The Attorney-Client Relationship

Undertaking Representation

Prospective Clients

Declining and Terminating Representation

Scope of Representation & Authority

Clients with Diminished Capacity

In the Matter of Silva, 636 A.2d 316 (R.I. 1994)

The respondent, Daniel J. Silva, appeared before this court on December 2, 1993, pursuant to an order to show cause why discipline should not be imposed. The Disciplinary Board conducted an evidentiary hearing and received legal memoranda from the respondent and disciplinary counsel. The board has filed with us its decision and a concurring opinion signed by three members of the board.

The board found that Silva violated several provisions of the Rules of Professional Conduct when he failed to report a diversion of mortgage funds by his long-time friend Edward Medeiros. Silva served as counsel to Medeiros’s mortgage company, Medcon Mortgage Corporation, and Suncoast Savings and Loan of Hollywood, Florida. In his capacity as closing attorney for Suncoast, Silva received wire transfers of mortgage proceeds in his client account. Upon receipt of the wire transfers from Suncoast, Silva simply turned the proceeds over to Medeiros and/or MEDCON for disbursement. In the fall of 1990 Silva learned that Medeiros had diverted funds from a closing funded by Suncoast in which Silva acted as closing attorney. The diverted funds were designated to pay off a preexisting mortgage on the property. Silva advised Medeiros that his conduct was criminal. Silva did not notify Suncoast of the diversion of funds, nor did he inform the title insurance company, which had issued a title policy that did not except the prior mortgage from coverage, that the prior mortgage had not been discharged. Silva testified that Medeiros forbade him to do so on the basis of Medeiros’s assertion of the attorney/client privilege on behalf of both MEDCON and himself personally.

In December 1990 Silva received a wire transfer from Suncoast for another closing with MEDCON. Notwithstanding his knowledge of the previous diversion of funds by Medeiros, Silva did not disburse the funds in accordance with the terms listed on the closing sheet; instead, he turned the proceeds over to MEDCON. Silva kept $100 of the proceeds as his fee for serving as a conduit of the funds. Medeiros converted those funds to his own use, and was subsequently convicted and imprisoned. The respondent was never charged with committing a criminal act.

The respondent’s position before the board and this court is that he was prohibited from disclosing Medeiros’s defalcation by the provisions of Rule 1.6 of the Rules of Professional Conduct. Respondent also took the position that he had no obligation to protect Suncoast’s interests. We do not agree with either of his contentions.

On the basis of the record before us, we believe that Silva had an obligation to both MEDCON and Suncoast to ensure that the transactions in which he acted as attorney and/or agent were carried out with fair dealing and good faith. We further believe that Silva had an obligation to report Medeiros’s overt act of diverting the funds as soon as he learned of it. In addition Silva should have withdrawn from representing both MEDCON and Suncoast as soon as he discovered Medeiros’s fraud.

Although we consider Silva’s failure to act appropriately and to make the requisite disclosures serious breaches of his ethical obligation, we find no evidence that Silva’s actions were motivated by personal gain. Rather, he appears to have had a genuine belief that Medeiros’s assertion of the attorney/client privilege and the requirements of Rule 1.6 prohibited the disclosure we now say was required.

Silva did not appear to appreciate and understand to whom he owed the duty of confidentiality. It is apparent from this record, however, that he was counsel to the corporate entity MEDCON, and therefore, it was to MEDCON he owed the duty of confidentiality. Silva’s dealings with Medeiros did not establish the attorney/client relationship that would trigger the application of the prohibitions against disclosure encompassed in Rule 1.6. Therefore, Silva’s obligations to both Suncoast and MEDCON required him to disclose Medeiros’s overt criminal act of conversion of the funds.

This court concurs with the findings of the disciplinary board that Silva exercised very poor judgment and that he engaged in serious misconduct. We are constrained however to depart from the board’s recommendation for sanction. We believe that Rule 1.6 has created a great deal of confusion among the members of the Rhode Island Bar. We therefore censure Silva for his failure to fulfill his ethical obligations to the parties to these transactions. The court’s issuance of this sanction rather than the three-month suspension of Silva’s license is due in part to the absence of any motive for personal gain and Silva’s ten years at the bar without a disciplinary complaint. The court’s position on the appropriate level of sanction, however, would be more severe were it not for the apparent confusion in the mind of this attorney concerning whom he represented and the silence of Rule 1.6 on that question.

In re Grand Jury Subpoena: Under Seal, 415 F.3d 334 (4th Cir. 2005)

Wilson, District Judge (sitting by designation)

This is an appeal by three former employees of AOL Time Warner from the decision of the district court denying their motions to quash a grand jury subpoena for documents related to an internal investigation by AOL. Appellants in the district court argued that the subpoenaed documents were protected by the attorney-client privilege. Because the district court concluded that the privilege was AOL’s alone and because AOL had expressly waived its privilege, the court denied the appellants’ motion. We affirm.

I.

In March of 2001, AOL began an internal investigation into its relationship with PurchasePro, Inc. AOL retained the law firm of Wilmer, Cutler & Pickering to assist in the investigation. Over the next several months, AOL’s general counsel and counsel from Wilmer Cutler interviewed appellants, AOL employees Kent Wakeford, John Doe 1, and John Doe 2.

The investigating attorneys interviewed Wakeford, a manager in the company’s Business Affairs division, on six occasions. At their third interview, and the first one in which Wilmer Cutler attorneys were present, Randall Boe, AOL’s General Counsel, informed Wakeford, “We represent the company. These conversations are privileged, but the privilege belongs to the company and the company decides whether to waive it. If there is a conflict, the attorney-client privilege belongs to the company.” Memoranda from that meeting also indicate that the attorneys explained to Wakeford that they represented AOL but that they “could” represent him as well, “as long as no conflict appeared.” The attorneys interviewed Wakeford again three days later and, at the beginning of the interview, reiterated that they represented AOL, that the privilege belonged to AOL, and that Wakeford could retain personal counsel at company expense.

The investigating attorneys interviewed John Doe 1 three times. Before the first interview, Boe told him, “We represent the company. These conversations are privileged, but the privilege belongs to the company and the company decides whether to waive it. You are free to consult with your own lawyer at any time.” Memoranda from that interview indicate that the attorneys also told him, “We can represent you until such time as there appears to be a conflict of interest, but the attorney-client privilege belongs to AOL and AOL can decide whether to keep it or waive it.” At the end of the interview, John Doe 1 asked if he needed personal counsel. A Wilmer Cutler attorney responded that he did not recommend it, but that he would tell the company not to be concerned if Doe retained counsel.

AOL’s attorneys interviewed John Doe 2 twice and followed essentially the same protocol they had followed with the other appellants. They noted, “We represent AOL, and can represent you too if there is not a conflict.” In addition, the attorneys told him that, “the attorney-client privilege is AOL’s and AOL can choose to waive it.”

In November, 2001, the Securities and Exchange Commission began to investigate AOL’s relationship with PurchasePro. In December 2001, AOL and Wakeford, through counsel, entered into an oral “common interest agreement,” which they memorialized in writing in January 2002. The attorneys acknowledged that, “representation of their respective clients raised issues of common interest to their respective clients and that the sharing of certain documents, information, and communications with clients” would be mutually beneficial. As a result, the attorneys agreed to share access to information relating to their representation of Wakeford and AOL, noting that “the oral or written disclosure of Common Interest Materials would not diminish in any way the confidentiality of such Materials and would not constitute a waiver of any applicable privilege.”

