in promoting access to legal services in a country founded on the rule of law.  See ABA Formal Opinion 93-379 (“A lawyer should not charge more than a reasonable fee, for excessive costs of legal service would deter a laymen from utilizing the legal system in protection of their rights.  Furthermore, an excessive charge abuses the professional relationship between lawyer and client”).  Finally, it is difficult to imagine any argument that could be made to defend such a fee, which the public would understand, let alone accept.  While how lawyers are viewed by the public cannot be the sole yardstick by which lawyer conduct is measured, in the area of legal fees it should be a paramount consideration. 

The second change to Rule 1.5(a) is that it has been revised to make explicit that a lawyer may not charge an unreasonable amount for expenses for which the client is responsible.  This change in the text of the rule, which is consistent with the opinions of state ethics committees, is not intended to change the substance of the prior rule.  See ABA Formal Opinion 93-379.

The New Hampshire rule differs markedly from the ABA Model Rule because it allows so-called "naked" referral fees.  The ABA Model Rule allows a division of a fee between lawyers not in the same law firm only where each lawyer actively participates in a matter or assumes joint responsibility and risk for the representation of the client.  The New Hampshire rule changes this requirement and allows a division of fee with a forwarding lawyer, regardless of the work performed or responsibility assumed, provided that the client consents in writing to the division of fees and the total fee is not increased because of the fee division and is reasonable.  This change from the ABA Model Rule and from the previous New Hampshire rule is intended to facilitate the association of alternate counsel in order to best serve the client and is often but not exclusively used when the division is between a referring lawyer and a trial lawyer.

2004 ABA Model Code Comment
RULE 1.5  FEES

Reasonableness of Fee and Expenses

[1] Paragraph (a) requires that lawyers charge fees that are reasonable under the circumstances. The factors specified in (1) through (8) are not exclusive. Nor will each factor be relevant in each instance. Paragraph (a) also requires that expenses for which the client will be charged must be reasonable. A lawyer may seek reimbursement for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges, either by charging a reasonable amount to which the client has agreed in advance or by charging an amount that reasonably reflects the cost incurred by the lawyer.

Basis or Rate of Fee

[2] 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 promptly established. Generally, it is desirable to 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. A written statement concerning the terms of the engagement reduces the possibility of misunderstanding.

[3] Contingent fees, like any other fees, are subject to the reasonableness standard of paragraph (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

[4] A lawyer may require advance payment of a fee, but is obliged to return any unearned portion. See Rule 1.16(d). 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.

Prohibited Contingent Fees

[6] Paragraph (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 alimony or 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 post-judgment balances due under support, alimony or other financial orders because such contracts do not implicate the same policy concerns.

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 specialist. Paragraph (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. In addition, the client must agree to the arrangement, including the share that each lawyer is to receive, and the agreement must be confirmed in writing. Contingent fee agreements must be in a writing signed by the client and must otherwise comply with paragraph (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 Rule 1.1.

[8] Paragraph (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, such as an arbitration or mediation procedure established by the bar, 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.