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A Battle for Reason: The Unconscionable Attorney-Client Fee Agreement Keith William Diener* I. Introduction Decades before the American Bar Association (ABA) promulgated its Model Rule of Professional Conduct 1.5 requiring reasonable attorneys’ fees, courts were regularly tasked with deciphering attorney-client fee agreements under the then-prevailing standards of unconscionability. The doctrine of unconscionability is still utilized today to proffer the occasional challenge to questionable provisions of attorney-client fee agreements. Although the ABA requirement of a reasonable fee is the standard adopted by the disciplinary rules of almost all states, the reasonable fee has largely been conflated into an admonition against unconscionable fees, making it difficult for clients to prevail in claims involving unreasonable, but not unconscionable fees. The standard requiring a reasonable fee is less stringent than unconscionability, yet there is a tendency by courts and disciplinary committees to conflate these two standards. This tendency results in miscarriages of justice, leaving injured clients with considerably lower monetary awards than the law contemplates, and many unscrupulous attorneys with considerably more compensation than their efforts merit. Section II traces the historical application of the unconscionability standard to attorney-client fee agreements. Section III samples cases involving state applications of disciplinary rules, such as Rule 1.5, tracing the influence and application of the doctrine of unconscionability. Section IV suggests an analytic distinction between unreasonableness and unconscionability. Section V concludes by calling for the meticulous judicial monitoring of attorney-client fee agreements. II. The Use of Unconscionability to Challenge Fee Agreements Skepticism of attorney-client fee agreements persisted through the early twentieth century. The ABA’s 1908 Canons of Professional Ethics originally contemplated judicial supervision of contingency fees, for fear that “contingent fees lead to many abuses.”1 Canon 13 was eventually adopted to include a standard requiring contingent fees be “reasonable,” with the proviso that courts continue to supervise contingent fee arrangements.2 However, these early professional

* Assistant Professor of Business Law and Ethics, Stockton University, School of Business 1. CANONS OF PROF ’L ETHICS, FINAL REPORT OF THE COMMITTEE ON CODE OF PROFESSIONAL ETHICS, CANON 13 (May 1908). 2. CANONS OF PROF ’L ETHICS, CANON 13 (1933).

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canons had an “uncertain legal status” that were, even when adopted by bar associations, only “quasi-authoritative” assessments of professional obligation (and were not given the force of law).3 As a result of the questionable authoritative force and inadequate dissemination of these early ethics canons, many challenges to attorney-client fee agreements took place through judicial application of the unconscionability standard. Even through the mid twentieth century, as the Canons were replaced by the ABA’s 1969 Model Code of Professional Responsibility, the unconscionability standard continued to be applied in courts to decipher the validity of fee agreements. The Model Code also contained requirements of a “reasonable” and not “clearly excessive” fee, whether such fee be a contingency fee or not.4 By the time that the ABA Model Rules of Professional Conduct were adopted in 1983, and the reasonableness standard was once again asserted for all fees, the more stringent standard of unconscionability was well engrained in the case law of the many states.5 The unconscionability standard has been utilized to challenge many contingent fee arrangements, but also other questionable attorneyclient fee agreements and provisions thereof.6 Take, for example, the 1920 case of State v. Vernor.7 In Vernor, the Oklahoma Supreme Court deemed a contract between attorneys and client (a particularly vulnerable, young black girl who had inherited property) as unconscionable and unenforceable.8 As a result of this unconscionable contract and related matters, a disbarment proceeding was brought against two Oklahoma attorneys.9 Stella Mason, resident of the District of Columbia, was to inherit valuable land in Oklahoma (which contained deposits of oil and gas) on her eighteenth birthday.10 This land

3. 4. 5. 6.

GEOFFREY C. HAZARD JR., ET AL., THE LAW OF LAWYERING, Vol. 1 1-31 (4th ed. 2015). MODEL CODE OF PROF ’L RESPONSIBILITY EC 2-17 & DR 2-106 (1980). MODEL RULES OF PROF ’L CONDUCT R. 1.5 (1983). Lester Brickman, ABA Regulation of Contingency Fees: Money Talks, Ethics Walks, 65 FORDHAM L. REV. 247, 298 (1996) (citing many cases concerning whether contingency fees are excessive, unreasonable, or unconscionable); Lester Brickman, Contingency Fee Abuses, Ethical Mandates, and the Disciplinary System: The Case Against Case-by-Case Enforcement, 53 WASH. & LEE L. REV. 1339, 1373, n. 68 (1996) (citing many cases involving legal challenges to contingency fees on the basis of excessiveness, unreasonableness, and unconscionability); Lester Brickman, Contingent Fees Without Contingencies: Hamlet Without the Prince of Denmark?, 37 UCLA L. REV. 29, 137, n. 218 (1989) (“Unconscionability cases in which a contract is struck down solely because the price is excessive are rare.”); Ted Schneyer, Legal-Process Constraints on the Regulation of Lawyers’ Contingent Fee Contracts, 47 DEPAUL L. REV. 371, 412, n. 122 (1998); and Charles Silver, Flat Fees and Staff Attorneys: Unnecessary Casualties in the Continuing Battle over the Law Governing Insurance Defense Lawyers, 4 CONN. INS. L.J. 205, 257, n. 28 (1998). See also Paul D. Carrington, Unconscionable Lawyers, 19 GA. ST. U. L. REV. 361 (2002) (for a discussion of concerns relating to attorney drafting of unconscionable contracts for clients, but not focusing on the attorney-client fee agreement). 7. State v. Vernor, 191 P. 729 (1920). 8. Id. at 730-731. 9. Id. at 729. 10. Id. at 730-731.

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was held with a guardian, also in Oklahoma, until Stella’s eighteenth birthday, May 21, 1917, when she was due to take possession and control over her inheritance.11 In what the relators alleged as a devious and intricate plot to separate Stella from her wealth, the court found that Stella was induced to go to the offices of two attorneys to sign a contract for their representation shortly after midnight on her eighteenth birthday.12 The court found that this contract was for employment of the two attorneys for a period of five years, with payment for all years required in advance, and the $25,000 prepayment to come from the oil producing lands that Stella inherited moments before signing this contract.13 The court deemed this contract “unethical and unconscionable” in light of “all the circumstances surrounding the making of this contract, terms, the inexperience and incompetency of Stella Mason . . . together with the situation and surroundings under which the parties acted with regard to this contract . . .”14 This unconscionable contract and the circumstances surrounding its formation led the Oklahoma Supreme Court to suspend the two lawyers from the practice of law for six months.15 Although the facts of Vernor are unique, and reflect particularly improper advantage-taking of a youthful client, several cases contemporary to Vernor reveal similar concerns in the procurement of attorney-client contingency fee agreements. As the Court of Appeals of New York explained in 1906 in Morehouse v. Brooklyn Heights Railroad Co., “[o]f late years the subject of attorneys’ fees and their manner of procuring contracts of retainer, especially in negligence cases, have attracted the attention of both the public and the courts. The charges made in some cases have been exorbitant, if not scandalous, and have tended in a measure to bring the profession into disrepute.”16 Notwithstanding this social commentary, the Morehouse court refused to adopt a bright-line rule requiring that all 50 percent contingent fee agreements be deemed unconscionable. To the contrary, the Morehouse court held that “whether such a contract is unconscionable, is one of fact, depending upon the character of the claim and the amount of services to be rendered . . .”17 In so holding the Court of Appeals confirmed its 1903 decision, In re Fitzsimons, which reversed a lower court’s finding

11. Id. 12. Id. at 733-734. 13. Id. 14. Id. at 735. 15. Id. at 737. 16. Morehouse v. The Brooklyn Heights R. Co., 185 N.Y. 520, 525 (1906). 17. Id. at 525-26 (1906) (the court goes on to say “An agreement to pay an attorney one-half of the recovery where the action was to recover a penalty of fifty dollars would not by any person be considered to be improper, but if it was for fifty thousand dollars it might be considered quite improper. So that the mere fact that the attorney under the agreement was to receive one-half does not render it unconscionable, unless it appears from the evidence that it was induced by fraud, or, in view of the nature of the claim, that the compensation provided for was so excessive as to evince a purpose on the part of the attorney to obtain an improper or undue advantage over his client.”).

