When a client got a discounted rate through a legal services plan, can the lawyer's fee petition recite the lawyer's full rate instead of the discounted rate actually charged?

Plain-English summary

A lawyer represented plaintiffs who prevailed in a restrictive-covenant dispute where the covenants entitled the prevailing party to recover reasonable attorney's fees. The lawyer charged the plaintiffs $59 per hour, half his customary rate, because they subscribed to a prepaid group legal services plan for which his firm received a monthly per-enrollee payment. He wanted his fee petition to recite his full hourly rate rather than the discounted rate, reasoning that disclosing the fee arrangement would breach confidentiality and that the opposing party should not benefit from the plaintiffs' foresight in joining the plan.

The opinion held that the petition must recite the discounted rate actually charged. Rule 3.3(a)(2) requires a lawyer to disclose material facts to a court when necessary to avoid assisting a client's fraudulent act, and the committee reasoned that, even without intent to defraud, presenting the full rate could mislead the court into making a fee award without the facts it needs (citing 98 Formal Ethics Opinion 5, which required disclosing a prior driving record in a limited-privilege petition even when adverse to the client).

The opinion gave the lawyer room to advocate: the petition may recite the actual $59 rate and also explain that the plaintiffs bought a legal services plan to obtain the discount, and the lawyer may argue that the opposing party should not reap the benefit of that foresight and that his usual rate is a reasonable basis for the award. If the plaintiffs do not consent to disclosing the fee-arrangement details, the lawyer may disclose only that they were charged $59 per hour, and may not imply they were charged more.

Currency note

This opinion was issued in 2001, before North Carolina's adoption of the 2003 revisions to the Rules of Professional Conduct, and it cites the rule numbering then in effect (the candor duty was then Rule 3.3(a)(2) of the Revised Rules). 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 Treat this page as historical context, not current guidance.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: Can a lawyer petition for fees using the full rate when the client paid a discounted rate?

A: No. The opinion held the petition must recite the discounted hourly rate actually charged; under Rule 3.3(a)(2) presenting the full rate could mislead the court even without intent to defraud.

Q: Can the lawyer still argue for an award based on the higher rate?

A: Yes. The opinion allowed the lawyer to explain that the clients bought a legal services plan to get the discount and to argue that the opposing party should not benefit and that his usual rate is a reasonable basis for the award.

Q: What if the clients will not consent to disclosing the fee arrangement?

A: Then the opinion permitted disclosing only that the clients were charged $59 per hour, and barred the lawyer from implying or inferring that they were charged more.

Q: Doesn't disclosing the rate breach confidentiality?

A: The opinion treated the candor duty under Rule 3.3(a)(2) as requiring disclosure of the actual rate, while limiting disclosure of the broader fee arrangement to what the clients consent to.

Background and rules framework

The opinion applied North Carolina Rule 3.3(a)(2) (candor toward the tribunal; disclosing material facts to avoid assisting a client's fraud), the analogue to Model Rule 3.3, against the lawyer's confidentiality duty under Rule 1.6, the analogue to Model Rule 1.6. It relied on the bar's prior 98 Formal Ethics Opinion 5.

Citations and references

Rules of Professional Conduct:

• MR 3.3 (candor toward the tribunal) / NC Rule 3.3(a)(2)
• MR 1.6 (confidentiality of information) / NC Rule 1.6

Other opinions cited:

• NC 98 Formal Ethics Opinion 5: a limited-driving-privilege petition must disclose the prior driving record even if adverse to the client

See also

• NC State Bar 2008 FEO 1: Client Alias & Candor
• NC State Bar 2011 FEO 12: Disclosing a Clerk's Error
• ABA Formal Op. 93-379: Billing for Fees and Expenses

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2001-formal-ethics-opinion-1/

Original opinion text

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

Inquiry:

Attorney represented the plaintiffs in a dispute involving the interpretation of restrictive covenants for a subdivision. Suit was filed and the plaintiffs ultimately prevailed in an appeal to the North Carolina Supreme Court. The restrictive covenants provide that in the event of a litigated dispute, the prevailing party is entitled to recover costs and reasonable attorney's fees.

Attorney's fee agreement with the plaintiffs provides that Attorney's hourly rate will be $59.00 per hour. This rate is one-half of Attorney's customary rate at the time the representation commenced in 1995. A discount was given to the plaintiffs because they subscribe to a prepaid or group legal services plan that benefits enrollees who pay a monthly premium. Attorney is one of the lawyers for the plan. As such, his firm receives a monthly payment from the plan administrator of $1.50 to $2.00 per client enrolled in the plan. This provides the firm with about $1,200.00 to $1,400.00 in income per month.

Attorney's usual fee petition to a court includes an affidavit with the following information: a breakdown of the time expended and the legal services rendered for the client; a summary of the client's costs; a statement on Attorney's expertise in the area of practice; and a description of the difficulty of the matter. It does not usually include a description of the fee arrangement with the client.

Attorney believes that disclosure of his fee arrangement with the plaintiffs in this case would violate the duty of confidentiality he owes to the plaintiffs. He also believes that the opposing party should not benefit from the plaintiffs' foresight in subscribing to a legal services plan. May Attorney file a petition for legal fees in the current case that does not disclose the discounted hourly rate charged to the plaintiffs but instead recites Attorney's full hourly rate at the time the representation of the plaintiffs commenced?

Opinion:

Rule 3.3(a)(2) requires a lawyer to disclose material facts to a court when necessary to avoid assisting in a fraudulent act by the client. Although Attorney and the plaintiffs may have no intent to defraud the opposing party, the effect may be the same if the court does not have all of the facts necessary to make a fair and informed decision about an award of legal fees. See, e.g., 98 Formal Ethics Opinion 5 (to petition court for a limited driving privilege, prior driving record must be disclosed even if disclosure is adverse to client). The fee petition must recite the discounted hourly rate actually charged to the clients but it may also explain to the court that the clients purchased a prepaid or group legal services plan in order to obtain the discount. Attorney may then argue to the court that the opposing party should not reap the benefit of the plaintiffs' foresight and that Attorney's usual hourly rate is a reasonable amount upon which to calculate the award of legal fees. If the plaintiffs do not consent to the disclosure of this information about the fee arrangement in the petition, Attorney may disclose only that the plaintiffs were charged $59.00 per hour for his services. He may not imply or infer that the plaintiffs were charged more.