Can a lawyer ethically charge a client for the provision of in-house services such as secretarial overtime, photocopying, electronic investigation processing, electronic legal research, CDs, mileage and parking, meals, Federal Express, postage, and long distance calls? Given California`s lack of direct – or even indirect – authority on this issue, and for this reason, we turn to ethical opinions outside of California. The Code of Professional Conduct, the State Bar Act, and California court notices interpreting this authority are binding on California attorneys. Although the ABA Model Rules are not binding in California, they may be used by attorneys as a guideline if there is no direct California agency and the ABA Model Rules do not conflict with the California Guidelines. (City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 852.) Therefore, in the absence of authority, we can be guided by the ABA Model Rules and official statements that interpret them, as well as by the ethical opinions of other jurisdictions or Bar associations. (Rule 1-100(A) (ethics and rules and standards issued by other jurisdictions and bar associations may also be considered); State Compensation Ins. Fund v.WPS, Inc. (1999) 70 Cal.App.4th 644, 656.) “Especially when there is no conflict with California public policy, the ABA Model Rules serve as a collateral source of advice for appropriate professional advice in California.” (Kennedy v. Eldridge (2011) 201 Cal.App.4th 1197, 1210 [internal quotation marks and citation omitted]; Legacy Villas at La Quinta Homeowners Assoc. v. Centex Homes (C.D.
Cal. April 30, 2012) 2012 WL 1536036 at *7). Similarly, the City of New York Bar Association`s Formal Notice 2006-3 regarding the outsourcing of legal services followed ABA`s Formal Notice 93-379 and concluded that an attorney cannot charge the client more than the direct costs associated with the outsourcing, plus an appropriate allocation of overhead, directly related to the provision of that service. However, some federal courts in California have concluded that some of these fees — albeit in very different contexts — are so high that they would not be charged properly to a customer. Accordingly, the courts have refused to award these fees as costs. For example, in Allen v. City of Los Angeles (C.D. Cal. 13. January 1995) 1995 WL 433720, at *20, in deciding the award of attorneys` fees and expenses in the Rodney King civil rights case “the court .
prohibits meals, parking and telephone costs. In Zynga Game Networks v. Ekran (N.D. Cal. August 31, 2010) 2010 WL 3463630, a Lanham Act case, the court found that Lexis/Nexis` computer research and telephone charges constituted overhead costs, and with respect to Media Vision Technology (N.D. Cal. January 23, 1996) 913 F.Supp. 1362, 1370, in approving the settlement of a securities class action, the court concluded that “private express postal services are part of the overhead of the business and should be covered as business expenses.” The court also reduced the copy fee from $0.25 per page to $0.08 to reflect the average price of most commercial copying services.
(Id. c. 1368.) In Ringcentral, Inc. v. Quimby (N.D. Cal. 8. April 2010) 711 F.Supp.2d 1048, 1066, another Lanham Act case, “the court considers that costs incurred as a result of long distance calls are overhead costs that are not properly included in a decision on costs” and in American Small Business League v. U.S. Small Bus.
Admin. (N.D. Cal. September 12, 2005) 2005 WL 2206486 to *2, a FOIA lawsuit, “the court concludes that Westlaw`s $1,660.83 in legal research costs should be properly treated as overhead and not expenses.” Any reasonable calculation of direct costs and any reasonable allocation of related overhead costs should be consistent with ethical requirements. On the other hand, in the absence of an agreement to the contrary, it is unacceptable for a lawyer to create an additional source of profit for the law firm that goes beyond that contained in the provision of professional services itself. Avocado inventory and business is the sale of legal services, not photocopier paper, tuna sandwiches, computer time or courier services. (Ibid.) In addition to and independently of attorney`s fees for legal services on behalf of the client, the client is also responsible for any costs and expenses incurred by the lawyer in representing the client. Some typical costs and expenses include fees for experts, investigators and consultants, filing fees, the cost of hearing and testimony minutes, jury fees, photocopying services, travel expenses, and any other costs or expenses incurred by counsel on behalf of the client.
