What can an Alaska lawyer charge a client for costs and expenses beyond the fee, and what has to be disclosed?

Plain-English summary

Noting that ABA Formal Opinion 93-379 gave incomplete guidance on how much a lawyer may charge for costs over and above the fee, the Committee issued its own standards for Alaska. The opinion concluded that a lawyer may require clients to pay actual out-of-pocket costs, may charge a reasonable amount for in-house services such as photocopying, and may impose certain overhead surcharges, but in every case must explicitly disclose (a) the client's liability for the charge and (b) the basis on which it will be computed.

The opinion was guided by two principles drawn from the Alaska Rules of Professional Conduct: that all transactions between client and lawyer should be fair and reasonable to the client (Comment to ARPC 1.8), and that the reasonableness and disclosure standards governing fees (ARPC 1.5(a) and 1.5(b)) apply equally to non-fee expense items. Disclosures that can be made at the outset of a new representation should be made then; if an expense becomes apparent later, disclosure should follow as soon as the need appears, and major expenses (a lengthy deposition transcript, out-of-town travel, retaining an expert) require advance approval with a reasonable estimate.

On specific categories, the opinion concluded that out-of-pocket disbursements (filing fees, deposition costs, travel, expert fees) are reimbursable at actual cost, with any discount passed to the client; in-house charges such as photocopying or secretarial overtime are permitted only if disclosed in advance and limited to the rate agreed to; and surcharges to recoup capital improvements are permitted only if their nature and amount are disclosed and agreed to. Absent an express agreement, the opinion stated, the client may expect overhead to be subsumed in the fee. The Committee expressly declined to follow the ABA's positions that surcharges may be added to discounted services and that in-house services may be billed without prior disclosure of the amount.

Currency note

This opinion was issued in 1995, before Alaska's adoption of the 2009 revisions to the Alaska 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 Treat this page as historical context, not current guidance.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 an Alaska lawyer bill a client for photocopying and similar in-house costs?

A: Yes, the opinion concluded a reasonable charge for in-house services was permissible, but only if it was disclosed in advance and limited to the rate the client agreed to.

Q: If the lawyer got a discounted airfare or hotel, could the client be billed the full rate?

A: No. The opinion concluded the benefit of any discount must be passed on to the client, and it declined to adopt the ABA's suggestion that surcharges could be added to discounted third-party services.

Q: Did the lawyer have to say anything about expenses up front?

A: The opinion concluded that disclosures that could reasonably be made at the outset should be, and that the client had to be told both that a charge would be made and its basis, preferably in writing, before or within a reasonable time after the representation began.

Background and rules framework

The opinion interpreted the Alaska Rules of Professional Conduct on fees and on transactions with clients. It applied ARPC 1.5(a) (Model Rule 1.5, reasonableness of fees) and ARPC 1.5(b) (communicating the basis of the fee) to non-fee expense items, and drew its fairness principle from the Comment to ARPC 1.8 (Model Rule 1.8). It noted that ARPC 1.8(e) permits making repayment of litigation expenses contingent on outcome and paying such expenses for indigent clients. The opinion measured its conclusions against ABA Formal Opinion 93-379.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / Alaska RPC 1.5(a), (b) (reasonableness of fees; communicating the basis of the fee)
• Model Rule 1.8 / Alaska RPC 1.8, 1.8(e) (fairness of client transactions; advancing litigation expenses)

Other opinions cited:

• ABA Formal Opinion 93-379 (1993): billing for fees and expenses

See also

• ABA Formal Op. 93-379: Billing for Fees and Expenses
• Alaska Ethics Op. 2004-1: Withholding Expert Reports for Nonpayment
• Alaska Ethics Op. 2009-1: Nonrefundable Fee Misleading

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/95-4.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Ethics Opinion No. 95-4
Standards Governing Charges to Clients for Disbursements and Other
Expenses.
In a 1993 opinion, the American Bar Association noted that the Rules of
Professional Conduct "provide no specific guidance on the issue of how much a
lawyer may charge a client for costs incurred over and above her fee." Formal
Ethics Opinion 93-379 at 8. In the Committee's judgment, such guidance is
necessary. Lawyers commonly bill clients for items labeled as disbursements,
and there is a clear potential for honest misunderstandings concerning such
charges, as well as the possibility of overreaching by attorneys practicing in an
increasingly competitive and demanding business environment. Though this
issue is among those addressed in Opinion 93-379, the Committee views the
ABA's treatment of the issue as incomplete. We are, therefore, issuing an
opinion setting forth the standards to be applied to these charges in Alaska.
It is permissible for a lawyer to require clients to pay for actual out-ofpocket costs. In addition, clients may be charged a reasonable amount for inhouse services, such as photocopying. Charges for certain overhead items are
also permitted. With regard to all of these charges, the lawyer is obligated to
make explicit disclosures to the client of
(a) the client's liability for the charges; and
(b) the basis on which the charges will be computed.
In reaching this opinion, we have been guided by two principles. First,
"all transactions between client and lawyer should be fair and reasonable to the
client." Comment, Alaska Rule of Professional Conduct ("ARPC") 1.8. Second,
the standards which govern reasonableness and disclosures with regard to fees
for professional services should also be applied in the context of non-fee
expense items. This means that such charges should not be unreasonably high
in light of the nature of the service and the amount customarily charged in the
community. See, ARPC 1.5(a). It also means that in a new lawyer-client
relationship, the fact that the charge will be made, as well as its basis, must be
communicated to the client, preferably, in writing, before, or within a
reasonable time after, commencing the representation. See, ARPC 1.5(b).
The statement that disclosures can be made within a reasonable time after
the commencement of representation requires further elaboration. The
Comment to Rule 1.5 states as follows:

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When the lawyer has regularly represented a client, they ordinarily will have evolved an
understanding concerning the basis or rate of the fee. In a new client-lawyer relationship,
however, an understanding as to the fee should be promptly established.
(Emphasis added.)
The requirement for a prompt understanding also applies to the charges
under discussion here. Any disclosures which can reasonably be made at the
outset of the representation should be made. If, at the beginning of the
representation, it is not apparent that a particular expense will be incurred,
advance disclosure should be made as soon as the need for the expense
becomes apparent. Having stated the guiding principles, we will turn to a
discussion of their application to specific categories charges.
A. Out-of-Pocket Expenses.
This category encompasses actual disbursements to third party vendors
and service providers paid in connection with the provision of legal services in a
particular matter. It includes items such as filing fees, deposition costs, travel
expenses, and fees paid to experts. It is reasonable to require clients to
reimburse the lawyer for actual payments made for such expenses. (endnote 1)
A lawyer who obtains a discounted airline ticket or hotel room should not
charge the client the cost for the undiscounted fare or room. The benefits of
any discount must be passed on to the client. (endnote 2)
At the beginning of the representation, clients should be told that they
will be expected to pay for actual disbursements. Though we agree with the
ABA that such a disclosure should lead clients to "expect that the lawyer will
be passing on to the client those actual payments of funds made by the lawyer
on the client's behalf" [Formal Opinion 93-379 at B], further express approval
should be sought and obtained in advance of incurring major expenses in the
course of the representation. For example, a lawyer should not incur the
expense connected with ordering a lengthy deposition transcript, out-of-town
travel, or retention of an expert without obtaining the client's approval in
advance. It will not always be possible to advise the client of the precise
amount of an anticipated expense, but he or she should be given a reasonable
estimation.
B. In-House Services.
The best example of items in this category are charges for photocopying.
Secretarial overtime presents another example. Such charges may be made if
they are disclosed to the client with specificity in advance. Furthermore, there
is no reason why such charges cannot be disclosed at the outset of a
representation. (endnote 3) Thus, if a firm charges 10 cents a page for
photocopying, the client should be informed of this fact. If a lawyer wishes the
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client to pay for secretarial overtime, this fact must be disclosed in advance,
along with the overtime rate. Charges for in-house services should be limited to
the charge disclosed and agreed to by the client.
Sometimes law firms utilize surcharges to recoup the cost of capital
improvements such as phone systems or hardware acquired in connection with
on-line computer services. Such charges are permissible provided their nature
and amount are disclosed and agreed to by the client. In the absence of an
express disclosure, the client has every right to expect that overhead charges
are subsumed in the lawyer's fee. As the ABA has noted,
[I]n the absence of an agreement to the contrary, it is impermissible for a lawyer to create
an additional source of profit for the law firm beyond that which is contained in the
provision of legal services themselves. The lawyer's stock in trade is the sale of legal
services, not photocopy paper, tuna fish sandwiches, computer time or messenger
services.
Formal Opinion 93-379 at 9-10. The standards outlined above represent the
minimum which are appropriate given the special relationship which exists
between lawyers and their clients.
Approved by the Alaska Bar Association Ethics Committee on February 2,
1995.
Adopted by the Board of Governors on March 17, 1995.
1. Former DR 5-103(B) required the client to be held ultimately responsible
for costs incurred in the course of litigation. ARPC 1.8(e) now permits
lawyers to make the repayment of court costs and litigation expenses
contingent on the outcome of a matter and to pay such expenses on
behalf of indigent clients.
2. ABA Formal Opinion 93-379 seems to imply that surcharges can be
added on to discounted third party services so long as they are disclosed.
Opinion 93-379 at 9. The Committee declines to adopt such a standard
for Alaska. Given the lawyer's overriding obligation to treat clients fairly
and reasonably, we can see no justification for not passing the benefits of
discounts on to clients.
3. The ABA would permit lawyers to charge clients for the actual cost of inhouse services without prior disclosure of the amount. See, Formal
Opinion 93-379 at 9. Here again, the Committee disagrees with the ABA's
approach and declines to adopt it in Alaska

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