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that a 50 percent contingency fee was per se unconscionable.18 Although the Court of Appeals determined that 50 percent contingent agreements were not per se unconscionable, such agreements, in different factual circumstances, were held in two 1903 federal cases to be unconscionable.19 Yet, other New York cases found other factual circumstances insufficient to deem attorney-client contingency fee agreements unconscionable.20 Beyond contingency fees, the doctrine of unconscionability is still being utilized today to attempt to invalidate various provisions of attorney-client agreements. The doctrine of unconscionability has been used to challenge arbitration provisions of attorney-client agreements,21 high fee awards resulting from hybrid hourly-contingency fee agreements,22 and agreements involving purportedly excessive fees.23 Further, it was held by the Illinois Supreme Court that a finding of

18. In re Fitzsimons, 174 N.Y. 15, 25, 66 N.E. 554, 558 (1903); see also In re Fitzsimons, 77 A.D. 345, 79 N.Y.S. 194 (App. Div. 1902) rev’d, 174 N.Y. 15, 66 N.E. 554 (1903). 19. See Herman v. Metro. St. Ry. Co., 121 F. 184 (C.C.S.D.N.Y. 1903); Muller v. Kelly, 125 F. 212 (3d Cir. 1903). 20. McCoy v. Gas Engine & Power Company, et al., 71 Misc. 537; 129 N.Y.S. 251 (1911) (50% contingency fee not unconscionable); Ward v. Orsini et al., 243 N.Y. 123, 127 (1926); Ransom et al. v. Cutting, 188 N.Y. 447; 81 N.E. 324 (1907) (refusing to find attorney fee agreement unconscionable even when attorney took 50%). See also Haverstock v. Wolf, 491 F. Supp. 447, 453 (D. Minn. 1980) (“contingent fee contracts are generally valid unless they are unconscionable or are procured by fraud or overreaching”). 21. Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494, 500 (Tex. 2015) (reversing court of appeals decision finding arbitration provision of agreement unconscionable); see also Pavone v. Yeager, No. D059578, 2013 WL 6054813, at *7 (Cal. Ct. App. Nov. 18, 2013) (“Even if portions . . . were arguably unconscionable, an issue we are not required to reach, they are collateral and do not merit throwing out the entire agreement.”); Vandekerckhove v. Scarfone, No. 303130, 2012 WL 4840546, at *4 (Mich. Ct. App. Oct. 11, 2012) (refusal to find arbitration provision unconscionable); In re Pham, 314 S.W.3d 520, 526 (Tex. App. 2010) (confirming the rejection of the “notion that arbitration provisions in attorney-client contracts are inherently unconscionable without additional restrictions”) (citing Labidi v. Sydow, 287 S.W.3d 922, 927–28 (2009)). 22. Campbell Harrison & Dagley, L.L.P. v. Hill, No. 3:12-CV-4599-L, 2014 WL 2207211, at *11 (N.D. Tex. May 28, 2014) aff ’d in part, rev’d in part, 782 F.3d 240 (5th Cir. 2015) cert. denied, 136 S. Ct. 247, 193 L. Ed. 2d 134 (2015) (in this case, the district court found a fee agreement unconscionable when it combined hourly and contingency fees, making for a high award, but circuit court reversed); Goesel v. Boley Int’l (H.K.) Ltd., 806 F.3d 414, 423 (7th Cir. 2015) (did not find agreement unconscionable when attorneys took 1/3rd of recovery for fees plus litigation costs, in total taking roughly 58% of the settlement amount, and leaving 42% for the client; 7th Circuit reversed finding of district court). 23. Joseph Brenner Associates, Inc. v. Starmaker Entm’t, Inc., No. 91 CIV. 4128 (RO), 1995 WL 271741, at *3 (S.D.N.Y. May 9, 1995) aff ’d, 82 F.3d 55 (2d Cir. 1996) (refusal to find fee agreement unconscionable); William J. Cooney, P.C. v. Rowland, 240 Ga. App. 703, 703, 524 S.E.2d 730, 731 (1999) (reversed trial court—court of appeals held that the attorney fee agreement was not unconscionable); Alderman & Alderman v. Millbrook Owners’ Ass’n, Inc., No. CV000802857S, 2001 WL 1160737, at *3 (Conn. Super. Ct. Aug. 27, 2001) (“insufficient facts have been alleged to support a finding of unconscionability.”).


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unconscionable fees subjects the involved attorneys to disciplinary proceedings.24 In addition to these various circumstances, courts have deemed attorney-client fee agreements unconscionable under common law even without accompanying sanctions. The remainder of this section surveys these common law cases. It is relatively rare that a court deems an attorney-client fee agreement unconscionable without correlative ethical violations. Nevertheless, some agreement provisions are so substantively unconscionable as to merit a court determination of the invalidity of said provisions. Under other circumstances, the manner and means by which a contract is procured are procedurally unconscionable and simultaneously entail substantively unconscionable terms.25 Falling into the latter camp is the unpublished case from the California Court of Appeals, Matson v. Dean.26 The Matson case presents elements of both substantive and procedural unconscionability in a very unique circumstance where an attorney took advantage of a particularly vulnerable client.27 Matson suffered, since at least 1999, from a slew of health issues, having suffered through numerous lung tumors, radiation therapy, a laryngectomy, and even adenoid cystic carcinoma (a rare, terminal form of cancer).28 As a result of her deteriorating health, in 2002, Matson stopped working as a sales professional, and filed for short term and long term disability.29 Her initial applications were denied by Liberty (the insurance company).30 After being denied, Matson contacted attorney Dean, seeking his advice, counsel, and representation.31 Dean assisted Matson with extending the deadline for filing the appeal, but did not confirm that he would take her case.32 After causing Matson stress and worry from being nonresponsive to her requests for representation, one week before the appeals deadline with Liberty, Dean sent Matson a revised fee agreement requiring her to pay him pursuant to a unique fee arrangement.33

24. In re Kutner, 78 Ill. 2d 157, 163-64, 399 N.E.2d 963, 965 (1979) (“where there is an unconscionable fee fixed in an attorney-client agreement, the matter is subject to action by the Attorney Registration and Disciplinary Commission”); In re Teichner, 104 Ill. 2d 150, 160-61, 470 N.E.2d 972, 977 (1984) (unconscionable contingent fees are also a matter for the Attorney Registration and Disciplinary Commission). 25. For an explanation of the relationship between substantive and procedural unconscionability, see Sitogum Holdings, Inc. v. Ropes, 352 N.J. Super. 555, n. 13 (2002) (“There do not appear to be any decisions where procedural unconscionability was present but not substantive unconscionability. This should not come as any surprise. No matter how the contract came about, it would be unlikely that a party would complain—or a court would listen—if the contract was otherwise fair or reasonable. It would be much like arguing about negligent conduct which failed to result in any damage”). 26. Matson v. Dean, No. B234024, 2012 WL 3678600, at *1 (Cal. Ct. App. Aug. 28, 2012). 27. Id. 28. Id. 29. Id. 30. Id. 31. Id., at *1-2. 32. Id. 33. Id.

