In Kentucky, does complying with the workers' compensation law's attorney-fee limits and fee-approval disclosures violate the ethics rules, and do the ex parte rules apply before the Department of Workers' Claims?

Plain-English summary

The Committee responded to inquiries arising from Kentucky's 1996 workers' compensation overhaul, which set maximum attorney fees (now applying to employers' counsel as well as claimants' counsel) subject to approval by an arbitrator or ALJ. It stressed at the outset that the Ethics Committee answers questions of ethics, not questions of law, and would not decide the statute's constitutionality.

On Questions 1 and 2 the Committee gave a qualified no. As to fee limits, it observed that legislatures have a long tradition of limiting legal fees, that budget limits already exist in many settings (KBA E-331), and that the lawyer's core duties of competence and diligence (KRPC 1.1, 1.3) persist regardless of the fee; if an inadequate fee impairs the lawyer's ability to meet those duties, the lawyer may be permitted or required to decline or withdraw under KRPC 1.16. It would not say that poorly paid lawyers necessarily violate the rules, nor that the rules justify charging fees above the legislated limits. As to the fee-approval affidavit, the Committee found nothing in the statute requiring counsel to disclose privileged or strategic detail; assuming the legislature did not intend to override KRPC 1.6 or the attorney-client privilege, a lawyer can ordinarily edit the affidavit to satisfy the arbitrator or ALJ while protecting confidences (comparing Montana Op. 960828), and must assert applicable privileges and seek a ruling if information is improperly demanded.

On Question 3, the Committee concluded that KRPC 3.5(b) (ex parte communications) applies in the adjudicatory and quasi-adjudicatory proceedings of the workers' compensation system, and that, as a matter of fundamental fairness and due process, non-lawyer arbitrators, hearing officers, and ALJs should be subject to the same prohibition; the Department can and should make and enforce rules to that effect. On Question 4, the Committee declined to opine, repeating that it does not address questions of law or the constitutionality of legislation.

Currency note

This opinion was issued in 1997 and predates the Kentucky Supreme Court's substantial 2009 revisions to the Rules of Professional Conduct (SCR 3.130), under which Rule 1.6 was renumbered and its Comment 21 deleted, and the judicial-conduct canon on ex parte communications was renumbered. The Kentucky Bar Association notes that lawyers should consult the current version of the rules before relying on this opinion. Treat this page as historical context, not current guidance. Verify against the current rules and the current workers' compensation statutes before relying on any specific point mentioned here.

Common questions

Q: Does following the workers' comp fee caps violate the ethics rules?

A: Per the opinion, not by itself (a qualified no). The Committee concluded the duties of competence and diligence persist regardless of the fee, and that a lawyer who cannot meet them may decline or withdraw under KRPC 1.16.

Q: Must a fee-approval affidavit disclose privileged billing detail?

A: The opinion concluded no. The Committee found the statute does not require disclosing privileged or strategic detail and that counsel can ordinarily edit the affidavit to protect confidences under KRPC 1.6.

Q: Do the ex parte rules apply before the Department of Workers' Claims?

A: Per the opinion, yes. KRPC 3.5(b) applies in these adjudicatory proceedings, and the Committee said non-lawyer arbitrators and hearing officers should be subject to the same prohibition.

Q: Did the opinion decide whether the fee statute is constitutional?

A: No. The Committee declined, repeating that it does not opine on questions of law or the constitutionality of legislation.

Background and rules framework

The opinion interprets KRPC 1.1 and 1.3 (competence and diligence; Model Rules 1.1, 1.3), KRPC 1.6(b)(3) (disclosure to comply with other law; Model Rule 1.6), KRPC 1.16 (declining or withdrawing; Model Rule 1.16), and KRPC 3.5(b) (ex parte communications; Model Rule 3.5), against the Supreme Court's exclusive authority over the practice of law (Kentucky Constitution Section 116) and the workers' compensation statutes (KRS 342.320, 342.429).