Model Rule 1.5 (a) of the ABA, on which the opinion is based, prohibits “unreasonable fees or expenses”; California Rule 4-200(A), on the other hand, prohibits “illegal or unscrupulous fees.” While many of the same factors are set out in Rule 4-200(B) of Model Rule 1.5(a)(1), the difference between “illegal or unscrupulous” and “unreasonable” is both remarkable and not negligible.6 Code of Professional Conduct 4-200(A) prohibits a lawyer from entering into an agreement on illegal or unscrupulous fees or from charging or collecting illegal or unscrupulous fees. Rule 4-200(B) sets out 11 factors to be taken into account, if any, in determining whether a fee is unscrupulous.2 A lawyer must invoice the client for all costs and expenses related to representation. Eventually, the client becomes dissatisfied, breaks off the relationship with the lawyer, and alleges, among other things, that the lawyer breached his fiduciary duty to the client because the lawyer disguised his overhead costs as the client`s expenses in violation of the Code of Professional Conduct and the Crown Counsel Act. In particular, the client claims that additional secretarial costs are charged; Photocopy for $0.25 per page; processing electronic surveys; electronic search (Westlaw, Lexis/Nexis); the cost of CDs for document storage; mileage and parking; Restoration; Federal Express; Postage; and long distance calls are all part of the lawyer`s office overhead, for which it was unethical to charge the client a fee.1 In Ojeda v. Sharp Cabrillo Hosp. (1992) 8 Cal.App.4th 1 (4th Dist., Div. 1) – Approval of a minor`s compromise in a medical malpractice action – the main issue was whether a contingency fee for a medical officer was appropriate, especially with regard to MICRA. Regarding customer billing costs, the court stated: However, ABA`s formal opinion 93-379 concludes that: However, the Ojeda court did not address the issue of whether such an “extension” is ethically permissible. In addition, no California agency specifically states whether a lawyer can charge a client for providing in-house services such as those mentioned in the submitted question. Nor has any California agency determined whether these expenses were part of an attorney general`s office expenses.4 By applying ABA Formal Notice 93-379, as approved by Kroff, and Comment 1 of Model Rule 1.5, counsel could legitimately charge the client for the actual direct costs of photocopies, processing eDiscovery, electronic searches, the cost of CDs, kilometres and parking, meals, Federal Express, postage and long distance calls, provided that these costs are directly related to their representation of the customer. Since nothing in the lawyer`s fee agreement states that the lawyer can charge the client more than the direct costs associated with each service, the lawyer is ethically prohibited from doing so. California approves ABA Formal Notice 93-379.
Library maintenance, malpractice insurance, office space rentals, utilities, etc. would fall under the fees charged by the professional services lawyer. In Kroff (1998) 3 Cal. State Bar Ct.Rptr. 838, the Court approved the findings of ABA Formal Opinion 93-379. In Kroff, the court could not find that counsel`s recovery of the estimated lump sum reimbursements ($105) resulted in unscrupulous fees or constituted an act involving moral upheaval because there was no evidence that the $105 was excessive or that the lawyer was hiding his lump sum reimbursement procedure from his client. However, Kroff found that the failure to disclose costs violated Rule 4-100(B)(3). (Id.
at 854; see also In the Matter of Elstead (2012) 2012 WL 5406777, *6, and In the Matter of Fonte (1994) 2 Cal. State Bar Ct.Rptr. 752, 757-758 [requires a detailed summary of hourly fees and costs in the hourly fee agreement].) Under Section 6148(a) of the Business & Professions Code, a written fee agreement must include, among other things, a statement of “fees applicable to the matter.” Vapnek et al. treat “fees applicable to the case” as costs without discussion, comparing this article to the provision of Section 6147(a)(2), which requires an explanation in a contingency fee agreement of how payments and costs affect the client`s success fees and recovery. (Id. at 5:651.) Nothing in section 6148(a)(1) indicates the level of detail that such a written fee agreement must contain.