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After Matson signed, Dean wrote an appeal and Liberty reversed their decision, by awarding Matson disability payments.34 The unique fee arrangement resulted in Matson owing Dean 25 percent of her monthly disability payment, or $1409 per month, and, of particular interest to the court, Matson had to pay Dean 25 percent of any fee award (“the formula has the client paying a contingency percentage of attorney’s fees awarded to the attorney in litigation or settlement, an award that the client never receives”).35 At the time Matson requested relief from the court, she had already paid Dean over $84,000 for what she contended was approximately 20 days of work on her case.36 After examining these facts, the trial court and the California Court of Appeals affirmed that this agreement was both procedurally and substantively unconscionable.37 In its findings, the Court of Appeals noted that “Matson had no meaningful opportunity to negotiate the fee agreement,”38 and that the fee agreement was “manifestly unfair,” as well as vague and incomprehensible.39 Included in the camp of cases involving sheer substantive unconscionability are the New York case of Joel R. Brandes, P.C. v. Zingmond,40 and the Texas cases of Lee v. Daniels & Daniels41 and Hoover Slovacek LLP v. Walton.42 All of these cases involve substantive terms of a fee agreement that courts deemed to be substantively unconscionable. The Brandes case involved an attorney including a “minimum fee” provision in the agreement with his client.43 The nonrefundable minimum fee that the attorney would charge, regardless of time spent on the case, was $15,000.44 The agreement was for a routine matrimonial matter, but this minimum fee was said (in the agreement) to be to “assure the availability of the ‘attorneys’.”45 The client then reconciled with her husband, decided not to proceed with the matrimonial matter, and, in the meantime, the firm billed only $1,305.00 for a total of approximately five hours of work.46 The mass of attorney time billed was for conversations with the client, and not a single 34. Id. at *2. 35. Id. at *4 & *10. 36. Id. at *4. 37. Id. at *10. 38. Id. at *7. 39. Id. at *9. 40. Joel R. Brandes, P.C. v. Zingmond, 151 Misc. 2d 671, 675-76, 573 N.Y.S.2d 579, 582 (Sup. Ct. 1991) (finding that an attorney-client agreement with a “minimum fee” provision requiring a minimum fee of “$15,000 is both grossly excessive and shocking to the court’s conscience” when only approximately 5 hours were billed for the client prior to termination). 41. Lee v. Daniels & Daniels, 264 S.W.3d 273, 279-80 (Tex. App. 2008) (fees awarded for time attorney spent in an effort to terminate attorney-client relationship, deemed unconscionable and so the arbitrator’s award of those fees was deemed to violate public policy). 42. Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 566 (Tex. 2006). 43. Joel R. Brandes, P.C., supra note 40, at 672. 44. Id. 45. Id. 46. Id. at 674.


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document was created on the client’s behalf, no settlement negotiations took place, and no court hearings were scheduled.47 As the court noted, to allow this minimum fee to persist would be to permit the approval of an hourly rate of over $3,500 per hour.48 As a result, under the circumstances of this case, the nonrefundable minimum fee was deemed excessive and unconscionable. The Brandes court did indicate that there are circumstances in which a nonrefundable fee may be permissible, but those criteria were not satisfied in Brandes, moreover the New York Court of Appeals subsequently came to an alternative conclusion regarding nonrefundable special retainers.49 In Lee v. Daniels & Daniels, the court deemed provisions of a fee-agreement to be unconscionable, although this case did not involve a “minimum fee,” but instead involved an attorney requiring a client to pay for all fees relating to the attorney withdrawing from client representation.50 The lawsuit was brought by Lee, the mother of the client (“guarantor”), who had guaranteed certain payment pursuant to the retainer agreement, along with her son, Cummings (“client”).51 A fee disagreement arose between attorney and client (and, thus the guarantor), which eventually went to arbitration. The arbitrator awarded Daniels his fees and interest on fees associated with the motion to withdraw, a subsequent mandamus proceeding, and the arbitrator’s fees.52 The retainer agreement provided that client and guarantor would “pay for all time spent, costs and expenses incident to withdrawal as attorney of record to include, but not limited to, airfare, mileage, motel, and lodging.”53 As a result, the arbitrator awarded Daniels $15,046.13 for fees relating to withdrawal and the mandamus, $1,802.97 as interest, and ordered the client and guarantor to pay the full arbitrator’s fee, including

47. Id. 48. Id. 49. Id. at 673 (quoting N.Y. St. Bar Ass’n Op. No. 599) (“The specified minimum must not be excessive or unconscionable under the circumstances of the particular matter; non-refundability must be expressly conditioned on the absence of lawyer default; and the agreement must clearly and unambiguously explain in language that is ‘fully known and understood by the client’ the grounds that would entitle the client to a refund of the otherwise non-refundable fee.”). Cf. In re Cooperman, 633 N.E.2d 1069 (N.Y. 1994) (holding nonrefundable special retainers as per se unethical and against public policy); DeGraaf v. Fusco, 660 A.2d 9, 12 (N.J. Super Ct. App. Div. 1995) (holding nonrefundable special retainers not per se unethical but that they are “subject to the overriding precept that any fee arrangement must be reasonable.”). See also John Yukio Gotanda, Setting Arbitrators’ Fees: An International Survey, 33 VAND. J. TRANSNAT’L L. 779, 809-10 (2000); and Lester Brickman & Lawrence A. Cunningham, Nonrefundable Retainers: Impermissible Under Fiduciary, Statutory and Contract Law, 57 FORDHAM L. REV. 149 (1988). 50. Lee v. Daniels & Daniels, 264 S.W.3d 273, 279-80 (Tex. App. 2008) (fees awarded for time attorney spent in an effort to terminate attorney-client relationship, deemed unconscionable and so the arbitrator’s award of those fees was deemed to violate public policy). 51. Id. at 273. 52. Id. at 280-281. 53. Id. at 280.

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the 50 percent due by Daniels, which was $7,250.00.54 The trial court affirmed this award, but the Texas Court of Appeals reversed the award, finding these fees unconscionable and in violation of public policy. Another Texas case, Hoover Slovacek LLP v. Walton, deemed a provision of an attorney-client fee agreement unconscionable, but decided to sever the unconscionable provision while enforcing the rest of the agreement.55 In Hoover, the contested provision was incorporated in a 30 percent contingency fee contract.56 It provided that the client could terminate the firm at any time, but, the client must then “immediately pay the Firm the then present value of the Contingent Fee . . . Costs . . . [and] subsequent legal fees . . .”57 The firm subsequently lowered its contingency fee to 28.66 percent, and later, the client terminated the firm and settled the case with another firm’s assistance.58 At the time of termination, there was a $6 million settlement offer pending, and so the firm sent the client a bill for $1.7 million (28.66 percent of the $6 million), claiming this was the then present value of the contingent fee.59 The Supreme Court of Texas decided that the “termination fee provision is unconscionable” but it “does not render the parties’ entire fee agreement unenforceable,” thus severing the provision but reversing the appellate court’s “take-nothing” decision.60 Although some of these cases arguably involve minor ethics violations, no sanctions were mentioned in the opinions of the courts holding these attorney-client fee agreements unconscionable. The next section discusses those cases where unconscionable fee agreements were accompanied by other findings of ethical violations and sanctions. III. Unconscionability with Correlating Disciplinary Violations Most disciplinary (ethics) rules of the states prohibit attorneys from charging unreasonable fees, but the minority of states, including Texas and California, explicitly prohibit unconscionable fees via their disciplinary rules.61 For a time, the ABA Model Code of Professional Responsibility prohibited “clearly excessive” fees and also required fee agreements to be reasonable,62 but this Code was sup54. Id. at 280 & 282-283. 55. Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 566 (Tex. 2006). 56. Id. at 559. 57. Id. 58. Id. 59. Id. at 559-560. 60. Id. at 565. 61. See CALIFORNIA RULES OF PROF ’L CONDUCT R. 4-200 (1992) (prohibiting “illegal or unconscionable fee”); and TEXAS DISCIPLINARY RULES OF PROF ’L CONDUCT R. 1.04 (1991) (prohibiting an “illegal fee or unconscionable fee”; although the Texas rule uses the term “unconscionable,” Rule 1.04 goes on to say that “A fee is unconscionable if a competent lawyer could not form a reasonable belief that the fee is reasonable” and then lists the same factors that the ABA Model Rule 1.5 lists to determine if a fee is reasonable. The California Rule 4-200 lists very similar factors, although not identical factors for determining if a fee is conscionable.). 62. MODEL CODE OF PROF ’L RESPONSIBILITY, DR 2-106(A) & (B) (1980).