Wakeford testified before the SEC on February 14, 2002, represented by his personal counsel. Laura Jehl, AOL’s general counsel, and F. Whitten Peters of Williams & Connolly, whom AOL had retained in November 2001 in connection with the PurchasePro investigation, were also present, and both stated that they represented Wakeford “for purposes of the deposition.” During the deposition, the SEC investigators questioned Wakeford about his discussions with AOL’s attorneys. When Wakeford’s attorney asserted the attorney-client privilege, the SEC investigators followed up with several questions to determine whether the privilege was applicable to the investigating attorneys’ March-June 2001 interviews with Wakeford. Wakeford told them he believed, at the time of the interviews, that the investigating attorneys represented him and the company.

John Doe 1 testified before the SEC on February 27, 2002, represented by personal counsel. No representatives of AOL were present. When SEC investigators questioned Doe about the March-June 2001 internal investigation, his counsel asserted that the information was protected and directed Doe not to answer any questions about the internal investigation “in respect to the company’s privilege.” He stated that Doe’s response could be considered a waiver of the privilege and that, “if the AOL lawyers were present, they could make a judgment, with respect to the company’s privilege, about whether or not the answer would constitute a waiver.”

On February 26, 2004, a grand jury in the Eastern District of Virginia issued a subpoena commanding AOL to provide “written memoranda and other written records reflecting interviews conducted by attorneys for AOL” of the appellants between March 15 and June 30, 2001. While AOL agreed to waive the attorney-client privilege and produce the subpoenaed documents, counsel for the appellants moved to quash the subpoena on the grounds that each appellant had an individual attorney-client relationship with the investigating attorneys, that his interviews were individually privileged, and that he had not waived the privilege. Wakeford also claimed that the information he disclosed to the investigating attorneys was privileged under the common interest doctrine.

The district court denied John Doe 1’s and John Doe 2’s motions because it found they failed to prove they were clients of the investigating attorneys who interviewed them. The court based its conclusion on its findings that: (1) the investigating attorneys told them that they represented the company; (2) the investigating attorneys told them, “we can represent you,” which is distinct from “we do represent you”; (3) they could not show that the investigating attorneys agreed to represent them; and (4) the investigating attorneys told them that the attorney-client privilege belonged to the company and the company could choose to waive it.

The court initially granted Wakeford’s motion to quash because it found that his communications with the investigating attorneys were privileged under the common interest agreement between counsel for Wakeford and counsel for AOL. Following a motion for reconsideration, the court reversed its earlier ruling and held that the subpoenaed documents relating to Wakeford’s interviews were not privileged because it found that Wakeford’s common interest agreement with AOL postdated the March-June 2001 interviews. In addition, the court held that Wakeford failed to prove that he was a client of the investigating attorneys at the time the interviews took place. The court based its conclusion on its findings that: (1) none of the investigating attorneys understood that Wakeford was seeking personal legal advice; (2) the investigating attorneys did not provide any personal legal advice to him; and (3) the investigating attorneys believed they represented AOL and not Wakeford. This appeal followed.

II.

Appellants argue that because they believed that the investigating attorneys who conducted the interviews were representing them personally, their communications are privileged. However, we agree with the district court that essential touchstones for the formation of an attorney-client relationship between the investigating attorneys and the appellants were missing at the time of the interviews. There is no evidence of an objectively reasonable, mutual understanding that the appellants were seeking legal advice from the investigating attorneys or that the investigating attorneys were rendering personal legal advice. Nor, in light of the investigating attorneys’ disclosure that they represented AOL and that the privilege and the right to waive it were AOL’s alone, do we find investigating counsel’s hypothetical pronouncement that they could represent appellants sufficient to establish the reasonable understanding that they were representing appellants. Accordingly, we find no fault with the district court’s opinion that no individual attorney-client privilege attached to the appellants’ communications with AOL’s attorneys.

“The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law.” “When the privilege applies, it affords confidential communications between lawyer and client complete protection from disclosure.” Because its application interferes with “the truth seeking mission of the legal process,” however, we must narrowly construe the privilege, and recognize it “only to the very limited extent that excluding relevant evidence has a public good transcending the normally predominant principle of utilizing all rational means for ascertaining the truth.” Accordingly, the privilege applies only to “confidential disclosures by a client to an attorney made in order to obtain legal assistance.” The burden is on the proponent of the attorney-client privilege to demonstrate its applicability.”

The person seeking to invoke the attorney-client privilege must prove that he is a client or that he affirmatively sought to become a client. “The professional relationship hinges upon the client’s belief that he is consulting a lawyer in that capacity and his manifested intention to seek professional legal advice.” An individual’s subjective belief that he is represented is not alone sufficient to create an attorney-client relationship. Rather, the putative client must show that his subjective belief that an attorney-client relationship existed was reasonable under the circumstances.

With these precepts in mind, we conclude that appellants could not have reasonably believed that the investigating attorneys represented them personally during the time frame covered by the subpoena. First, there is no evidence that the investigating attorneys told the appellants that they represented them, nor is there evidence that the appellants asked the investigating attorneys to represent them. To the contrary, there is evidence that the investigating attorneys relayed to Wakeford the company’s offer to retain personal counsel for him at the company’s expense, and that they told John Doe 1 that he was free to retain personal counsel. Second, there is no evidence that the appellants ever sought personal legal advice from the investigating attorneys, nor is there any evidence that the investigating attorneys rendered personal legal advice. Third, when the appellants spoke with the investigating attorneys, they were fully apprised that the information they were giving could be disclosed at the company’s discretion. Under these circumstances, appellants could not have reasonably believed that the investigating attorneys represented them personally. Therefore, the district court’s finding that appellants had no attorney-client relationship with the investigating attorneys is not clearly erroneous.

The appellants argue that the phrase “we can represent you as long as no conflict appears,” manifested an agreement by the investigating attorneys to represent them. They claim that, “it is hard to imagine a more straightforward assurance of an attorney-client relationship than ‘we can represent you.’” We disagree. As the district court noted, “we can represent you” is distinct from “we do represent you.” If there was any evidence that the investigating attorneys had said, “we do represent you,” then the outcome of this appeal might be different. Furthermore, the statement actually made, “we can represent you,” must be interpreted within the context of the entire warning. The investigating attorneys’ statements to the appellants, read in their entirety, demonstrate that the attorneys’ loyalty was to the company. That loyalty was never implicitly or explicitly divided. In addition to noting at the outset that they had been retained to represent AOL, the investigating attorneys warned the appellants that the content of their communications during the interview “belonged” to AOL. This protocol put the appellants on notice that, while their communications with the attorneys were considered confidential, the company could choose to reveal the content of those communications at any time, without the appellants’ consent.

We note, however, that our opinion should not be read as an implicit acceptance of the watered-down “Upjohn warnings” the investigating attorneys gave the appellants. It is a potential legal and ethical mine field. Had the investigating attorneys, in fact, entered into an attorney-client relationship with appellants, as their statements to the appellants professed they could, they would not have been free to waive the appellants’ privilege when a conflict arose. It should have seemed obvious that they could not have jettisoned one client in favor of another. Rather, they would have had to withdraw from all representation and to maintain all confidences. Indeed, the court would be hard pressed to identify how investigating counsel could robustly investigate and report to management or the board of directors of a publicly-traded corporation with the necessary candor if counsel were constrained by ethical obligations to individual employees. However, because we agree with the district court that the appellants never entered into an attorney-client relationship with the investigating attorneys, they averted these troubling issues.

U.S. v. Stein, 463 F. Supp.2d 459 (S.D.N.Y. 2006)

Kaplan, District Judge

Defendant Carol Warley was a partner in KPMG LLP, one of the world’s largest accounting firms. She was questioned in the course of an IRS investigation by attorneys hired by KPMG. When that investigation gave way to a threatened indictment of KPMG, the firm, in an effort to curry favor with prosecutors and avoid prosecution, waived its attorney-client privilege and gave the government documents embodying the substance of the attorneys’ communications with Ms. Warley. Warley contends that the attorneys were representing her as well as KPMG, that her attorney-client privilege was compromised by the actions of the government and KPMG, and that the evidence should be suppressed. She thus raises a troublesome question that arises whenever an employee of a business organization consults with counsel retained by the entity about matters involving both the employee and the entity—when does the lawyer represent the employee as well as the entity?