Citations and references

Rules of Professional Conduct:

• MR 1.1, MR 1.3 / KRPC 1.1, 1.3 (competence; diligence)
• MR 1.6 / KRPC 1.6(b)(3) (disclosure to comply with other law)
• MR 1.16 / KRPC 1.16 (declining or terminating representation)
• MR 3.5 / KRPC 3.5(b) (ex parte communications)

Statutes and authorities:

• Kentucky Constitution Section 116 (Supreme Court authority over the practice of law); KRS 342.320, 342.429 (workers' compensation fees)
• Ex Parte Auditor of Public Accounts, 609 S.W.2d 682 (Ky. 1980)

Other opinions cited:

• KBA E-331 (1988): ethical implications of restricted defense budgets
• ABA Formal Ops. 96-399 (1996) and 347 (1981): duties of legal-services lawyers under funding limits; Montana Op. 960828 (sterilizing billing detail)

See also

• KBA Ethics Op. E-416: Insurer-Prescribed Case-Handling Guidelines in Insurance Defense
• KBA Ethics Op. E-419: Ex Parte Meetings Between Prosecutors and Judges

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-402.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-402
Issued: September 1997

Since the adoption of the Rules of Professional Conduct in 1990, the Kentucky Supreme
Court has adopted various amendments, and made substantial revisions in 2009. For
example, this opinion refers to Rule 1.6, which was renumbered and to Comment 21,
which was deleted. The Code of Judicial Conduct, Canon 3B(4) has been renumbered
and is now Canon 3B(7). Lawyers should consult the current version of the rules and
comments, SCR 3.130 (available at http://www.kybar.org), before relying on this
opinion.

Question 1:

Does compliance with the limitations on attorney fees under the new Workers’
Compensation Law violate the KRPC?

Answer:

Qualified No. See Opinion.

Question 2:

Does compliance with the arbitrator’s or ALJ’s demands for information needed
for approval of fees necessarily violate the KRPC?

Answer:

Qualified No. See Opinion.

Question 3:

Do the rules governing ex parte communications apply in proceedings before the
Kentucky Department of Workers’ Claims?

Answer:

Yes.

Question 4:

Is the new law in conflict with the KRPC and therefore unconstitutional?

Answer:

The Committee is not authorized to issue advisory opinions on questions of law as
distinguished from questions of ethics.

References:

Kentucky Constitution Section 116; Ex Parte Auditor of Public Accounts, 609
S.W.2d 682 (Ky. 1980); Commissioner’s Second Quarterly Report Implementation of House Bill 1 (July 31, 1997), p. 5; KRSs 342.320. 342.429;
SCRs 3.020 and 4.300; Code of Judicial Conduct Canon 3(4); Department of
Workers’ Claims - Guidelines for Communication for Workers’ Compensation
Specialists; KRPCs 1.1, 1.3, 1.6(b)(3) and Comment (21), 1.16, and 3.5(b) KBA
E-297, E-331; ABA Formal Ops. 96-399 (1996) and 347 (1981); Montana Op.
960828; Charles Wolfram, Modern Legal Ethics (1986); Richard Flamm, Judicial
Disqualification (1996); UKCLE, Workers’ Compensation Reform in Kentucky
(January 24, 1997).