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planted in 1983 by the ABA Model Rules of Professional Conduct, which prohibit “unreasonable” fees.63 As one commentator notes, “Such terms as ‘excessive,’ ‘exorbitant,’ ‘extortionate,’ ‘unconscionable,’ and ‘unreasonable’ have been variously used to describe the fees of an attorney who has charged or is attempting to charge so much as to be subject to disciplinary action.”64 The interchangeability of such terms is unfortunate because, as will be argued in the next section, there is an analytical distinction between unconscionable and unreasonable fees that courts rarely acknowledge. Nevertheless, the remainder of this section discusses the role that unconscionability plays in the determination of ethical violations and corresponding sanctions.65 When attorney-client fee agreements are deemed unconscionable, courts often find additional violations of ethics rules (other improper conduct), aside from clearly excessive fees. The sanctions resulting from these ethical violations span the spectrum from reprimand and public censure to temporary suspension and even, in the most egregious cases, to the disbarment of attorneys who couple the charging of unconscionable fees with other ethical violations. The reprimand is a more lenient sanction for attorneys who violate ethical rules, although it is a sanction forever recorded in the courts of the jurisdiction.66 In Kemp, the attorneys were reprimanded for, inter alia, charging “clearly excessive” fees in contravention of Maryland ethics rule DR 2-106(A), which (at that time) provided that a “lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly exces-

63. Gabriel J. Chin & Scott C. Wells, Can A Reasonable Doubt Have an Unreasonable Price? Limitations on Attorneys’ Fees in Criminal Cases, 41 B.C. L. REV. 1, 3 (1999); See also ABA Chronological List of States Adopting the Model Rules, AMERICAN BAR ASSOCIATION, http:// www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_ professional_conduct/chrono_list_state_adopting_model_rules.html (although officially adopted by the House of Delegates in 1983, the first state to adopt the new Model Rules was Michigan, about five years later, and it took decades for some states to finally adopt the Model Rules; as of this writing, California still has not adopted the Model Rules). 64. George L. Blum, Annotation, Attorney’s Charging Excessive Fee as Ground for Disciplinary Action—Business and Tax, Employee Benefits and Termination, Civil Rights, and Other Limited Civil Matters, 27 A.L.R.6th 1 (Originally published in 2007). See also MODEL RULES OF PROF ’L CONDUCT R. 1.5 (2009) (“[a] lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. . . .”). 65. For sources pertaining to whether an excessive fee alone should give rise to attorney discipline, see H.H. Henry, Annotation, Amount or Character of Compensation as Ground for Disciplinary Action Against Attorney, 70 A.L.R.2d 962, 965 (1960) (superseded) (at common law “[a] number of cases have recognized that an excessive fee is not enough, in the absence of other factors, to warrant disciplinary action against an attorney, some of the cases also recognizing, however, that where a fee is so clearly excessive in comparison to the services rendered that it could not have been charged in good faith, discipline will be warranted”) (quoted in Gabriel J. Chin & Scott C. Wells, Can A Reasonable Doubt Have an Unreasonable Price? Limitations on Attorneys’ Fees in Criminal Cases, 41 B.C. L. REV. 1, n. 41 & n. 119 (1999) (citing a wealth of resources relating to the issue of whether an excessive fee alone should result in disciplinary action)). 66. Attorney Grievance Comm’n v. Kemp, 303 Md. 664, 680 (1985).

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sive fee.”67 The attorneys in Kemp represented a client for personal injuries arising from an automobile accident. The attorneys charged the client a one-third contingency fee for, among other things, $5000.00 worth of Med Pay benefits (payments made to an injured insuree), which are generally automatically payable upon completion of a form, involve no risk and no skill of an attorney, and are made by insurance companies without regard to fault.68 The Maryland State Bar Association’s Ethics Committee had previously determined that taking contingency percentages of personal injury protection coverage was “unreasonable and unconscionable,”69 for these same reasons. As a result, the Maryland Court of Appeals held that taking a contingency percentage of Med Pay benefits was similarly a violation of Maryland ethics rules. Kemp also violated Maryland prohibitions on commingling funds, and both attorneys in Kemp violated Maryland accounting and record-keeping requirements.70 They were reprimanded for these violations. The charging of unconscionable fees, at times, results in the public censure of attorneys. The Colorado Supreme Court twice utilized public censure to sanction attorneys who charged unconscionable fees and violated other ethics rules. In 1968, the Colorado Supreme Court, sitting en banc, publically censured an attorney for his misconduct, including charging unconscionable fees in People v. Barbary.71 The unconscionable fee in Barbary involved a charging of a “double fee” for questionable services rendered.72 Although the court was particularly vague as to the details of this “double fee,” it did elaborate that this same attorney also gave contradicting testimony during his disciplinary proceedings and further “wrongfully caused and nurtured a fee dispute” between another attorney and a former client.73 Although holding a public censure was the appropriate sanction for the ethics code violations, the court noted that the attorney was “admonished that any further acts of misconduct on your part will be more severely dealt with.”74 A number of ethical violations were found in Barbary, and public censure was deemed the appropriate sanction. Public censure was again imposed as the appropriate sanction in a 1976 en banc decision of the Colorado Supreme Court in People v. Spiegel.75 Although the Spiegel court did not specify the amount of the fee, it deemed an attorney’s attempted fee “unconscionable” and, correlating with other violations (including dereliction of duty) and a previous private censure, the court deemed public censure the appropriate sanction.76

67. 68. 69. 70. 71. 72. 73. 74. 75. 76.

Id. at 675. Id. at 678. Id. at 676. Id. at 664. People v. Barbary, 164 Colo. 588 (1968). Id. at 590-91. Id. at 589. Id. at 592. People v. Spiegel, 190 Colo. 169 (1976). Id.


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Courts in Washington, California, and New York have deemed temporary suspension from the practice of law to be an appropriate sanction in cases involving the charging of unreasonable or unconscionable fees that coincide with other ethical violations. In Boelter, the Washington Supreme Court expressly overruled its prior decisions, which limited disciplinary proceedings to only unconscionable fees, but noted explicitly that this old doctrine was overruled when it adopted Rule 1.5, which prohibited not only unconscionable fees, but also unreasonable fees.77 The attorney in Boetler argued that his fee was not an unconscionable fee, but the Washington Supreme Court held that, in light of Rule 1.5, disciplinary proceedings may be brought for unreasonable fees, even if they are not also unconscionable.78 The implication of the Washington Supreme Court’s decision is that unconscionable is a higher bar than unreasonable, and, in some cases, unreasonable fees may not meet the higher standard of unconscionability (but it matters not because unreasonable fees are prohibited whether they are unconscionable or not). In Boetler, the attorney’s charging of an unreasonable fee coupled with other ethics violations, including misrepresentations to a client, resulted in a six-month suspension from the practice of law.79 A suspension from the practice of law was similarly deemed the appropriate sanction for the charging of an unconscionable fee along with an illegal fee agreement and conduct involving moral turpitude in the reciprocal attorney disciplinary proceeding that suspended an attorney for one year from practicing in both California and New York.80 Although the New York court did not detail the facts surrounding the unconscionable fee, it agreed that suspension was the appropriate sanction under these circumstances. In more egregious circumstances, the California Supreme Court repeatedly held that charging excessive fees, coupled with other ethics violations, should result in disbarment. In the cases of Tarver v. State Bar,81 Dixon v. State Bar,82 and Barnum v. State Bar,83 the California Supreme Court held that the attorneys at issue should be disbarred for these violations. The Illinois Supreme Court similarly held disbarment to be the appropriate sanction in at least one case.84 The

77. In re Disciplinary Proceeding Against Boelter, 139 Wash. 2d 81 (1999). 78. Id. at 96-97, 106 (1999). See also In re Disciplinary Proceeding Against Behrman, 165 Wash. 2d 414, 423, 197, n. 1 (2008). 79. In re Disciplinary Proceeding Against Boelter, supra note 77, at 107. 80. In re Yagman, 263 A.D.2d 151, 152-153 (1st Dept. 1999) (“By order dated September 16, 1998, the California Supreme Court suspended respondent from the practice of law in California for three years, with two years of that suspension stayed and actual suspension ordered for one year and with probation ordered for the full three years”; the New York court then ordered the attorney remain suspended in New York until not suspended in California, and that, only then, may he petition for reinstatement). 81. Tarver v. State Bar, 688 P.2d 911 (Cal. 1984). 82. Dixon v. State Bar, 702 P.2d 590 (Cal. 1985). 83. Barnum v. State Bar, 801 P.2d 390 (Cal. 1990). 84. In re Teichner, 470 N.E.2d 972 (Ill. 1984).