This problem could be avoided if counsel in these situations routinely made clear to employees that they represent the employer alone and that the employee has no attorney-client privilege with respect to his or her communications with employer-retained counsel. Indeed, the Second Circuit advised that they do so years before the communications here in question. But there is no evidence that the attorneys who spoke to Ms. Warley followed that course.

Facts

Ms. Warley was a partner of KPMG at all relevant times. In 2003, the IRS was investigating KPMG’s tax shelter activities, including some in which clients of Warley had participated. In the course of the investigation, Warley communicated with KPMG’s in-house counsel and with two law firms retained by KPMG, Kronish Lieb Weiner & Hellman LLP and King & Spalding LLP. Warley does not recall having been told that the attorneys represented only KPMG or that any privilege belonged solely to the firm and could be waived by the firm without her consent.

In September 2004, in circumstances that have been discussed elsewhere, KPMG waived its attorney-client privilege for communications relating to the IRS summons. It gave the government documents relating to these communications, and the government apparently intends to use them in prosecuting Warley and others. The government argues that KPMG’s waiver was sufficient to allow it to obtain the documents and disputes Warley’s claim of privilege.

Warley identifies two sets of allegedly privileged communications relating to which the government has documents. First, Warley was interviewed by attorneys from Kronish and King & Spalding on two occasions in August 2003. The government is in possession of a memorandum of these interviews prepared by a Kronish attorney as well as his handwritten notes. In addition, it has listed as a trial witness one of the Kronish attorneys present at these interviews.

The second allegedly privileged communication is an email exchange in January and February of 2003 between Warley and Steven Gremminger, an in-house attorney for KPMG, relating to the tax strategies under investigation. The government has a copy of this email string.

Both parties point to the substance of the communications to support their respective claims that privilege did or did not attach. Warley further relies upon KPMG’s 2003 partnership agreement, which provided that “the General Counsel shall act on behalf of all Members, except where a dispute arises between an individual Member and the Firm.” Finally, Warley alleges that counsel retained by KPMG jointly represented KPMG and her personally in two lawsuits prior to the events at issue here.

Discussion

A. Scope of Privilege

The question whether employee communications with counsel retained by the employer about matters relating to the employment are privileged vis-a-vis the employee—in other words, whether the employee has a personal attorney-client privilege that only the employee may waive—is troublesome because competing interests are at play.

On the one hand, an employee, like any other agent, owes the employer a duty to disclose to the employer any information pertinent to the employment. This includes an obligation “to assist the employer’s counsel in the investigation and defense of matters pertaining to the employer’s business.” Moreover, an employer has a substantial interest in retaining freedom of action to respond to investigations and other legal threats, an interest borne of the desire to remain in business and of duties to other constituents of the entity. Allowing individual employees to assert personal attorney-client privilege over communications with the employer’s counsel could frustrate an employer’s ability to act in its own self interest, perhaps to the detriment of other employees, stockholders, or partners.

Nevertheless, there are weighty considerations on the other side of the scale. Once a government investigation begins, the interests of employees and of the entity may diverge. Indeed, that may be true in other circumstances in which employees communicate with employer counsel. Employees often are unaware of the potential personal consequences of cooperating with lawyers hired by their employers. Even more troublesome, they may cooperate with employer-retained counsel in the belief that their communications are protected by a personal privilege, sometimes as a result of a misapprehension of the law and occasionally perhaps as a result of deception, inadvertent or otherwise.

Courts have wrestled with this problem for some time now. In the absence of evidence that the employee was deceived by the employer as to the existence of a personal attorney-client relationship or as to a personal right to control the disclosure of privileged materials, circuits have employed different standards to determine when personal privilege attaches. Some have looked at whether the individual reasonably believed that there was a personal attorney-client relationship, although the Second Circuit has rejected this approach. Others have focused on whether the individual expressly requested personal advice or representation. In In re Bevill, Bresler & Schulman Asset Management Corp., the Third Circuit enunciated a five-part test that has been adopted by at least two other circuits

First, the individual claiming personal privilege must show they approached counsel for the purpose of seeking legal advice. Second, they must demonstrate that when they approached counsel they made it clear that they were seeking legal advice in their individual rather than in their representative capacities. Third, they must demonstrate that the counsel saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise. Fourth, they must prove that their conversations with counsel were confidential. And, fifth, they must show that the substance of their conversations with counsel did not concern matters within the company or the general affairs of the company.

Our circuit addressed the issue in United States v. International Brotherhood of Teamsters. The Teamsters court first noted that courts typically have said that the attorney-client privilege for an employee’s communication with corporate counsel about corporate matters belongs to the corporation, not the individual employee. Nevertheless, it said, courts have found a personal privilege where the individual met “certain requirements.” It quoted the Third Circuit’s Bevill test as one such example and noted that other courts have required the employee “make it clear to corporate counsel that he seeks legal advice on personal matters.” Drawing upon all of these sources, the Circuit concluded that the individual before it lacked any personal privilege with respect to the communications at issue because he “neither sought nor received legal advice from his employer’s counsel on personal matters.”

Teamsters’ holding thus rests on the scope of “personal matters.” But the meaning of that phrase has not been developed. Do “personal matters” involve solely the individual, with no impact on the entity’s interests whatsoever? Or may they encompass matters that implicate both the individual and the entity? Although the facts of Teamsters suggest that the Circuit might have contemplated the former view, it did not expressly address the question.

Some guidance may be gained from circuits that have addressed this issue in the context of the fifth Bevill factor, which requires that the communication “not concern matters within the company or the general affairs of the company.” The Tenth Circuit concluded that this factor

only precludes an officer from asserting an individual attorney client privilege when the communication concerns the corporation’s rights and responsibilities. However, if the communication between a corporate officer and corporate counsel specifically focuses upon the individual officer’s personal rights and liabilities, then the fifth prong of Bevill can be satisfied even though the general subject matter of the conversation pertains to matters within the general affairs of the company. For example, a corporate officer’s discussion with his corporation’s counsel may still be protected by a personal, individual attorney-client privilege when the conversation specifically concerns the officer’s personal liability for jail time based on conduct interrelated with corporate affairs.

The First Circuit adopted the Tenth Circuit’s interpretation and discussed its application where communications involving the individual’s liabilities “do not appear to be distinguishable” from those concerning the entity’s interests. Acknowledging that both the employee and the entity could have an attorney-client relationship with the attorney with respect to such a communication, but noting also the fiduciary duty owed by a corporate officer to the corporation, the First Circuit concluded that “a corporation may unilaterally waive the attorney-client privilege with respect to any communications made by a corporate officer in his corporate capacity, notwithstanding the existence of an individual attorney-client relationship between him and the corporation’s counsel.” Thus, under the First Circuit formulation, individual privilege may be asserted successfully only when “communications regarding individual acts and liabilities are segregable from discussions about the corporation.” To hold otherwise, the court reasoned, “would open the door to a claim of jointly held privilege in virtually every corporate communication with counsel.”

The Tenth and First Circuits thus have argued persuasively that communications implicating personal liability for acts within the scope of an individual’s employment may be protected by individual attorney-client privilege, at least in some circumstances. It is an open question whether such communications involve “personal matters” within the meaning of Teamsters. But it is unnecessary to resolve that issue here. As discussed below, and particularly in light of the fact that the burden of proof lies with the party asserting privilege, Warley fails to meet any standard.