OPINION
Background
A number of KBA members have requested opinions from the Ethics and Unauthorized
Practice of Law Committees as a result of the recent (December 1996) changes in Kentucky’s
Workers’ Compensation Law.
Pursuant to Section 116 of the Kentucky Constitution, the Kentucky Supreme Court is
vested with exclusive jurisdiction over the regulation of the practice of law. See Ex Parte
Auditor of Public Accounts, 609 S.W.2d 682 (Ky. 1980); Commissioner’s Second Quarterly
Report - Implementation Of House Bill 1, p. 5. For example, what is Unauthorized Practice of
Law is defined in Supreme Court Rule (SCR) 3.020. In KBA U-52 the Unauthorized Practice
Committee opined that KRS 342.320 (purporting to authorize non-attorney “workers’
compensation specialists” to advise parties of their rights and obligations under the law and assist
claimants in preparing claim applications) are in conflict with SCR 3.020 and are therefore
invalid legislative intrusions into an area within the exclusive jurisdiction of the Supreme Court.
The Court did not “authorize” the “practice” alluded to in KRS 342.320 and 342.329, and
legislature did not have the authority to “authorize” it.
Similar arguments are now being presented to the Ethics Committee. Just as the Practice
of Law is defined in SCR 3.020, the rules and regulations governing licensed practitioners are set
forth in the SCRs. Among these SCRs are the Kentucky Rules of Professional Conduct (KRPC),
which may be found at SCR 3.130. Some of the KRPC refer to other “law.” For example,
KRPC 1.6(b)(3) provides that “[a] lawyer may reveal [otherwise protected ‘information relating
to the representation of a client’] to the extent that lawyer reasonably believes necessary ... to
comply with other law or court order.” (Emphasis added) Comment (21) to KRPC 1.6 alludes
to the fact that other provisions of law may obligate or permit a lawyer to provide information
about a client to others, but a presumption exists that “other law” does not supersede the KRPC.
Indeed, in the case of state legislation, the argument might be advanced that in light of the
exclusive power of the Supreme Court, “other law” cannot supersede the KRPC . See Ex Parte
Auditor of Public Accounts, supra.
It is conceivable that demand or limitations placed on licensed practitioners of law by the
provisions of the KRS might present the practitioner with (1) question of professional ethics, and
might, in some instances, suggest (2) questions regarding the constitutionality of a statute. It is
proper for the Ethics Committee to address questions in the first category. The Committee must
be cautious when it comes to opining on questions in the second category. The Committee has
observed on many occasions that, unlike the Unauthorized Practice Committee, the Ethics
Committee does not answer questions of law, hold forth on the constitutionality of legislation, or
opine on the powers of particular government officers. See, e.g., KBA E-297 (1984).
Regarding Questions 1 and 2
The new law sets maximum fees for the plaintiff’s counsel, for services rendered in
securing the award, and for services rendered in successful and unsuccessful appeals. The old

law also limited the fees of the claimant’s counsel. Such fees had to be approved by the Board,
and the Claimant’s counsel could not collect any additional fees from the plaintiff. Such
unapproved fees would have been “illegal” as that term was used in former DR 2-106(A). “[I]n
administrative proceedings such as those before worker compensation commissions ... the point
of the commission’s setting the fee is to protect workers against excessive fee charges [which
would come out of the amount recovered]. “Charles Wolfram, Modern Legal Ethics 524 (1986).
As Professor Wolfram notes, “[a] long tradition exists in American law of legislation
limiting the amount of legal fees or prohibiting their payment altogether. ... Few decisions have
accepted arguments that statutory limitations on fees infringe on the inherent power of courts to
regulate the legal profession.” Id. at 522, text and note 79. On the other hand, to our knowledge
the Kentucky courts have not yet considered the “inherent power” argument in the context of fee
limitations. But compare Ex Parte Auditor of Public Accounts, supra. Such a challenge to the
new law may be entertained in a court.1
What has given rise to the current controversy is a new twist in the law - KRS
342.320(8), which provides that attorney fees for lawyers representing employers are subject to
approval by an arbitrator or ALJ in the same manner as prescribed for the fees plaintiff’s counsel
and are subject to the same maximums at each level, not to exceed the amount set by the attorney
client contract.
Question 1 is suggested by the argument of inquiring counsel that “the limitation on the
amount that may be expended by an employer for counsel is [a] restriction on a client’s ability to
defend itself in a claim brought against it2 and [a] limitation ... imposed upon counsel who ...
have ethical obligations unrelated to the amount of the fee.”
Of course, litigation budgets are limited in a variety of contexts. In some states attorney
fees in medical malpractice cases are limited by laws because of wishful thinking that limits on
fees will bring down insurance premiums.3 In ordinary accident and insurance litigation the
defense budget is often limited by the insurance carrier for reasons of the “bottom line.” See
KBA E-331 (1988) (ethical implications or restricted budget for the defense in an individual
case.) Taxpayers are also concerned with “bottom line.” In Kentucky the defense budgets of
1 [Chairman’s editorial note]

The Ethics Committee approved this opinion by an 11 to 2 vote. Two
members felt that we should tackle the “inherent power” question. The minority suggested that KRPC
1.5 is not simply a prohibition of excessive fees; that it is the only rule that may be applied to fees, and
that legislative limits on fees that add to or “conflict with” KRPC 1.5 are therefore unconstitutional. The
majority of the Committee felt that this was a decision on a question of law that should be left to the
courts.