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sanction available for charging unconscionable fees covers the spectrum from reprimand and censure to suspension and disbarment. As one commentator notes, “contract law is, on its face, stricter on lawyers than nonlawyers . . . [in] the situation in which a lawyer charges an unreasonable or clearly excessive fee.”85 Between the traditional common law principles prohibiting unconscionable contracts (including attorney-client fee agreements) and the disciplinary rules prohibiting typically excessive and unreasonable fees, lawyers are held to a higher standard than non-lawyer parties to an agreement, and face potentially deleterious consequences from charging too much. IV. Analytical Distinction between Unconscionable and Unreasonable Analytically deciphering between two inherently amorphous concepts poses difficulties, particularly in light of the need for flexibility in the application of these standards. As is generally understood, what is reasonable in one circumstance may be unreasonable in light of a different circumstance, whether it be slightly or significantly different, or if there be one key distinguishing feature of a scenario that tilts the scale from reasonable to unreasonable. Just as it may be reasonable for a number of young university students to tell off-color jokes when drinking at a bar, it is unreasonable for these same young university students to tell off-color jokes during a classroom session on the university’s campus. Whether something is reasonable or not is fundamentally a question of the surrounding factual circumstances at issue. Determinations of unconscionability are similarly of a factual nature, involving analysis of the circumstances surrounding the allegedly unconscionable actions or agreements. Although a high price in a contract may be unconscionable when such a price is given to a particularly vulnerable party with little education, business acumen, or mental capacity, a similarly high price may not be unconscionable when agreed to by a savvy business person who is experienced in a trade or profession and who had agreed to the price with a knowledge and understanding of the associated risks of the contractual terms. Although there is a need to maintain the flexibility of the standards of reasonableness and of unconscionability, there nevertheless are characteristics that distinguish the two concepts.

85. Alex B. Long, Attorney-Client Fee Agreements That Offend Public Policy, 61 S.C. L. REV. 287, 302-03 (2009) (“Under traditional contract law principles, the fact that one party agreed to grossly overpay for goods or services is typically not enough to excuse that party from paying. Only where there is some problem, such as fraud, in the bargaining process or where the agreement is unconscionable, which also typically involves some serious procedural concerns, is a party likely to be excused after entering into a bad deal. With an attorney-client fee agreement, however, a client may be able to avoid payment of legal fees on the grounds that the agreed-upon fee is merely “unreasonable” under the jurisdiction’s legal ethics code. Sometimes a statute will place a ceiling on the fees a lawyer may charge a client. More prevalent, however, is the prohibition on unreasonable fees contained in Model Rule 1.5(a).”).


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Before delving into the analytical distinction between unreasonable and unconscionable, it is first worth mentioning that there are at least two approaches to distinguishing between these two concepts. The first approach is adopted by the disciplinary rules of Texas and California, both of which imply that unreasonable and unconscionable are to be defined as synonyms.86 At least one commentator argues that courts should consider the reasonableness of fees only when the fees are also unconscionable or in other “extraordinary circumstances.”87 Another commentator argues that the “reasonableness” standard should be abandoned and the “unconscionability” standard should govern attorney-client fee agreements.88 These commentators, along with the disciplinary rules of Texas and California, conflate the two standards. The second approach distinguishes between the two concepts by making unconscionability the more stringent standard. According to this view, all unconscionable fees are unreasonable fees, but all unreasonable fees are not necessarily unconscionable fees. An unreasonable fee encompasses a lesser degree of severity than an unconscionable fee, which, in turn, encompasses a greater degree of severity (than an unreasonable fee). In other words, unreasonableness is entailed in unconscionability, but not vice-versa. As one commentator explains, “reasonableness . . . is more restrictive than the unconscionability standard.”89 The problems, however, with drawing a bright-line distinction between unreasonable and unconscionable are further exacerbated by the frequent fusion of the terms: courts and ethics committees often deem a fee both “unreasonable and unconscionable” without distinguishing between the two concepts.90 Many fees that may indeed be

86. CALIFORNIA RULES OF PROF ’L CONDUCT R. 4-200 (1992) (prohibiting “illegal or unconscionable fee”); and TEXAS DISCIPLINARY RULES OF PROF ’L CONDUCT R. 1.04 (1991). See also Lee A. Watson, Communication, Honesty, and Contract: Three Buzzwords for Maintaining Ethical Hourly Billing, 11 GEO. J. LEGAL ETHICS 189, 197 (1998) (discussing the Texas standard of unconscionability). 87. George B. Murr, Analysis of the Valuation of Attorney Work Product According to the Market for Claims: Reformulating the Lodestar Method, 31 LOY. U. CHI. L.J. 599, 636 (2000) (“The ‘reasonableness’ standard should only be resorted to in cases of unconscionability, duress or similar extraordinary circumstances. It should not be used as a ‘gatekeeper’ governing standard. The free market of claims and negotiated fees will provide the proper standard. As in all other claims, the court should interfere only if the claim is clearly unconscionable or requires otherwise extraordinary action. Contracts law allows this in situations of fraud, duress and acts of God.”). 88. Carl M. Selinger, Inventing Billable Hours: Contract v. Fairness in Charging Attorney’s Fees, 22 HOFSTRA L. REV. 671 (1994). 89. James P. George, Access to Justice, Costs, and Legal Aid, 54 AM. J. COMP. L. 293, 311-12 (2006). See also Gabriel J. Chin & Scott C. Wells, Can A Reasonable Doubt Have an Unreasonable Price? Limitations on Attorneys’ Fees in Criminal Cases, 41 B.C. L. REV. 1, 70, n. 119 (1999); Morris A. Ratner, Achieving Procedural Goals Through Indirection: The Use of Ethics Doctrine to Justify Contingency Fee Caps in Mdl Aggregate Settlements, 26 GEO. J. LEGAL ETHICS 59, 93, n. 63 (2013); Geoffrey C. Hazard, Jr., Under Shelter of Confidentiality, 50 CASE W. RES. L. REV. 1, 18, n. 33 (1999); Frederick J. Dennehy, Fee Arrangements with Clients, N.J. LAW., Dec. 2011, at 29, 31. 90. See, e.g., Attorney Grievance Comm’n v. Kemp, 303 Md. 664, 676 (1985). See also Blum, supra note 64, at 1.

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unreasonable, are not both “unreasonable and unconscionable,” and therefore are not held impermissible by courts or committees.91 This is a troublesome tendency that may result in unreasonable fees being enforced, simply because they are not unconscionable. The legislative history of ABA Model Rule 1.5 is vivid in its explanation that the reasonableness standard was implemented to lower the threshold requirements for improper fees. The committee explicitly refused to adopt the higher threshold, a standard that requires that the attorney “has really taken advantage of a client,”92 before a fee is deemed improper. To the contrary, reasonableness was used to replace the Model Code’s “clearly excessive” standard because the latter “was not believed to provide adequate protection for the client.”93 The legislative history to Rule 1.5 indicates that reasonableness was meant to be an easier burden to satisfy than the former standard, which did not provide sufficient protection to clients. The list of cases involving exorbitant attorney fee awards continues to expand, as eyebrows are raised both in the inner circle of the legal profession and across the general public. Those within the inner circle of the legal profession are often hesitant to contest agreed fees awarded pursuant to otherwise valid contracts (perhaps due to a semblance of the golden rule or a shared understanding of the perils of the legal profession). There is, after all, some merit to the argument that the infrequent high fee counterbalances the many bad debts (of clients who did not pay in full for services as promised), often resulting in collections actions, or the clients who went bankrupt before paying attorneys’ fees (leaving the firm with no means of collecting). Every professional, after all, deserves the occasional payday and it is not in the interest of the courts to undermine the freely agreed contracts of its officers. Notwithstanding these considerations, media headlines boldly display outrageous fees earned by attorneys, particularly when those fees are disproportionate to the work required for the case. Despite legitimate reasons to allow the occasional high fee to make up for other business losses, overhead, and the increasingly expensive proposition of becoming a lawyer and maintaining a legal practice, some fee awards are so outra-

91. See also In re Greer, 61 Wash. 2d 741, 749, 380 P.2d 482, 486 (1963) (“While a determination that a fee is reasonable or unreasonable is appropriate only to a civil court, where the fee retained or demanded can be considered to be unconscionable, it is a matter for a disciplinary proceeding. The word ‘unconscionable,’ as is the case with terms like reasonable, unreasonable, fair, moderate, inordinate, excessive, exorbitant, etc., is not susceptible of exact definition”), overruled by In re Disciplinary Proceeding Against Boelter, 139 Wash. 2d 81, 985 P.2d 328 (1999); Wolfe v. Morgan, 11 Wash. App. 738, 744, 524 P.2d 927, 931 (1974) (“In each case, the fee that the parties have bargained for should be given great weight in judging its reasonableness, but where the amount of attorneys’ fees is unconscionable or works a penalty, the award should be less than that provided for in the contract.”). 92. A LEGISLATIVE HISTORY: THE DEVELOPMENT OF THE ABA MODEL RULES OF PROFESSIONAL CONDUCT, 1982-2005 78 (2006) [hereinafter A LEGISLATIVE HISTORY]. 93. Id.


