In-House Pay: Are Salaries, Stock Options and Health Benefits a 'Fee' Subject to a Reasonableness Requirement and Why the Answer Constitutes the Opening Shot in a Class War between Lawyer-Employees and Lawyer-Professionals

Abstract

Attorneys’ fees must be reasonable. Does that mean that in-house counsels’ salaries, stock grants and benefits must comply with the reasonableness requirement? If so, what does “reasonable” mean in the context of in-house lawyer-employees’ compensation? This article tackles these important and timely questions for the first time.

Part I of this paper is an exercise in statutory interpretation construing Rule 1.5 of the ABA Model Rules of Professional Conduct (“Rules”), the nationally accepted standard imposing a reasonableness requirement on attorneys’ fees. Exploring the various rationales for Rule 1.5, it concludes that as long as the bar insists on a one-size-fits-all regulatory approach that applies to all lawyers the rule applies to in-house lawyers, and explains the meaning of reasonableness in the context of in-house compensation including salaries, stock grants and benefits.

In-house counsels are lawyer-employees, part of a growing class of 21st-century lawyer-employees. Historically, the Rules were meant to regulate the conduct of relatively powerful and independent lawyer-professionals, not comparatively weak, interconnected lawyer-employees.

Applying the Rules to in-house lawyers thus has profound implications for lawyer-professionals, lawyer-employees, the profession and the future of attorney regulation, examined in Part II.
In addition to challenging the traditional lawyer-professionals model by virtue of their employee status, in-house lawyers also contest the traditional model by acting as lawyer-businesspersons. Part III studies the role of in-house counsels as lawyer-businesspersons and the additional burden this sea-change imposes on the Rules, the profession and our core understanding of what it means to be a lawyer.