WHAT ARE REASONABLE ATTORNEY FEES?

[Pages:13]WHAT ARE REASONABLE ATTORNEY FEES?

BENJAMIN K. SANCHEZ Sanchez Law Firm

806 Main Street, Suite 920 Houston, Texas 77002 (713) 780-7745 law@

State Bar of Texas REPRESENTING SMALL BUSINESS

March 22 - 23, 2007 Dallas

CHAPTER 15

Sanchez Law Firm 806 Main Street, Suite 920 Houston, Texas 77002

BENJAMIN K. SANCHEZ

Tel: (713) 780-7745 Fax: (713) 780-3800 E-mail: law@

Benjamin is a Texas attorney specializing in commercial, construction, probate, and debt recovery litigation. He is the owner of Sanchez Law Firm. Benjamin practiced commercial, construction, and probate litigation as the senior associate for the Houston firm of Leyh & Payne, L.L.P. (2004-2007). Before joining Leyh & Payne in 2004, Benjamin practiced commercial litigation for the Dallas firm of John H. Carney & Associates (2002-2003). Benjamin started his career in 1998 as a solo practitioner in Houston before moving to Dallas in 2000. Benjamin is licensed to practice law in all Texas courts, United States District Courts for the Northern, Southern, and Eastern Districts of Texas, United States Court of Appeals ? Fifth Circuit, and United States Supreme Court.

After receiving his BA in Government from the University of Texas at Austin in 1994, Benjamin obtained his JD from the University of Houston Law Center in 1997, where, among other accomplishments, he was named a Dean's Scholar, was Editor-in-Chief of Legalese, the official student publication of the University of Houston Law Center, and received awards for outstanding achievement in legal research and best brief in legal writing.

Benjamin is the 2006-07 Chair of the State Bar of Texas Hispanic Issues Section, as well as the 200708 President of the Mexican-American Bar Association of Houston and the 2006-07 President-Elect of the Mexican American Bar Association of Texas. Benjamin served as the Co-Chairman of the Pro Bono Subcommittee of the ABA Section of Litigation Trial Practice & Procedure Committee from 2005 to 2007. Benjamin currently serves on the Board of Trustees of the Houston Lawyer Referral Service, the Editorial Board of The Houston Lawyer magazine, and the City of Houston Automotive Board (appointed by Mayor Bill White).

Benjamin has been Chair of the Houston Bar Association's Lawyers in Public Schools Committee and a member of the Houston Bar Association's Speakers Bureau Committee. Benjamin was a member of the award-winning 2005-06 Editorial Board of The Houston Lawyer, which received the State Bar of Texas' Best Publication Award for 2005-06, and was named a "Local Hero" by the 2004-2005 Editorial Board of The Houston Lawyer (of which he was not a member at the time).

Benjamin has spoken to and taught students from elementary school to law school and to adult groups on a myriad of subjects, including the power of positive thinking, setting and achieving goals, the importance of education, choosing law as a career, our justice system and how it operates, the everyday life of a litigator, the importance of our jury system, and the 50th Anniversary of Brown v. Board of Education. Benjamin was chosen to give the New Century 8th Grade Promotion Keynote Speech at his alma mater, Alexander Hamilton Middle School in the Houston Heights in 2000. Benjamin has been married for 15 years.

What are Reasonable Attorney Fees?

TABLE OF CONTENTS

Chapter 15

I.

Introduction ................................................................................... 1

II. Texas Disciplinary Rules of Professional Conduct ...................................... 1

A. The Preamble ............................................................................. 1

i. Paragraph 7 ........................................................................... 2

ii. Paragraph 9 ........................................................................... 2

iii. Paragraph 11 ......................................................................... 3

B. Rule 1.04 .................................................................................. 3

i. Fees are never "unreasonable" .................................................... 3

ii. Unconscionable fees ................................................................ 4

iii. 8 non-exclusive factors ............................................................. 5

III. Arthur Andersen .............................................................................. 6

IV. When is the determination made? ......................................................... 6

V. Conclusion .................................................................................... 7

What are Reasonable Attorney Fees?

WHAT ARE REASONABLE ATTORNEY FEES? by

Benjamin K. Sanchez

Chapter 15

I. Introduction

Some lawyers tend to give short shrift to proving up attorney fees, believing that they can "self testify" without argument. Yet, I have seen lawyers stumble when questioned about the reasonableness of their fees in a default hearing, let alone a jury trial with opposing counsel. Lawyers must prepare their attorney fees evidence and arguments as vigorously as the underlying representation or be subject to doing all of their work for less compensation than expected.