B. Warley’s Claims

To begin with, there is no evidence that Warley was deceived by KPMG or its attorneys about the nature of her relationship with counsel. Although she claims to have “understood that counsel were representing her personally as a partner in the firm,” her subjective belief alone does not support a conclusion that KPMG’s acts were responsible for that belief. Accordingly, the analysis of her claims rests on whether the communications involved “personal matters.”

Warley’s communications with counsel were about events and conduct within the scope of her work as a partner at KPMG, thus clearly implicating KPMG’s interest in responding to the IRS investigation. The events and conduct, however, also implicated Warley’s personal interests and liabilities, as is amply evidenced by her status as a defendant in this case. Warley’s communications thus present the difficult circumstance where both the individual’s and the entity’s interests are involved.

As discussed above, the scope of “personal matters” under Teamsters is unclear. Under a narrow reading, the fact that the communications implicated KPMG’s interests alone would require that Warley’s claim of privilege be rejected. Even under the approach adopted by the First and Tenth Circuits, however, Warley could not prevail on a privilege claim absent a showing that communications implicated her interests alone and were segregable from those involving KPMG’s interests. Nothing in the allegedly privileged documents or the affidavits submitted with this motion indicates that the communications focused on her personal interests alone. The Court therefore need not determine the parameters of “personal matters,” as Warley’s disclosures would not come within even a broad view of the term.

Warley nevertheless argues that her communications were privileged vis-a-vis herself because (1) the KPMG partnership agreement provides that “the General Counsel shall act on behalf of all Members, except where a dispute arises between an individual Member and the Firm,” and (2) counsel retained by KPMG represented both Warley and the firm in litigation on two occasions prior to the communications here at issue. But these contentions are not persuasive.

To begin with, the occasions on which Warley and KPMG were jointly represented occurred in circumstances in which Warley was a witness, not a party, to the litigation. The Court is not persuaded that representation of an employee by employer-retained counsel where the employee’s role is that of a witness in a lawsuit against the employer could give rise to a reasonable expectation on the part of the employee that all communications she might have with employer-retained counsel, even a long time thereafter, were made in the context of an individual attorney-client relationship.

Nor has Warley offered any evidence that she in fact subjectively relied either upon the language in the partnership agreement or the previous litigation experience in concluding that Kronish, King & Spalding, or Gremminger was representing her individually.

Conclusion

In the end, Warley’s showings amount merely to a claim of her subjective belief which, without more, is insufficient to meet her burden of proving privilege. For the foregoing reasons, Warley’s motion for relief from the government’s alleged violation of her attorney-client privilege is denied.

Matter of Cooperman, 633 N.E.2d 1069 (N.Y. 1994)

Bellicosa, J.

The issue in this appeal is whether the appellant attorney violated the Code of Professional Responsibility by repeatedly using special nonrefundable retainer fee agreements with his clients. Essentially, such arrangements are marked by the payment of a nonrefundable fee for specific services, in advance and irrespective of whether any professional services are actually rendered. The local Grievance Committee twice warned the lawyer that he should not use these agreements. After a third complaint and completion of prescribed grievance proceedings, the Appellate Division suspended the lawyer from practice for two years. It held that the particular agreements were per se violative of public policy. We affirm the order of the Appellate Division.

I.

In 1990, the petitioner, Grievance Committee for the Tenth Judicial District, initiated a disciplinary proceeding charging attorney Cooperman with 15 specifications of professional misconduct. They relate to his use of three special nonrefundable retainer fee agreements.

The first five charges derive from a written fee agreement to represent an individual in a criminal matter. It states: “My minimum fee for appearing for you in this matter is Fifteen Thousand ($15,000.00) Dollars. This fee is not refundable for any reason whatsoever once I file a notice of appearance on your behalf.” One month after the agreement, the lawyer was discharged by the client and refused to refund any portion of the fee. The client filed a formal complaint which the Grievance Committee forwarded to Cooperman for a response. Cooperman had already received a Letter of Caution not to use nonrefundable retainer agreements, and while this new complaint was pending, Cooperman was issued a second Letter of Caution admonishing him not to accept the kind of fee arrangement at issue here. He rejected the admonition, claiming the fee was nonrefundable.

Charges 6 through 10 refer to a written retainer agreement in connection with a probate proceeding. It states in pertinent part: “For the MINIMAL FEE and NON-REFUNDABLE amount of Five Thousand ($5,000.00) Dollars, I will act as your counsel.” The agreement further provided: “This is the minimum fee no matter how much or how little work I do in this investigatory stage and will remain the minimum fee and not refundable even if you decide prior to my completion of the investigation that you wish to discontinue the use of my services for any reason whatsoever.” The client discharged Cooperman, who refused to provide the client with an itemized bill of services rendered or refund any portion of the fee, citing the unconditional nonrefundable fee agreement.

The last five charges relate to a fee agreement involving another criminal matter. It provides: “The MINIMUM FEE for Mr. Cooperman’s representation to any extent whatsoever is Ten Thousand ($10,000.00) Dollars. The above amount is the MINIMUM FEE and will remain the minimum fee no matter how few court appearances are made. The minimum fee will remain the same even if Mr. Cooperman is discharged.” Two days after execution of the fee agreement, the client discharged Cooperman and demanded a refund. As with the other clients, he demurred.

Cooperman’s persistent refusals to refund any portion of the fees sparked at least three separate client complaints to the Grievance Committee. In each case, Cooperman answered the complaint but refused the Grievance Committee’s suggestion for fee arbitration. Thereafter, the Grievance Committee sought authorization from the Appellate Division, Second Department, to initiate formal disciplinary proceedings against Cooperman. It tendered an array of arguments that these retainer agreements are unethical because, first, they violate the lawyer’s obligation to “refund promptly any part of a fee paid in advance that has not been earned.” Further, the agreements create “an impermissible chilling effect upon the client’s inherent right upon public policy grounds to discharge the attorney at any time with or without cause.” The petition also alleged that the fees charged by Cooperman were excessive, and that he wrongfully refused to refund unearned fees. Finally, it notes that denominating the fee payment as nonrefundable constitutes misrepresentation.

After an extensive hearing, the Referee made findings supporting violations on all 15 charges. On appropriate motion, the Appellate Division confirmed the Referee’s report with respect to charges 2 through 5, 7 through 10, and 12 through 15. The Court disaffirmed the report as to charges 1, 6 and 11, which alleged that the retainer agreements constituted deceit and misrepresentation. In sustaining the remaining charges, the Court held that these retainer agreements were unethical and unconscionable and “violative of an attorney’s obligations under the Code of Professional Responsibility to refund unearned fees upon his or her discharge.” The Court also concluded that Cooperman’s fees were excessive. The Court suspended him from the practice of law for a period of two years but did not order restitution.

II.

Whether special nonrefundable retainer fee agreements are against public policy is a question we left open in Jacobson v. Sassower, a fee dispute case. We agree with the Appellate Division in this disciplinary matter that special nonrefundable retainer fee agreements clash with public policy and transgress provisions of the Code of Professional Responsibility, essentially because these fee agreements compromise the client’s absolute right to terminate the unique fiduciary attorney-client relationship.

The particular analysis begins with a reflection on the nature of the attorney-client relationship. Sir Francis Bacon observed, “the greatest trust between people is the trust of giving counsel.” This unique fiduciary reliance, stemming from people hiring attorneys to exercise professional judgment on a client’s behalf—“giving counsel”—is imbued with ultimate trust and confidence. The attorney’s obligations, therefore, transcend those prevailing in the commercial marketplace. The duty to deal fairly, honestly and with undivided loyalty superimposes onto the attorney-client relationship a set of special and unique duties, including maintaining confidentiality, avoiding conflicts of interest, operating competently, safeguarding client property and honoring the client’s interests over the lawyer’s. To the public and clients, few features could be more paramount than the fee—the costs of legal services. The Code of Professional Responsibility reflects this central ingredient by specifically mandating, without exception, that an attorney “shall not enter into an agreement for, charge, or collect an illegal or excessive fee,” and upon withdrawal from employment “shall refund promptly any part of a fee paid in advance that has not been earned.” Accordingly, attorney-client fee agreements are a matter of special concern to the courts and are enforceable and affected by lofty principles different from those applicable to commonplace commercial contracts.

