Fiduciaries and Fees: Preliminary Thoughts
Lynn A. Baker
University of Texas School of Law
University of Texas at Austin - School of Law
March 21, 2011
Fordham Law Review Vol. 79, p. 1833, 2011
U of Texas Law, Law and Econ Research Paper No. 199
In this Article, which was prepared for the Fordham Law Review Symposium on “Civil Procedure and the Legal Profession,” we make a preliminary effort to identify a principled basis for distinguishing self-interested conduct by attorneys that violates the fiduciary duty from similar conduct that is a proper exercise or assertion of an attorney’s contractual right to payment. We believe that a start at distinguishing properly selfish from improperly selfish behavior can be made by examining the reasonable expectations of clients and attorneys. An implication of this expectations-based approach is that attorney-client retainer agreements trump the common law fiduciary duty on matters to which the contracts properly apply. By entering into a retainer agreement, a client endows a lawyer with legal rights against the client. The only reasonable expectation the client can have is that the lawyer will look out for his own interests, not the client’s, when handling matters governed by those rights.
In Part I, we examine the little existing law regarding the boundaries that separate matters to which lawyers’ fiduciary responsibilities apply from other matters to which they are inapplicable, and further elaborate on the basic principles that we believe to be useful in this area. In Part II, we first examine two fee issues that contingent-fee plaintiffs’ attorneys have recently confronted which our proposed principles suggest should not constitute a breach of an attorney’s fiduciary duties. Thus, we believe that these scenarios fall on the side of permissible fee collection. The first issue is whether it is a breach of fiduciary duty for a contingent-fee attorney to challenge a court’s sua sponte order reducing the attorney’s fees below the amount set out in the attorney-client contract. The second issue is whether, when confronted with a variety of possible venues in which to file or settle a case, the attorney has a fiduciary obligation to choose the venue that ensures that the client pays the smallest possible fee to the attorney. We go on to examine a third issue of recent interest to contingent-fee plaintiffs’ attorneys that we believe does constitute a breach of the attorney’s fiduciary obligations: whether it is permissible for the attorney to negotiate a settlement agreement with the defendant that obligates the client to pay for a service that would not otherwise be properly chargeable to the client, such as the resolution by a third party of any Medicare liens on the client’s settlement proceeds.
Number of Pages in PDF File: 35
Keywords: fiduciaries, attorneys' fees, contingent fees, legal profession, fee caps, legal ethics, professional responsibility, mass torts
JEL Classification: K10, K12, K30, K39, K40, K41, K49
Date posted: March 21, 2011
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