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geous as to merit inquiries regarding their reasonableness.94 In 1994, for example, the New York Times reported the following: On Sept. 21, 1989, a soft-drink delivery truck slammed into a school bus in Alton, Tex., killing 21 children and injuring dozens of others. Insurers for the bottling company and the bus manufacturer settled the claims of the victims’ families quickly, for an estimated $122 million. Notwithstanding that early resolution of a case that was never really in doubt, the families’ lawyers received at least a third of the settlement in contingency fees . . . that sum was equal to at least $25,000 an hour to each plaintiff lawyer involved in the case, in exchange for what amounted to nothing more than routine legal services.95 Although a contingency contract generally involves some degree of risk, to allow lawyers to take such an outrageous fee (the equivalent of $25,000 per hour) at the expense of the devastated families of this unfortunate accident, merits inquiry into the reasonableness of the fee agreement. Nevertheless, such practices have long been permitted and justified in part by the benefits that contingency fee agreements offer to the general public. The arguments suggest that contingency agreements allow individuals, who would not otherwise be able to afford attorneys’ fees, access to the courts.96 In 2007, the New York Times reported that a 40 percent contingency fee that resulted in an approximately $42 million payout to the law firm was not unconscionable.97 In this case, the “retainer agreement was signed when a $60 million settlement offer was already on the table,” and the final settlement amount, about five months later, was a little over $100 million.98 The lawyers, in five months,

94. See Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866, 875 (9th Cir. 1979) (refusing to strike down on unconscionability grounds a lawyer’s million dollar contingent fee from a sophisticated business client and noting that “whether a contract is fair or works an unconscionable hardship is determined with reference to the time the contract was made and cannot be resolved in hindsight”). 95. Peter Passell, Winfall Fees In Injury Cases Under Assault, N.Y. TIMES, Feb. 11, 1994, http://www.nytimes.com/1994/02/11/us/windfall-fees-in-injury-cases-under-assault.html? pagewanted=all. 96. Id.; see also Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997); and Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 561 (Tex. 2006) (“Although contingent fee contracts are increasingly used by businesses and other sophisticated parties, their primary purpose is to allow plaintiffs who cannot afford an attorney to obtain legal services by compensating the attorney from the proceeds of any recovery.”) 97. Anemona Hartocollis, Court Calls a 40% Fee to Lawyers Defensible, N.Y. TIMES, Nov. 29, 2007, http://www.nytimes.com/2007/11/29/nyregion/29estate.html?_r=2&bl&ex=1196485200&en= d9cff4767794ed01&ei=5087&oref=slogin. See also Debra Cassens Weiss, Court Doesn’t Void $42M Contingency Deal Reached Before Settlement, A.B.A. J., Nov. 29, 2007, http://www. abajournal.com/news/article/court_doesnt_void_42m_contingency_deal_reached_before_settlement; Lawrence v. Graubard Miller, 853 N.Y.S.2d 1 (2007) aff ’d, 11 N.Y.3d 588, 901 N.E.2d 1268 (2008). 98. Hartocollis, supra note 97.

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made $42 million, and obtained a settlement that would essentially pay for their fees, and give the client approximately the same amount the client would have received without their representation (offering no substantial monetary benefit to the client through their representation).99 In a 4-1 opinion, the New York Supreme Court held that this fee was not, as a matter of law, unconscionable, and so a trial was required.100 Judge Catterson dissented to the opinion, stating that “[b]ecause I believe that as a matter of law a legal fee of $40 million for five months’ work following years of litigation which was fully compensated on an hourly basis is unconscionable, I respectfully dissent and would void the agreement embodying that fee.”101 The New York Court of Appeals ultimately affirmed the majority opinion, stating that “[b]ecause questions which cannot be resolved on a motion to dismiss are present and because a full record has not been developed, dismissal of the petition is not warranted at this time.”102 The hesitancy to, as a matter of law, void this agreements was due to unknown factual circumstances relating to the fee agreement, which had to be analyzed prior to any dismissal. The costs and profit margins for firms utilizing contract attorneys is similarly a hot topic for the media.103 In the California case of Shaffer v. Superior Court, the profit margin of a firm that paid contract attorneys for certain legal services was deemed irrelevant for the purposes of an unconscionability determination.104 The court concluded that “if a law firm’s profit margin were relevant to the analysis of the conscionability of its fees, a veritable Pandora’s Box of questions and problems would be opened.”105 The calculations of firm profit, and actual income in light of all of the expenses of a law firm, would indeed be a difficult task.106

99. Id. 100. Lawrence v. Graubard Miller, 48 A.D.3d 1, 9 (2007). 101. Id. 102. Lawrence v. Grauber Miller, 11 N.Y.3d 588, 596-97, 901 N.E.2d 1268, 1273 (2008). 103. Charging $250/Hour For Contract Attorney Not ‘Unconscionable’, LAWYERS WEEKLY USA, May 8, 1995, at 8; see also Shaffer v. Superior Court 39 Cal. Rptr. 2d 506 (Cal. Ct. App. 1995) (court not requiring amount that contract attorney was paid because profit margins not relevant); Douglas R. Richmond, For A Few Dollars More: The Perplexing Problems of Unethical Billing Practices by Lawyers, 60 S.C. L. REV. 63, 76 (2008) (arguing that the profit margin of the law firm should not be considered in analyzing the reasonableness of a fee); Douglas R. Richmond, Professional Responsibility and the Bottom Line: The Ethics of Billing, 20 S. ILL. U. L.J. 261, 264-65 (1996) (same arguments against looking at profit margin); and Lydia DePillis, The Lawyers Who Are Fighting For the Same Rights as Janitors, W ASH . P OST , Feb. 29, 2016, https://www. washingtonpost.com/news/wonk/wp/2016/02/29/the-lawyers-who-are-fighting-for-the-same-rightsas-janitors/. 104. Shaffer v. Superior Court, 39 Cal. Rptr. 2d 506 (Cal. Ct. App. 1995). 105. Id. at 511. 106. Id. (The Shaffer opinion went on to state: “For example, how are we to define “profit margin.” Is it gross revenues minus total costs? If so, are those numbers measured on an accrual basis, a cost basis, or some other basis? Are they to be evaluated in absolute dollar terms or in terms of a percentage of its costs? Is every single item of cost incurred by a firm (e.g., both capital


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The plight of contract attorneys is receiving more and more media attention as firms and agencies continue to offer low wages, often without overtime, and limited benefits to these contract attorneys while simultaneously billing the contract attorneys out to clients for significantly more than they pay the contract attorneys and agencies that employ them.107 Another publicized case from New York held that an unconscionable attorneyclient fee agreement could be enforceable, if ratified by the client in the course of ongoing representation.108 In King v. Fox, the New York Court of Appeals affirmatively decided that, even though unconscionable fee agreements are voidable, when they are ratified, then they are enforceable.109 From 1972-1975 Edward King was a guitarist in the rock band Lynyrd Skynyrd who co-wrote some of the band’s hit songs, including “Sweet Home Alabama.”110 King was entitled to royalties under an agreement with MCA records as both a writer and an artist, however, after leaving the band in 1975, MCA refused to pay him his artist’s royalties.111 King hired an attorney who took a one-third contingency percentage from all recovered royalties, past and future.112 From 1978 to 1995, the attorney took one-third of the royalties that King received, totaling over $400,000 for future royalties.113 There was some dispute over whether the attorney was entitled to these future royalties and whether