Because the attorney-client relationship is recognized as so special and so sensitive in our society, its effectiveness, actually and perceptually, may be irreparably impaired by conduct which undermines the confidence of the particular client or the public in general. In recognition of this indispensable desideratum and as a precaution against the corrosive potentiality from failing to foster trust, public policy recognizes a client’s right to terminate the attorney-client relationship at any time with or without cause. This principle was effectively enunciated in Martin v. Camp: “The contract under which an attorney is employed by a client has peculiar and distinctive features thus notwithstanding the fact that the employment of an attorney by a client is governed by the contract which the parties make the client with or without cause may terminate the contract at any time.”

The unqualified right to terminate the attorney-client relationship at any time has been assiduously protected by the courts. An attorney, however, is not left without recourse for unfair terminations lacking cause. If a client exercises the right to discharge an attorney after some services are performed but prior to the completion of the services for which the fee was agreed upon, the discharged attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the completed services. We have recognized that permitting a discharged attorney “to recover the reasonable value of services rendered in quantum meruit, a principle inherently designed to prevent unjust enrichment, strikes the delicate balance between the need to deter clients from taking undue advantage of attorneys, on the one hand, and the public policy favoring the right of a client to terminate the attorney-client relationship without inhibition on the other.”

Correspondingly and by cogent logic and extension of the governing precepts, we hold that the use of a special nonrefundable retainer fee agreement clashes with public policy because it inappropriately compromises the right to sever the fiduciary services relationship with the lawyer. Special nonrefundable retainer fee agreements diminish the core of the fiduciary relationship by substantially altering and economically chilling the client’s unbridled prerogative to walk away from the lawyer. To answer that the client can technically still terminate misses the reality of the economic coercion that pervades such matters. If special nonrefundable retainers are allowed to flourish, clients would be relegated to hostage status in an unwanted fiduciary relationship—an utter anomaly. Such circumstance would impose a penalty on a client for daring to invoke a hollow right to discharge. The established prerogative which, by operation of law and policy, is deemed not a breach of contract is thus weakened. Instead of becoming responsible for fair value of actual services rendered, the firing client would lose the entire “nonrefundable” fee, no matter what legal services, if any, were rendered. This would be a shameful, not honorable, professional denouement. Cooperman even acknowledges that the essential purpose of the nonrefundable retainer was to prevent clients from firing the lawyer, a purpose which, as demonstrated, directly contravenes the Code and this State’s settled public policy in this regard.

Nevertheless, Cooperman contends that special nonrefundable retainer fee agreements should not be treated as per se violations unless they are pegged to a “clearly excessive” fee. The argument is unavailing because the reasonableness of a particular nonrefundable fee cannot rescue an agreement that impedes the client’s absolute right to walk away from the attorney. The termination right and the right not to be charged excessive fees are not interdependent in this analysis and context. Cooperman’s claim, in any event, reflects a misconception of the nature of the legal profession by turning on its head the axiom that the legal profession “is a learned profession, not a mere money-getting trade.”

DR 2-110 (A) and (B) of the Code of Professional Responsibility add further instruction to our analysis and disposition:

Withdrawal from Employment

(A) In general.

(3) A lawyer who withdraws from employment shall refund promptly any part of a fee paid in advance that has not been earned.

(B) Mandatory withdrawal. A lawyer representing a client before a tribunal, with its permission if required by its rules, shall withdraw from employment, and a lawyer representing a client in other matters shall withdraw from employment, if:

(4) The lawyer is discharged by the client.

We believe that if an attorney is prohibited from keeping any part of a prepaid fee that has not been earned because of discharge by the client, it is reasonable to conclude also that an attorney may not negotiate and keep fees such as those at issue here. In each of Cooperman’s retainer agreements, the Appellate Division found that the lawyer transgressed professional ethical norms. The fee arrangements expressed an absoluteness which deprived his clients of entitlement to any refund and, thus, conflicted with DR 2-110(A)(3).

Since we decide the precise issue in this case in a disciplinary context only, we imply no views with respect to the wider array of factors by which attorneys and clients may have fee dispute controversies resolved. Traditional criteria, including the factor of the actual amount of services rendered, will continue to govern those situations. Thus, while the special nonrefundable retainer agreement will be unenforceable and may subject an attorney to professional discipline, quantum meruit payment for services actually rendered will still be available and appropriate.

Notably, too, the record in this case contradicts Cooperman’s claim that he acted in “good faith.” He urges us to conclude that he “complied with the limited legal precedents at the time.” The conduct of attorneys is not measured by how close to the edge of thin ice they skate. The measure of an attorney’s conduct is not how much clarity can be squeezed out of the strict letter of the law, but how much honor can be poured into the generous spirit of lawyer-client relationships. The “punctilio of an honor the most sensitive” must be the prevailing standard. Therefore, the review is not the reasonableness of the individual attorney’s belief, but, rather, whether a “reasonable attorney, familiar with the Code and its ethical strictures, would have notice of what conduct is proscribed.” Cooperman’s level of knowledge, the admonitions to him and the course of conduct he audaciously chose do not measure up to this necessarily high professional template. He even acknowledged at his disciplinary hearing that he knew that “there were problems with the nonrefundability of retainers.” Cooperman’s case, therefore, constitutes a daring test of ethical principles, not good faith. He failed the test, and those charged with enforcing transcendent professional values, especially the Appellate Divisions, ought to be sustained in their efforts.

Our holding today makes the conduct of trading in special nonrefundable retainer fee agreements subject to appropriate professional discipline. Moreover, we intend no effect or disturbance with respect to other types of appropriate and ethical fee agreements. Minimum fee arrangements and general retainers that provide for fees, not laden with the nonrefundability impediment irrespective of any services, will continue to be valid and not subject in and of themselves to professional discipline.

The Court is also mindful of the arguments of some of the amici curiae concerned about sweeping sequelae from this case in the form of disciplinary complaints or investigations that may seek to unearth or examine into past conduct and to declare all sorts of unobjectionable, settled fee arrangements unethical. We are confident that the Appellate Divisions, in the highest tradition of their regulatory and adjudicatory roles, will exercise their unique disciplinary responsibility with prudence, so as not to overbroadly brand past individualized attorney fee arrangements as unethical, and will, instead, fairly assess the varieties of these practices, if presented, on an individualized basis. Therefore, we decline to render our ruling prospectively, as requested.

In the Matter of Fordham, 423 Mass. 481 (1996)

O’Connor J.

On March 4, 1989, the Acton police department arrested Timothy, then twenty-one years old, and charged him with OUI, operating a motor vehicle after suspension, speeding, and operating an unregistered motor vehicle. At the time of the arrest, the police discovered a partially full quart of vodka in the vehicle. After failing a field sobriety test, Timothy was taken to the Acton police station where he submitted to two breathalyzer tests which registered .10 and .12 respectively.

Subsequent to Timothy’s arraignment, he and his father, Laurence Clark consulted with three lawyers, who offered to represent Timothy for fees between $3,000 and $10,000. Shortly after the arrest, Clark went to Fordham’s home to service an alarm system which he had installed several years before. While there, Clark discussed Timothy’s arrest with Fordham’s wife who invited Clark to discuss the case with Fordham. Fordham then met with Clark and Timothy.