2 In the context of workers’ compensation claims, it might also be thought that the limitations on

plaintiffs' fees could have an impact on the extent or quality of the representation.
3 We express no opinion on whether this is sensible policy or whether the Kentucky Courts would rule

that such limits are permissible under the Kentucky Constitution (or whether statutory limits are
opposed to limits set forth in a court rule or court imposed fee schedule would collide with the “inherent
power” to the Supreme Court).

public defenders are limited, and a public defender may not accept additional fees. KRS 31.250
(the rationale or KRS 31.250 may be to insure “indigence” or prevent exploitation, or both);
KBA v. Unnamed Attorney, 769, S.W.2d 45 (Ky. 1989). The ethical obligations of legal
services lawyers facing significant reductions in funding were discussed in ABA Formal
Opinions 96-399 (1996) and 347 (1981). What is different about the new provisions in KRS
342.320(8) is that employers can afford to pay fees above the legislative limit and presumably
don’t need “protecting.”
Leaving aside questions of law and policy, limitations on fees can raise questions of
ethics. Regardless of the fee being paid, the lawyer has an obligation to prepare adequately and
to provide competent representation. KRPC 1.1 and 1.3. If budgetary restrictions or the
adequacy of the fee impact adversely on the lawyers’ ability to fulfill his or her obligations, then
the lawyers may be permitted or required to decline the representation or withdraw from it. See
KRPC 1.16.
Aside from these observations, it is not clear how the Ethics Committee can provide a
satisfactory response to the argument that the fee maximums restrict the ability of employers to
defend themselves. Unless we depart from our long-standing policy of not answering questions
of law, we can only observe that the question of whether the limitation on defense fees is illegal,
unconstitutional, otherwise invalid may be presented to a court of competent jurisdiction.4 We
are not prepared to say that poorly paid lawyers will necessarily violate the KRPC, or that the
KRPC permit or require clients to pay fees in excess or the legislated limits or justify
noncompliance with the new law.
Question 2 is suggested by the argument of counsel that “information required to be
submitted by an employer’s attorney in affidavit form for approval of the fee to be charged” may
result in the disclosure of information relating to the representation of the client which may be
within the attorney-client evidentiary privilege or the ethical constraints of KRPC 1.6. The types
of information alluded to by the requestor-lawyers include “interim billings sent to insurance
carriers” itemizing activities performed and summarizing communications between lawyer and
client, information reflecting “patterns of defense” that may be followed in future cases, the
identity of “persons contacted for information,” “sources of information investigated but not
utilized,” and the rate and basis of charges which the client may consider to be sensitive market
information.”5 It is suggested that such detailed information must be set forth in the affidavit
seeking approval of the fee or the lawyer will receive no fee, and that such detailed information
will then be made part of the public record. It is also noted that the statute assumed that an
hourly rate will be charged, when “this is not necessarily the case.” All of this adds up to the
proposition that compliance with the statute and collection of a fee will necessitate violations of
KRPC 1.6.

4 See note 1.
5

The amount of a fee or the billing rate is ordinarily not within the attorney-client privilege.