expenditures and costs of operations) to be part of the calculation? What special rules must be adopted in order to avoid punishing law firm efficiency or a firm’s skill or luck in negotiating favorable leases or vendor contracts? Is every single item of revenue received by a firm to be included in the calculation (e.g., what about investment income)? How will the quality of the legal services be incorporated into the analysis? What about other intangibles, like professional reputation and goodwill? Will the firm be forced to disclose the compensation it pays to every lawyer and staff member? Will it be forced to disclose the amounts it pays for office space, equipment, supplies, furniture or utilities? Will it be forced to disclose the individuals or entities to whom it makes these payments? What portion of the attorney’s overall costs of doing business should be allocated to the particular case in which the fee dispute arises?”). 107. DePillis, supra note 103. 108. King v. Fox, 418 F.3d 121, 135 (2d Cir.) certified question accepted, 5 N.Y.3d 798, 835 N.E.2d 329 (2005) certified question answered, 7 N.Y.3d 181, 851 N.E.2d 1184, 1192 (2006) (holding that it is possible for a client to ratify an otherwise unconscionable fee agreement during a period of continuous representation in circumstances “[w]here a fully informed client with equal bargaining power knowingly and voluntarily affirms an existing fee arrangement that might otherwise be considered voidable as unconscionable, ratification can occur so long as the client has both a full understanding of the facts that made the agreement voidable and knowledge of his or her rights as a client.”). See also Roy Simon, Are Unconscionable Fee Agreements Enforceable?, N.Y. LEGAL ETHICS REPORTER, Feb.1, 2006. Contra cf. Walton v. Hoover, Bax & Slovacek, L.L.P., 149 S.W.3d 834, 846–847 (Tex. Ct. App. 2004); and Blattman v. Gadd, 112 Cal. App. 76, 97, 296 P. 681, 689 (1931)). 109. King v. Fox, 418 F.3d 121, 135 (2d Cir.) certified question accepted, 5 N.Y.3d 798, 835 N.E.2d 329 (2005) certified question answered, 7 N.Y.3d 181, 851 N.E.2d 1184, 1192 (2006). 110. King v. Fox, 7 N.Y.3d 181, 183-88, 851 N.E.2d 1184, 1186-89 (2006). 111. Id. 112. Id. 113. Id.

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they included just artist royalties or also writer royalties.114 As a result, King sued the attorney in 1995 to recover the over $400,000 of future royalties after 1978.115 Without concluding whether a ratification took place in King’s case, the New York Court of Appeals did confirm that unconscionable attorney-client fee agreements could be ratified.116 The media frequently publicizes high money cases or those involving celebrities, but not all cases involving unconscionable fees are highly publicized. In another case, an attorney entered into a fee agreement with a client specifying a 50 percent contingency fee along with a termination clause requiring that if the client terminated the attorney’s services without consent that a fee of $25,000 would be owed to the attorney for liquidated damages.117 The Supreme Court of New York held that “[a] fee of $25,000 payable on a discontinuance of an action without the attorney’s consent as the attorney’s ‘liquidated damages’ is as a matter of law unconscionable and violative of public policy in that it deprives a client of his untrammeled right to terminate a lawsuit without fear of payment of a substantial penalty.”118 Although on its face, this clause was problematic, the Court of Appeals of New York reversed, stating that although the “unfortunate language” of calling the $25,000 “liquidated damages” is not proper, that the provision should not be “held unconscionable and violative of public policy as a matter of law.”119 To the contrary, the court mandated that “a full exploration of the facts and circumstances, including the intent of the parties and whether the fee demanded is out of proportion to the value of the attorney’s services, is necessary before a determination of unconscionability may be made.”120 As a result, the Court of Appeals reversed and remanded the Supreme Court’s finding of unconscionability. In light of these cases and rules, many of which give rise to eye-catching media headlines, the dividing line between an unreasonable and unconscionable fee often becomes blurred. The Texas Disciplinary Rule 1.04 provides that a “fee is unconscionable if a competent lawyer could not form a reasonable belief that the fee is reasonable,” and then lists the same factors of reasonableness as the ABA Model Rule 1.5(a).121 This identification of concepts and standards adds further to the blurry line between unreasonable and unconscionable.122 Yet, it 114. Id. 115. Id. 116. Id. 117. Gross v. Russo, 76 Misc. 2d 441, 444, 351 N.Y.S.2d 355, 359 (Sup. Ct. 1974) rev’d, 47 A.D.2d 655, 364 N.Y.S.2d 184 (1975). 118. Id. 119. Gross v. Russo, 47 A.D.2d 655, 655, 364 N.Y.S.2d 184 (1975). 120. Id. (the court also notes that “We express no opinion as to the reasonableness of the agreement . . .”). 121. TEXAS DISCIPLINARY RULE OF PROF ’L CONDUCT R. 1.04 (2005); MODEL RULES OF PROF ’L CONDUCT R. 1.5 (2009). 122. Id.


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is because of this blurring distinction that it is imperative to distinguish clearly between the common law doctrine of unconscionability and the standard of reasonableness entailed in ABA Model Rule 1.5.123 The key distinguishing feature of unconscionable contracts is that they involve moral determinations, whereas reasonableness determinations may, but need not, involve moral determinations. In philosophical parlance, immorality is a necessary condition of an unconscionable contract. Simultaneously, immorality is often a sufficient, although not necessary condition, of an unreasonable contract. An unreasonable fee need not necessarily be immoral, but may be unreasonable for other reasons. To say that the key distinguishing feature of two amorphous concepts is yet the third amorphous concept of morality, at first blush, seems to add little value to the conversation. Yet, upon further examination, it becomes apparent that we need not define morality explicitly in order for it to instrumentally guide determinations of unconscionability. We need only look to the many examples of cases involving unconscionable contracts to observe the generally accepted measure of an immoral or unconscionable contract. However, due to the conflation of the reasonableness and unconscionability standards in the context of fees, existing cases involving unconscionable fee agreements should not be observed to guide the implementation of unconscionability, but rather, we should look to the broader context of common law to observe how courts utilize unconscionability as a vehicle for the promotion of equality and for the protection of the vulnerable In these cases, the doctrine of unconscionability is typically employed to protect the vulnerable and promote a measure of procedural equality. To protect the young, the elderly, the ignorant, the poor, or other traditionally vulnerable classes of people, even the grieving or those owed fiduciary obligations. The principle of procedural equality need not be an absolute equality, but should, at a minimum, protect those lacking meaningful bargaining power. The doctrine is also employed to protect against immoral or improper means of procuring a contract. The factors employed by ABA Model Rule 1.5 do not pertain to the morality of the contractual terms (in this case, the fee agreement), but reflect rational measures of deciphering reasonableness.124 The eight factors relate primarily to the 123. See contra Fred C. Zacharias, Integrity Ethics, 22 GEO. J. LEGAL ETHICS 541, 587 n. 76 (2009) (tracing some of the similarities between contract principles and the model rules). See also A LEGISLATIVE HISTORY, supra note 92, at 81-82 (the comments on the sponsor prior to the adoption of Rule 1.5 reveal hesitation about the meaning of “reasonableness”; the sponsor said “The ‘reasonableness’ of a fee is purely subjective and provides no basis for guidance. Furthermore, the reasonableness or unreasonableness of a fee, is essentially a contract dispute that should be resolved either by a bar association committee or by other legal process . . . Including terms such as ‘clearly excessive’ in lieu of the term ‘reasonableness’ would not solve this problem. In our view, it is better to simply remove this problem from the ethical code and leave it to resolution by legal means.”). 124. MODEL RULES OF PROF ’L CONDUCT R. 1.5(a) (2009) (Providing the eight non-exclusive factors for determining reasonableness as “(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 like-