At this meeting, Timothy described the incidents leading to his arrest and the charges against him. Fordham, whom the hearing committee described as a “very experienced senior trial attorney with impressive credentials,” told Clark and Timothy that he had never represented a client in a driving while under the influence case or in any criminal matter, and he had never tried a case in the District Court. The hearing committee found that “Fordham explained that although he lacked experience in this area, he was a knowledgeable and hard-working attorney and that he believed he could competently represent Timothy. Fordham described himself as ‘efficient and economic in the use of his time.’”

“Towards the end of the meeting, Fordham told the Clarks that he worked on a time charge basis and that he billed monthly. In other words, Fordham would calculate the amount of hours he and others in the firm worked on a matter each month and multiply it by the respective hourly rates. He also told the Clarks that he would engage others in his firm to prepare the case. Clark had indicated that he would pay Timothy’s legal fees.” After the meeting, Clark hired Fordham to represent Timothy.

According to the hearing committee’s findings, Fordham filed four pretrial motions on Timothy’s behalf, two of which were allowed. One motion, entitled “Motion in Limine to Suppress Results of Breathalyzer Tests,” was based on the theory that, although two breathalyzer tests were exactly .02 apart, they were not “within” .02 of one another as the regulations require. The hearing committee characterized the motion and its rationale as “a creative, if not novel, approach to suppression of breathalyzer results.” Although the original trial date was June 20, 1989, the trial, which was before a judge without jury, was held on October 10 and October 19, 1989. The judge found Timothy not guilty of driving while under the influence.

Fordham sent the following bills to Clark:

1. April 19, 1989, $3,250 for services rendered in March, 1989.

2. May 15, 1989, $9,850 for services rendered in April, 1989.

3. June 19, 1989, $3,950 for services rendered in May, 1989.

4. July 13, 1989, $13,300 for services rendered in June, 1989.

5. October 13, 1989, $35,022.25 revised bill for services rendered from March 19 to June 30, 1989.

6. November 7, 1989, $15,000 for services rendered from July 1, 1989 to October 19, 1989.”

The bills totaled $50,022.25, reflecting 227 hours of billed time, 153 hours of which were expended by Fordham and seventy-four of which were his associates’ time. Clark did not pay the first two bills when they became due and expressed to Fordham his concern about their amount. Clark paid Fordham $10,000 on June 20, 1989. At that time, Fordham assured Clark that most of the work had been completed “other than taking the case to trial.” Clark did not make any subsequent payments. Fordham requested Clark to sign a promissory note evidencing his debt to Fordham and, on October 7, 1989, Clark did so. In the October 13, 1989, bill, Fordham added a charge of $5,000 as a “retroactive increase” in fees. On November 7, 1989, after the case was completed, Fordham sent Clark a bill for $15,000.

Bar counsel and Fordham have stipulated that all the work billed by Fordham was actually done and that Fordham and his associates spent the time they claim to have spent. They also have stipulated that Fordham acted conscientiously, diligently, and in good faith in representing Timothy and in his billing in this case.

The board dismissed bar counsel’s petition for discipline against Fordham because it determined, relying in large part on the findings and recommendations of the hearing committee, that Fordham’s fee was not clearly excessive. Pursuant to S.J.C. Rule 3:07, DR 2-106(B), “a fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence, experienced in the area of the law involved, would be left with a definite and firm conviction that the fee is substantially in excess of a reasonable fee.” The rule proceeds to list eight factors to be considered in ascertaining the reasonableness of the fee:

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.

In concluding that Fordham did not charge a clearly excessive fee, the board adopted, with limited exception, the hearing committee’s report. The board’s and the hearing committee’s reasons for dismissing the petition are as follows: Bar counsel and Fordham stipulated that Fordham acted conscientiously, diligently, and in good faith in his representation of the client and his billing on the case. Although Fordham lacked experience in criminal law, he is a “seasoned and well-respected civil lawyer.” The more than 200 hours spent preparing the OUI case were necessary, “in part to educate Fordham in the relevant substantive law and court procedures,” because he had never tried an OUI case or appeared in the District Court. The board noted that “although none of the experts who testified at the disciplinary hearing had ever heard of a fee in excess of $15,000 for a first-offense OUI case, the hearing committee found that Clark had entered into the transaction with open eyes after interviewing other lawyers with more experience in such matters.” The board also thought significant that Clark “later acquiesced, despite mild expressions of concern, in Fordham’s billing practices.” Moreover, the Clarks specifically instructed Fordham that they would not consider a guilty plea by Timothy. Rather they were interested only in pursuing the case to trial. Finally, Timothy obtained the result he sought: an acquittal.

Bar counsel contends that the board’s decision to dismiss the petition for discipline is erroneous on three grounds: First, “the hearing committee and the Board committed error by analyzing only three of the factors set out in DR 2-106 (B) (1)-(8), and their findings with regard to these criteria do not support their conclusion that the fee in this case was not clearly excessive”; second, the board “misinterpreted DR 2-106’s prohibition against charging a clearly excessive fee by reading into the rule a ‘safe harbor’ provision”; and third, “by allowing client acquiescence as a complete defense.”

In reviewing the hearing committee’s and the board’s analysis of the various factors, as appearing in DR 2-106 (B), which are to be considered for a determination as to whether a fee is clearly excessive, we are mindful that, although not binding on this court, the findings and recommendations of the board are entitled to great weight. We are empowered, however, to review the board’s findings and reach our own conclusion. In the instant case we are persuaded that the hearing committee’s and the board’s determinations that a clearly excessive fee was not charged are not warranted.

The first factor listed in DR 2-106(B) requires examining “the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.” Although the hearing committee determined that Fordham “spent a large number of hours on the matter, in essence learning from scratch what others already know,” it “did not credit Bar Counsel’s argument that Fordham violated DR 2-106 by spending too many hours.” The hearing committee reasoned that even if the number of hours Fordham “spent were wholly out of proportion” to the number of hours that a lawyer with experience in the trying of OUI cases would require, the committee was not required to conclude that the fee based on time spent was “clearly excessive.” It was enough, the hearing committee concluded, that Clark instructed Fordham to pursue the case to trial, Fordham did so zealously and, as stipulated, Fordham spent the hours he billed in good faith and diligence. We disagree.

Four witnesses testified before the hearing committee as experts on OUI cases. One of the experts, testifying on behalf of bar counsel, opined that “the amount of time spent in this case is clearly excessive.” He testified that there were no unusual circumstances in the OUI charge against Timothy and that it was a “standard operating under the influence case.” The witness did agree that Fordham’s argument for suppression of the breathalyzer test results, which was successful, was novel and would have justified additional time and labor. He also acknowledged that the acquittal was a good result; even with the suppression of the breathalyzer tests, he testified, the chances of an acquittal would have been “not likely at a bench trial.” The witness estimated that it would have been necessary, for thorough preparation of the case including the novel breathalyzer suppression argument, to have billed twenty to thirty hours for preparation, not including trial time.

A second expert, testifying on behalf of bar counsel, expressed his belief that the issues presented in this case were not particularly difficult, nor novel, and that “the degree of skill required to defend a case such as this was not that high.” He did recognize, however, that the theory that Fordham utilized to suppress the breathalyzer tests was impressive and one of which he had previously never heard. Nonetheless, the witness concluded that “clearly there is no way that he could justify these kind of hours to do this kind of work.” He estimated that an OUI case involving these types of issues would require sixteen hours of trial preparation and approximately fifteen hours of trial time. He testified that he had once spent ninety hours in connection with an OUI charge against a client that had resulted in a plea. The witness explained, however, that that case had involved a second offense OUI and that it was a case of first impression, in 1987, concerning new breathalyzer equipment and comparative breathalyzer tests.

