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Rule and Commentary Regarding Legal Fees

KENTUCKY BAR ASSOCIATION
RULES OF THE SUPREME COURT OF KENTUCKY
PRACTICE OF LAW
SCR 3.130(1.5) Fees
(a) A lawyer's fee shall be reasonable. Some 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 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 basis or rate of the fee
should 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 paragraph (d) or other law.
Such a fee must meet the requirements of Rule 1.5(a). A contingent fee agreement shall be in
writing and should 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. Upon recovery of
any amount in a contingent fee matter, the lawyer shall provide the client with a written statement
stating the outcome of the matter and showing the remittance to the client and the method of its
determination.
(d) A lawyer shall not enter into an arrangement for, charge, or collect:
(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 alimony, maintenance, support, or
property settlement, provided this does not apply to liquidated sums in arrearage; or
(2) A contingent fee for representing a defendant in a criminal case.
(e) A division of a fee between lawyers who are not in the same firm may be made only if:
(1) (a) The division is in proportion to the services performed by each lawyer or,
(b) By written agreement with the client, each lawyer assumes joint responsibility for the
representation; and
(2) The client is advised of and does not object to the participation of all the lawyers
involved; and
(3) The total fee is reasonable.
HISTORY: Adopted by Order 89-1, eff. 1-1-90
COMMENTARY
Supreme Court
1989:
Basis or Rate of Fee
[1] When the lawyer has regularly represented a client, they ordinarily will have evolved
an understanding concerning the basis or rate of the fee. In a new client-lawyer relationship,
however, an understanding as to the fee should be promptly established. It is not necessary to
recite all the factors that underlie the basis of the fee, but only those that are directly involved in
its computation. It is sufficient, for example, to state that the basic rate is an hourly charge or a
fixed amount or an estimated amount, or to identify the factors that may be taken into account in
finally fixing the fee. When developments occur during the representation that render an earlier
estimate substantially inaccurate, a revised estimate should be provided to the client. A written
statement concerning the fee reduces the possibility of misunderstanding. Furnishing the client
with a simple memorandum or a copy of the lawyer's customary fee schedule is sufficient if the
basis or rate of the fee is set forth.
Terms of Payment
[2] 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(j). However,
a fee paid in property instead of money may be subject to special scrutiny because it involves
questions concerning both the value of the services and the lawyer's special knowledge of the
value of the property.
[3] 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.
When there is doubt whether a contingent fee is consistent with the client's best interest, the
lawyer should offer the client alternative bases for the fee and explain their implications.
Applicable law may impose limitations on contingent fees, such as a ceiling on the percentage.
Division of Fee
[4] 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 on either the basis of the proportion of services they render or
by agreement between the participating lawyers if all assume responsibility for the representation
as a whole and the client is advised and does not object. It does not require disclosure to the
client of the share that each lawyer is to receive. Joint responsibility for the representation entails
the obligations stated in Rule 5.1 for purposes of the matter involved.
Disputes over Fees
[5] If a procedure has been established for resolution of fee disputes, such as an
arbitration or mediation procedure established by the bar, 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.
[6] Factor (3) is intended to prohibit unreasonably high fees and does not prevent a
lawyer from sharing fees that are less than "customary."