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difficulty of the work, the experience of the attorney, the results obtained, the attorney’s relationship with the client, the reputation and experience of the attorney, and other factors that may make the client’s decision to pay a certain type of fee more or less reasonable.125 Aside from the inherently human considerations involved in these factors, the determinations of reasonableness are made through rational applications of these, and related, factors. The official comments to Rule 1.5 clarify that these rational factors are non-exclusive, and not all factors will be relevant in every circumstance.126 Nevertheless, the non-exclusive nature of these factors allows courts and committees to consider also moral questions, such as the unconscionability of a fee agreement. By considering morality as an additional, non-listed factor of reasonableness, a fee could be deemed unreasonable because it is so grossly immoral, or unconscionable, as to also be unreasonable. Unreasonableness does not necessarily involve advantage-taking of the vulnerable or gross inequality of bargaining power, but may result from an unanticipated, unusually high fee.127 In his discussion of the decline of the formality of contract law, Professor Eric Posner discusses how an early formalistic criticism of unconscionability was that “the doctrine requires direct application of a moral theory.”128 To respond to this critique, academics (and eventually courts) domesticated the doctrine of unconscionability by making it “consistent with the market approach,”129 and by distinguishing between procedural unconscionability (process, or procurement, or bargaining defects) and substantive unconscionability (grossly unfair contractual terms that also provide evidence of the procedural defects).130 Other

lihood, 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; and (8) whether the fee is fixed or contingent.”). 125. Id. 126. MODEL RULES OF PROF ’L CONDUCT R. 1.5 cmt. (2009) (the official comments also clarify that the reasonableness standard applies to all fees, including contingency fees, and fees divided among multiple attorneys). 127. See also In re Greer, 61 Wash. 2d 741, 749, 380 P.2d 482, 486-87 (1963) overruled by In re Disciplinary Proceeding Against Boelter, 139 Wash. 2d 81, 985 P.2d 328 (1999) (“We think that supplying amplifying phrases such as ‘shocking to the conscience,’ ‘montrously harsh,’ ‘exceedingly calloused,’ and other expletives, adds little or nothing to the definitive qualities sought to be established by the law. They depend largely for their meaning upon who is speaking and who is listening,” however, ethical considerations come into play when fees are unconscionable). 128. Eric A. Posner, The Decline of Formality in Contract Law, in THE FALL AND RISE OF FREEDOM OF CONTRACT 61-78, 68 (F.H. Buckley ed., 1999). 129. Id. at 69. 130. Id. See also In re Friedman, 64 A.D.2d 70, 85, 407 N.Y.S.2d 999, 1008 (1978) (“The courts have identified various elements of the unconscionable contract that may be characterized as substantive and procedural. Substantive elements of unconscionability appear in the content of


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academics contended that unconscionability was an antimarket doctrine that could be used “for condemning commercial practices that violated intuitions about fair play (especially ‘coercive’ creditor arrangements).”131 Although termed an antimarket intuition, assuring the rules of the game are adhered to by all players promotes a fair and just marketplace, and does not undermine it. Thus, the limits to the freedom of contract include substantively unconscionable contracts procured in a procedurally unconscionable way, or contracts that have substantively unconscionable terms.132 In either case, there is an inherent moral quality to determinations of unconscionability that are sometimes, though not necessarily, present in determinations of reasonableness. V. Concluding Remarks: Judicial Monitoring of Fee Agreements The common law agent-principal relationship underpins the attorney-client relationship, along with correlative duties that are enhanced and, in some cases, trumped by the rules of professional conduct. These common law agency duties give rise to a fiduciary relationship between attorneys and clients,133 which requires “the utmost good faith . . . be exercised in all dealings by the attorney to his client.”134 One oft-quoted passage from the 1800s illustrates magnificently why the nature of the attorney-client relationship merits the attention and concern of the courts: The situation of an attorney or solicitor puts it in his power to avail himself, not only of the necessities of his client, but of his good nature, lib-

the contract per se; procedural elements must be identified by resort to evidence of the contract formation process. Inflated prices (i.e., grossly inadequate consideration given by the seller), unfair disclaimers of warranty and termination clauses have been deemed substantively unconscionable. High pressure sales tactics, misrepresentation and unequal bargaining position have been recognized as procedurally unconscionable. The foregoing examples of unconscionable elements are by no means exhaustive; nor would we attempt to define a hierarchy of importance for any particular element in all cases. The weight to be given to each factor is as variable as the facts of each individual case. Where the disparity in the consideration exchanged by the parties is overwhelming, that factor alone may be sufficient to sustain (a finding that the contract is unconscionable), since such disparity itself leads inevitably to the felt conclusion that knowing advantage was taken of (one party).”) (internal quotations and citations omitted). 131. Posner, supra note 128, at 69. 132. Id. See also MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT 118-119 (1993). 133. Goranson v. Solomonson, 304 Ill. App. 80, 82-84, 25 N.E.2d 930, 931-32 (Ill. App. Ct. 1940). 134. Id. at 83. See also Adam Shajnfeld, A Critical Survey of the Law, Ethics, and Economics of Attorney Contingent Fee Arrangements, 54 N.Y.L. SCH. L. REV. 773, 780 (2010) (citing Affiliated Computer Serv., Inc. v. Kasmir & Krage, L.L.P., No. 05-98-00227-CV, 2000 WL 1702635, at *4 (Tex. App. Nov. 15, 2000)) (“An attorney may breach a fiduciary duty to her client if she attempts to collect an unreasonable or unconscionable fee.”).

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erality, and credulity, to obtain undue advantages, bargains and gratuities. Hence the law, with a wise providence, not only watches over all the transactions of parties in this predicament, but it often interposes to declare transactions void which, between other persons, would be held unobjectionable.135 Due to the particularly susceptible position that clients are placed in, reliant on the advice and knowledge of their attorneys, the doctrine of unconscionability may be used as a shield, along with other common law doctrines like undue influence and breach of fiduciary obligation, to protect particularly vulnerable clients. Another court acknowledged that “the attorney-client relationship places the attorney in a position of dominance,”136 and some attorneys take advantage of this dominance (this often correlates with narcissistic characteristics of attorneys that result in these attorneys advantaging themselves at the expense of their clientele). In many states, it is well-established that courts should monitor the attorneyclient relationship. It is a “well settled principle that transactions between an attorney and a client are subject to close scrutiny by the court and the burden of establishing fairness and equity of the transaction rests upon the attorney.”137 This assessment was re-confirmed in a case involving an attorney-client fee agreement that required the client to give the attorney six months advanced notice prior to the cancellation of the attorney’s services.138 The New Jersey Supreme Court held this provision requiring advanced notice as unenforceable.139 In the process, the court reiterated that “an attorney’s freedom to contract with a client is subject to the constraints of ethical considerations and our supervision. Consequently, courts scrutinize contracts between attorneys and clients to ensure that they are fair.”140 Courts across the many states should continue to monitor attorney-client fee agreements for not only unconscionable, but also unreasonable fees. In the monitoring of these agreements, courts should strive to protect clients from contracts that are not only unconscionable, but also unreasonable. The bar is set lower by the model rules than under common law, and fees that are unreason-

135. Goranson, supra note 133 at 83. (quoting Ross v. Payson, 169 Il. 349, 358 (1896) (quoting Story’s Equity Jurisprudence (section 310)). 136. Barnes v. Ricotta, 142 Ohio App. 3d 560, 565, 756 N.E.2d 218, 221 (2001) (quoting Disciplinary Counsel v. Clavner, 77 Ohio St.3d 431, 432 (1997)). 137. Cohen v. Radio-Elecs. Officers Union, Dist. 3, NMEBA, AFL-CIO, 275 N.J. Super. 241, 251, 645 A.2d 1248, 1253 (App. Div. 1994) (quoting and citing Matter of Gallop, 85 N.J. 317, 322, 426 A.2d 509 (1981); Matter of Humen, 123 N.J. 289, 300, 586 A.2d 237 (1991); Matter of Harris, 115 N.J. 181, 187, 557 A.2d 657 (1989); Matter of Nichols, 95 N.J. 126, 131, 469 A.2d 494 (1984)) (internal quotation marks omitted), judgment modified and remanded sub nom. Cohen v. RadioElecs. Officers Union, Dist. 3, NMEBA, 146 N.J. 140, 679 A.2d 1188 (1996)). 138. Cohen v. Radio-Elecs. Officers Union, Dist. 3, NMEBA, 146 N.J. 140, 155 (1996). 139. Id. 140. Id.


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able are passing muster because they, despite that they are unreasonable, do not satisfy the more stringent common law standard of unconscionability. The analytical distinction set forth in this essay is intended to help courts and commentators distinguish between those agreements that are grossly immoral and those that are unreasonable. Although the latter often includes the former, it is not limited to it. Unreasonable fees may result by accident or mistake, and need not involve any intentional wrongdoing or advantage-taking by the attorneys who, under contract, may otherwise be entitled to unreasonable fees. The unique relationship between the client and attorney, as a fiduciary, an advisor, a counselor, and a confidant, leads to risks that the vulnerable, weaker, and often less powerful client may be persuaded to agree to excessive payment terms. When those terms cross beyond the bounds of reasonableness, it is imperative the courts refuse to enforce such agreements. When the terms of fee agreements become unreasonable or even unconscionable, courts should decipher appropriate measures to deter future attempts to make and enforce such agreements.