An expert called by Fordham testified that the facts of Timothy’s case presented a challenge and that without the suppression of the breathalyzer test results it would have been “an almost impossible situation in terms of prevailing on the trier of fact.” He further stated that, based on the particulars in Timothy’s case, he believed that Fordham’s hours were not excessive and, in fact, he, the witness, would have spent a comparable amount of time. The witness later admitted, however, that within the past five years, the OUI cases which he had brought to trial required no more than a total of forty billed hours, which encompassed all preparation and court appearances. He explained that, although he had not charged more than forty hours to prepare an OUI case, in comparison to Fordham’s more than 200 expended hours, Fordham nonetheless had spent a reasonable number of hours on the case in light of the continuance and the subsequent need to reprepare, as well as the “very ingenious” breathalyzer suppression argument, and the Clarks’ insistence on trial. In addition, the witness testified that, although the field sobriety test, breathalyzer tests, and the presence of a half-empty liquor bottle in the car placed Fordham at a serious disadvantage in being able to prevail on the OUI charge, those circumstances were not unusual and in fact agreed that they were “normal circumstances.”

The fourth expert witness, called by Fordham, testified that she believed the case was “extremely tough” and that the breathalyzer suppression theory was novel. She testified that, although the time and labor consumed on the case was more than usual in defending an OUI charge, the hours were not excessive. They were not excessive, she explained, because the case was particularly difficult due to the “stakes and the evidence.” She conceded, however, that legal issues in defending OUI charges are “pretty standard” and that the issues presented in this case were not unusual. Furthermore, the witness testified that challenging the breathalyzer test due to the .02 discrepancy was not unusual, but the theory on which Fordham proceeded was novel. Finally, she stated that she thought she may have known of one person who might have spent close to one hundred hours on a difficult OUI case; she was not sure; but she had never heard of a fee in excess of $10,000 for a bench trial.

In considering whether a fee is “clearly excessive,” the first factor to be considered pursuant to that rule is “the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.” That standard is similar to the familiar standard of reasonableness traditionally applied in civil fee disputes. Based on the testimony of the four experts, the number of hours devoted to Timothy’s OUI case by Fordham and his associates was substantially in excess of the hours that a prudent experienced lawyer would have spent. According to the evidence, the number of hours spent was several times the amount of time any of the witnesses had ever spent on a similar case. We are not unmindful of the novel and successful motion to suppress the breathalyzer test results, but that effort cannot justify a $50,000 fee in a type of case in which the usual fee is less than one-third of that amount.

The board determined that “because Fordham had never tried an OUI case or appeared in the district court, Fordham spent over 200 hours preparing the case, in part to educate himself in the relevant substantive law and court procedures.” Fordham’s inexperience in criminal defense work and OUI cases in particular cannot justify the extraordinarily high fee. It cannot be that an inexperienced lawyer is entitled to charge three or four times as much as an experienced lawyer for the same service. A client “should not be expected to pay for the education of a lawyer when he spends excessive amounts of time on tasks which, with reasonable experience, become matters of routine.” “While the licensing of a lawyer is evidence that he has met the standards then prevailing for admission to the bar, a lawyer generally should not accept employment in any area of the law in which he is not qualified. However, he may accept such employment if in good faith he expects to become qualified through study and investigation, as long as such preparation would not result in unreasonable delay or expense to his client.” Although the ethical considerations set forth in the ABA Code of Professional Responsibility and Canons of Judicial Ethics are not binding, they nonetheless serve as a guiding principle.

The third factor to be considered in ascertaining the reasonableness of a fee is its comparability to “the fee customarily charged in the locality for similar legal services.” The hearing committee made no finding as to the comparability of Fordham’s fee with the fees customarily charged in the locality for similar services. However, one of bar counsel’s expert witnesses testified that he had never heard of a fee in excess of $15,000 to defend a first OUI charge, and the customary flat fee in an OUI case, including trial, “runs from $1,000 to $7,500.” Bar counsel’s other expert testified that he had never heard of a fee in excess of $10,000 for a bench trial. In his view, the customary charge for a case similar to Timothy’s would vary between $1,500 and $5,000. One of Fordham’s experts testified that she considered a $40,000 or $50,000 fee for defending an OUI charge “unusual and certainly higher by far than any I’ve ever seen before.” The witness had never charged a fee of more than $3,500 for representing a client at a bench trial to defend a first offense OUI charge. She further testified that she believed an “average OUI in the bench session is two thousand dollars and sometimes less.” Finally, that witness testified that she had “heard a rumor” that one attorney charged $10,000 for a bench trial involving an OUI charge; this fee represented the highest fee of which she was aware. The other expert witness called by Fordham testified that he had heard of a $35,000 fee for defending OUI charges, but he had never charged more than $12,000 (less than twenty-five per cent of Fordham’s fee).

Although finding that Fordham’s fee was “much higher than the fee charged by many attorneys with more experience litigating driving under the influence cases,” the hearing committee nevertheless determined that the fee charged by Fordham was not clearly excessive because Clark “went into the relationship with Fordham with open eyes,” Fordham’s fee fell within a “safe harbor,” and Clark acquiesced in Fordham’s fee by not strenuously objecting to his bills. The board accepted the hearing committee’s analysis apart from the committee’s reliance on the “safe harbor” rule.

The finding that Clark had entered into the fee agreement “with open eyes” was based on the finding that Clark hired Fordham after being fully apprised that he lacked any type of experience in defending an OUI charge and after interviewing other lawyers who were experts in defending OUI charges. Furthermore, the hearing committee and the board relied on testimony which revealed that the fee arrangement had been fully disclosed to Clark including the fact that Fordham “would have to become familiar with the law in that area.” It is also significant, however, that the hearing committee found that “despite Fordham’s disclaimers concerning his experience, Clark did not appear to have understood in any real sense the implications of choosing Fordham to represent Timothy. Fordham did not give Clark any estimate of the total expected fee or the number of $200 hours that would be required.” The express finding of the hearing committee that Clark “did not appear to have understood in any real sense the implications of choosing Fordham to represent Timothy” directly militates against the finding that Clark entered into the agreement “with open eyes.”

That brings us to the hearing committee’s finding that Fordham’s fee fell within a “safe harbor.” The hearing committee reasoned that as long as an agreement existed between a client and an attorney to bill a reasonable rate multiplied by the number of hours actually worked, the attorney’s fee was within a “safe harbor” and thus protected from a challenge that the fee was clearly excessive. The board, however, in reviewing the hearing committee’s decision, correctly rejected the notion “that a lawyer may always escape discipline with billings based on accurate time charges for work honestly performed.”

The “safe harbor” formula would not be an appropriate rationale in this case because the amount of time Fordham spent to educate himself and represent Timothy was clearly excessive despite his good faith and diligence. Disciplinary Rule 2-106(B)‘s mandate that “a fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence, experienced in the area of the law involved, would be left with a definite and firm conviction that the fee is substantially in excess of a reasonable fee,” creates explicitly an objective standard by which attorneys’ fees are to be judged. We are not persuaded by Fordham’s argument that “unless it can be shown that the ‘excessive’ work for which the attorney has charged goes beyond mere matters of professional judgment and can be proven, either directly or by reasonable inference, to have involved dishonesty, bad faith or overreaching of the client, no case for discipline has been established.” Disciplinary Rule 2-106 plainly does not require an inquiry into whether the clearly excessive fee was charged to the client under fraudulent circumstances, and we shall not write such a meaning into the disciplinary rule.

Finally, bar counsel challenges the hearing committee’s finding that “if Clark objected to the numbers of hours being spent by Fordham, he could have spoken up with some force when he began receiving bills.” Bar counsel notes, and we agree, that “the test as stated in the DR 2-106(A) is whether the fee ‘charged’ is clearly excessive, not whether the fee is accepted as valid or acquiesced in by the client.” Therefore, we conclude that the hearing committee and the board erred in not concluding that Fordham’s fee was clearly excessive.