The Committee has examined the text of the statute [and accompanying administrative
regulations] and finds nothing explicitly requiring counsel to include this degree of detail in
billing records6 or in a KRS 342.320(8) affidavit. The statute and regulations provide only that
A motion for allowance of defendant’s attorney fee shall be filed
as required by KRS 342.320. The motion shall be accompanied by
an affidavit of counsel detailing the extent of services rendered and
the time expended, the hourly rate and total amount charged, the
date upon which agreement was reached for providing the legal
services, and a certification of any amounts previously paid on the
claim in question.
We agree that much of the information alluded to by the requestors should not be
provided in the absence of a court order, and that providing it could run afoul of KRPC 1.6.
However, in the absence of contrary evidence, we start with the assumption that the legislature
did not intend to attempt an “override” of the attorney-client privilege or the ethical constraints
of KRPC 1.6; and we believe that a sufficiently detailed account of the services provided can be
supplied in affidavit form, sufficient to satisfy the arbitrator or ALJ, without including the sort of
information alluded to.7 In short, we believe that counsel should ordinarily be able to edit out
most of the matter giving cause for concern and comply with the statute and KRPC 1.6.
Compare Montana Op. 960828 (lawyer should not turn over detailed billing statements to a third
party without “sterilizing”them to remove substantive information about the representation.)
Counsel is obligated to assert any privileges for the benefit of the client. In any case in which
information is improperly demanded, counsel should have an opportunity to obtain a legal ruling.
Regarding Question 3
At the present time the Unauthorized Practice Committee has before it the question of
whether a non-lawyer may serve as an arbitrator for the Department of Workers’ Claims (the
new law does not require an arbitrator to be an attorney.) Regardless of how that question is
answered, the Ethics Committee will still be faced with the question put to us regarding ex parte
communications. The question has come up because it has been reported to us that non-lawyers
involved in the process engage in improper ex parte communications. That this may be, or at
least may have been, a problem seems to be acknowledged in the Guidelines For
Communications For Workers’ Compensation Specialists.
KRPC 3.5 [Impartiality and decorum of the Tribunal] provides that a lawyer shall not ...
(b) communicate ex parte with a [judge ... or other official] except as permitted by law .... The
language of the rule “fits” adjudicatory or quasi-adjudicatory proceedings in the workers’
As one “hotline” member noted in discussing these requests for opinons, the concerned client might be
able to moot many of the perceived problems by prescribing a new billing format that does not require so
much detail. Compare Montana Op. 960828.

6

The statute does assume that the defense lawyer will be charging an hourly rate. If that is not the case,
it seems that the basis of the charge might be otherwise explained or justified. We are doubtful that the
hourly rate or basis of the lawyer’s charge will be recognized by the courts as protected information.
7

compensation system. The fact that the KRPC prohibits lawyers from engaging in ex parte
communications has been offered as an additional justification for requiring arbitrators to be
lawyers.
Judicial officers subject to the Code of Judicial Conduct shall not initiate or engage in ex
parte communications. SCR 4.300, Code of Judicial Conduct, Canon 3(4). It is the Committee’s
understanding that the Judicial Ethics Committee does not fee that the Code of Judicial Conduct,
and its own “jurisdiction” to opine, extends to the administrative forum. Cf. Code of Judicial
Conduct: Compliance, SCR 4.300. Nevertheless, notions of fundamental fairness inherent in the
concept of “due process” inform us that all participants in an adjudicatory process, whether they
are “unauthorized practitioners” or “non-lawyer arbitrators, hearing officers, or ALJs,” should
also be subject to the same rules prohibiting ex parte communications. See generally Richard
Flamm, Judicial Disqualification, Chapter 30 Disqualification of Administrative Adjudicators,
Section 30.5.7 Ex Parte Communications (Boston; Little Brown & Co., 1996).
Non-lawyers as well as lawyers should consider ex parte communications to be
prohibited in the context of adjudicatory or quasi-adjudicatory proceedings, and the Kentucky
Department of Workers’ Claims can and should make and enforce appropriate rules to that
affect. The Ethics Committee must leave the legal and policy questions concerning unauthorized
practice and the desirability of having only lawyers in certain roles in the Department of
Workers’ Claims to the Unauthorized Practice Committee.
Regarding Question 4
No further discussion is necessary.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky
Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor
rule). The Rule provides that formal opinions are advisory only.