ABA 2000-11-29

Can a lawyer charge the client more for a contract lawyer's work than the lawyer paid for it?

Short answer: It depends on how it is billed. The opinion concluded a lawyer could add a surcharge (profit) when a contract lawyer's work was billed as legal services, so long as the total fee was reasonable under Rule 1.5(a); but when billed as an expense, the client could be charged only the actual cost plus directly associated costs absent a specific agreement.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ethics opinion (PDF)

ABA Formal Opinion 00-420: Surcharge to Client for Use of a Contract Lawyer

Short answer: The opinion concluded that a lawyer who billed a contract lawyer's work as legal services could add a surcharge so long as the total fee was reasonable under Rule 1.5(a), but when that work was billed as an expense or cost the client could be charged only the actual cost plus directly associated expenses absent a contrary agreement.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the American Bar Association's Model Rules of Professional Conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

Plain-English summary

The committee addressed whether a retaining lawyer could add a "surcharge," which it defined as profit, when billing a client for a contract lawyer's services. It observed that such services could be billed either as fees for legal services or as costs and expenses, and that "whether the cost attributable to a contract lawyer is billed as an expense or included in legal services fees is not addressed by the Model Rules and does not seem to be a matter of ethics." The answer turned on which billing method was used.

When the contract lawyer's work was billed as legal services, the committee read Rule 1.5(a)'s requirement that a fee be reasonable as governing the total fee rather than its components. It concluded that "the absence of a specific reference to a lawyer's profit in Rule 1.5 cannot reasonably be read to prohibit a lawyer from including a profit factor in her fees," and that profit was expected and appropriate "as long as the total fee is reasonable." Drawing on Formal Opinion 93-379, it found no duty to break out or disclose the surcharge: there was "no duty to disclose the surcharge when the work of the contract lawyer is supervised or, absent supervision, when the work of the contract lawyer is adopted as the work of the retaining lawyer."

The committee drew a different line for work billed as an expense. There, the principles of Formal Opinion 93-379 applied: a lawyer could not create an additional source of profit beyond the actual cost. The committee held that if costs of contract counsel's services "are billed as an expense, they should not be greater than the actual cost incurred, plus those costs that are associated directly with the provision of services, unless there has been a specific agreement with the client otherwise."

Currency note

This opinion was issued in 2000, before the American Bar Association's adoption of the 2002 (Ethics 2000) revisions to the Model Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could a lawyer profit on a contract lawyer's time?

A: Yes, when billed as legal services. The opinion concluded a profit factor was permissible so long as the total fee charged to the client was reasonable under Rule 1.5(a).

Q: Did the lawyer have to disclose the markup?

A: Not necessarily. The opinion found no duty to disclose the surcharge where the contract lawyer's work was supervised, or where, absent supervision, the work was adopted as the retaining lawyer's own.

Q: What if the contract lawyer's cost was billed as an expense instead?

A: Then no markup was allowed. The opinion held the charge should not exceed the actual cost plus directly associated costs unless the client specifically agreed otherwise.

Background and rules framework

The opinion interpreted Rule 1.5 (fees), centering on Rule 1.5(a)'s reasonableness requirement and touching Rule 1.5(b) and 1.5(e), and located the relevant disclosure duties in Rules 1.2(a), 1.4, and 7.5(d) rather than in any rule requiring disclosure of a surcharge. It built on Formal Opinion 93-379 (billing for fees and expenses) and Formal Opinion 88-356 (temporary lawyers). Because the opinion predated the 2002 revisions, it applied these provisions as they then stood.

Citations and references

Rules of Professional Conduct:

ABA Model Rule 1.5(a) (reasonable fee), with reference to Rule 1.5(b) and 1.5(e)
ABA Model Rule 1.4 (communication with the client)
ABA Model Rule 1.2(a) (scope of representation)

Other opinions cited:

ABA Formal Op. 93-379 (Billing for Professional Fees, Disbursements and Other Expenses)
ABA Formal Op. 88-356 (Temporary Lawyers)

Cases:

Oliver v. Board of Governors, Kentucky Bar Ass'n, 779 S.W.2d 212 (Ky. 1989)

Source

Landing page: ABA Formal Ethics Opinions index
Original PDF: 00-420.pdf