Fees are the life blood of a legal practice. Attorney fees are subject to a reasonableness standard, whereas general business transactions are not. But for extreme cases such as gasoline prices during hurricane evacuations, a seller and a purchaser are free to agree on any price for a product or service in our economic system. Yet, an attorney is restricted from exercising the same type of business judgment. Even should a client and an attorney agree to a fee, that fee could later be determined to be unreasonable and the fee reduced or revoked in its entirety!

The CLE presentation and article focuses on the standards used in Texas state courts to determine the reasonableness of a fee. Attorney fees in federal courts have different standards from Texas (consider the "lodestar"1 and Johnson2 factors). This CLE

1 See Hensley v. Eckerhart, 461, U.S. 424, 433 (1983) ("The most useful starting point for determining the amount of a reasonable fee is the number of hours

is an ethics CLE because determining the reasonableness of attorney fees is just as much, if not more so, an ethical issue as a practical one. Attorney fees can control access to our civil justice system and quality of defense in our criminal justice system. Attorney fees can affect the public's view of and respect of the legal profession and its primary participants (lawyers). Therefore, despite the fact that we are not free to bargain for any amount of attorney fees, I am confident that keeping attorney fees reasonable does more good than harm for our profession.

II. Texas Disciplinary Rules of Professional Conduct

Rule 1.04 of the Texas Disciplinary Rules of Professional Conduct3 ("the Rules") concerns attorney fees. Before reviewing that particular rule, we need to put that rule into context.

A. The Preamble

The Preamble to the Rules set forth general guidelines regarding a lawyer's professional and personal responsibilities in the practice of law in Texas as well as the

reasonably expended on the litigation multiplied by a reasonable hourly rate."). 2 See Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-719 (CA5 1974) (setting forth 12 factors to consider in determining the reasonableness of a fee). 3 Tex. Disciplinary R. Prof. Conduct, (1989) reprinted in Tex. Govt Code Ann., tit. 2, subtit. G, app. (Vernon Supp. 1995)(State Bar Rules art X section 9).

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What are Reasonable Attorney Fees?

scope of the Rules in their application to the legal profession in Texas. Three paragraphs contained in the Preamble are of particular importance in discussing attorney fees.

i. Paragraph 7

Paragraph 7 of the Preamble affirms that ethical conflicts routinely arise in the practice of law and that the Rules can be used to help resolve those tensions:

In the nature of law practice, conflicting responsibilities are encountered. Virtually all difficult ethical problems arise from apparent conflict between a lawyer's responsibilities to clients, to the legal system and to the lawyer's own interests. The Texas Disciplinary Rules of Professional Conduct prescribe terms for resolving such tensions. They do so by stating minimum standards of conduct below which no lawyer can fall without being subject to disciplinary action. Within the framework of these Rules many difficult issues of professional discretion can arise. The Rules and their Comments constitute a body of principles upon which the lawyer can rely for guidance in resolving such issues through the exercise of sensitive professional and moral judgment. In applying these rules, lawyers may find interpretive guidance in the principles developed in the Comments.

What to charge for fees is one of the most important ethical conflicts a lawyer faces in his or her practice. Should the lawyer be allowed to charge whatever the client will pay? Does the conflict depend on the specific lawyer, client, and situation? Does a $400 per hour attorney charge a reasonable rate to a major oil company in

Chapter 15

regulatory and administrative matters? If so, is that same $400 rate reasonable for a single mother of two children attempting to divorce her abusive husband? What if the husband was a millionaire instead of a truck driver? These types of ethical conflicts come up all the time in virtually every matter we lawyers handle, because we must determine in every matter we handle how much to charge for our fees (not taking into consideration appointments). Paragraph 7 states that we can look to the Rules and their Comments for guidance in navigating these conflicts.

ii. Paragraph 9

Paragraph 9 of the Preamble encourages lawyer to attain the highest degree of ethical conduct rather than meeting the minimum standards:

Each lawyer's own conscience is the touchstone against which to test the extent to which his actions may rise above the disciplinary standards prescribed by these rules. The desire for the respect and confidence of the members of the profession and of the society which it serves provides the lawyer the incentive to attain the highest possible degree of ethical conduct. The possible loss of that respect and confidence is the ultimate sanction. So long as its practitioners are guided by these principles, the law will continue to be a noble profession. This is its greatness and its strength, which permit of no compromise.

Although we expect lawyers to weigh their actions against their own conscience, we recognize that lawyers are flawed human beings like everyone else. Therefore, we don't necessarily trust a lawyer's conscience to be the determining factor in deciding ethical issues in our "noble profession."

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