Fordham argues that our imposition of discipline would offend his right to due process. A disciplinary sanction constitutes “a punishment or penalty” levied against the respondent, and therefore the respondent is entitled to procedural due process. Fordham contends that the bar and, therefore, he, have not been given fair notice through prior decisions of this court or the express language of DR 2-106 that discipline may be imposed for billing excessive hours that were nonetheless spent diligently and in good faith. It is true, as Fordham asserts, that there is a dearth of case law in the Commonwealth meting out discipline for an attorney’s billing of a clearly excessive fee. There is, however, as we have noted above, case law which specifically addresses what constitutes an unreasonable attorney’s fee employing virtually the identical factors contained within DR 2-106. More importantly, the general prohibition that “a lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee,” is followed by eight specific, and clearly expressed, factors, to be evaluated by the standard of “a lawyer of ordinary prudence,” in determining the propriety of the fee. In addition, nothing contained within the disciplinary rule nor within any pertinent case law indicates in any manner that a clearly excessive fee does not warrant discipline whenever the time spent during the representation was spent in good faith. The fact that this court has not previously had occasion to discipline an attorney in the circumstances of this case does not suggest that the imposition of discipline in this case offends due process. We reject Fordham’s due process argument.

In charging a clearly excessive fee, Fordham departed substantially from the obligation of professional responsibility that he owed to his client. The ABA Model Standards for Imposing Lawyer Sanctions § 7.3 endorses a public reprimand as the appropriate sanction for charging a clearly excessive fee. We deem such a sanction appropriate in this case. Accordingly, a judgment is to be entered in the county court imposing a public censure. The record in this case is to be unimpounded.

Culpepper & Carroll, PLLC v. Cole, 929 So.2d 1224 (La. 2006)

Connie Daniel Cole seeks review of a judgment of the court of appeal affirming an award of attorney’s fees to his former counsel. For the reasons that follow, we reverse the judgment of the court of appeal.

Facts and Procedural History

Connie Daniel Cole retained attorney Bobby Culpepper of the law firm of Culpepper & Carroll, PLLC to represent him in a contest of his mother’s will. Mr. Cole requested that the firm handle the matter on a one-third contingent fee basis, and Mr. Culpepper agreed to do so. On September 20, 2000, Mr. Culpepper sent Mr. Cole a letter in which he confirmed that he would accept the representation on a contingent fee basis of one-third “of whatever additional property or money we can get for you.”

After negotiation between Mr. Culpepper and counsel for the estate of Mr. Cole’s mother, Mr. Cole was offered property worth $21,600.03 over and above what he would have received under the terms of the decedent’s will. Mr. Culpepper thought the compromise was reasonable and recommended to Mr. Cole that he accept the offer. However, Mr. Cole refused to settle his claim for that amount, believing he was entitled to a larger share of his mother’s succession as a forced heir. When Mr. Culpepper refused to file suit in the matter, Mr. Cole terminated his representation. Mr. Cole then proceeded in proper person⊕“In propria persona is a Latin phrase meaning ‘for one’s self.’ The phrase is used for a person who appears before a court or represents themself in absence of a lawyer. It is synonymous with the term pro se.” Wex Legal Dictionary

to challenge his mother’s will, but he was unsuccessful and recovered nothing.

On April 12, 2004, Mr. Culpepper filed a “Petition on Open Account” on behalf of the Culpepper law firm. The suit was filed in Ruston City Court against Mr. Cole, seeking the sum of $6,950.01, plus legal interest, together with 25% on the principal and interest as additional attorney’s fees. Attached to the petition were Mr. Culpepper’s invoice for attorney’s fees and a demand letter to Mr. Cole seeking the payment of “the entire balance of $6,950.01 that you owe Culpepper & Carroll, PLLC.”

Mr. Cole, appearing in proper person, answered the law firm’s petition and denied that he owed any money. Mr. Cole explained in his answer that “Mr. Culpepper did this on a contingency fee basis,” that Mr. Culpepper “quit the case,” and that Mr. Cole paid court costs but Mr. Culpepper “would not go to court.”

Following a trial on the merits, at which both parties testified, the city court rendered judgment in favor of the law firm, awarding the sum of $6,950.01, plus legal interest from the date of judicial demand until paid, together with 25% on the principal and interest as additional attorney’s fees, and costs. In oral reasons for judgment, the city court judge stated that a “contingency fee was present” based on the record, including the testimony in open court and the written admission in Mr. Cole’s answer that there was a contingent fee arrangement. The court noted that “work was accomplished” by Mr. Culpepper and further noted that, according to the testimony, the settlement would have produced a better result than if the case had gone to trial on the issue of forced heirship. Thus, the court was satisfied that the law firm met its burden of proof.

Mr. Cole appealed the city court’s judgment, and in a 2-1 ruling, the court of appeal amended the judgment and affirmed. The majority agreed that a valid contingent fee contract existed between Mr. Cole and Mr. Culpepper, and found that by refusing to sign the “favorable settlement” negotiated by Mr. Culpepper before he was discharged, Mr. Cole was in effect depriving Mr. Culpepper of the contingent fee he had already earned. Accordingly, the court of appeal affirmed the award to Mr. Culpepper of $6,950.01 in attorney’s fees, plus legal interest. However, the court of appeal found that the money owing in this case does not derive from an open account, but rather from a contractual obligation in the form of a contingent fee agreement. Based on this reasoning, the court of appeal amended the trial court’s judgment to delete the award to the law firm of 25% additional attorney’s fees plus costs under the open account statute.

Judge Caraway dissented. He recognized that a contingent fee contract existed in this case, but found that because there was ultimately no recovery in the case, no fee was due to Mr. Culpepper. Judge Caraway further observed that to allow an attorney to collect a fee when the client rejects a settlement offer and later recovers nothing “ignores multiple and serious concerns embodied in the rules of professional conduct.”

Upon Mr. Cole’s application, we granted certiorari to review the correctness of the court of appeal’s ruling.

Discussion

As a threshold matter, we note the trial court made a finding of fact that a contingent fee contract existed between Mr. Cole and Mr. Culpepper. Based on our review of the record, we find no manifest error in this determination.

Having found a contingent fee contract exists, we now turn to the question of whether Mr. Culpepper is entitled to recover any attorney’s fees under this contract. Pursuant to the parties’ agreement, Mr. Culpepper is entitled to one-third “of whatever additional property or money” he obtained on behalf of Mr. Cole. It is undisputed that Mr. Cole recovered no additional property or money as a result of the litigation against his mother’s estate. Because Mr. Cole obtained no recovery, it follows that Mr. Culpepper is not entitled to any contingent fee.

Nonetheless, Mr. Culpepper urges us to find that his contingency should attach to the settlement offer he obtained on behalf of his client, even though his client refused to accept that offer. According to Mr. Culpepper, he did the work for which Mr. Cole retained him, and he is therefore entitled to one-third of the amount offered in settlement, notwithstanding Mr. Cole’s rejection of the settlement offer.

With the benefit of hindsight, it would have been in Mr. Cole’s best interest to accept the settlement offer obtained by Mr. Culpepper. However, it is clear that the decision to accept a settlement belongs to the client alone. Therefore, regardless of the wisdom of Mr. Cole’s decision, his refusal to accept the settlement was binding on Mr. Culpepper.

To allow Mr. Culpepper to recover a contingent fee under these circumstances would penalize Mr. Cole for exercising his right to reject the settlement. We find no statutory or jurisprudential support for such a proposition. Indeed, this court has rejected any interpretation of the Rules of Professional Conduct which would place restrictions on the client’s fundamental right to control the case.

In summary, we find that Mr. Culpepper did not obtain any recovery on behalf of Mr. Cole. In the absence of a recovery, it follows that Mr. Culpepper cannot collect a contingent fee for his services. Accordingly, we must reverse the judgment of the court of appeal awarding a contingent fee to Mr. Culpepper.