If a contract requires my client to pay the other side's attorney's fee and that fee seems excessive, can I still close the deal, and must I report the other lawyer?

Plain-English summary

The inquirer's client was entering a commercial loan with a bank, and a standard term required the borrower to pay the bank's attorney's fee. The inquirer described the transaction as standard with some nuances, said it would not require much extra drafting, and believed the bank attorney's proposed fee was at least double the normal fee for such a transaction. He had asked the bank's attorney to reduce the fee, and the attorney refused. The inquirer asked whether he could continue to represent his client in the transaction and whether he had to report the fee-charging attorney.

The opinion first observes that whether the fee is actually excessive is governed by Rule 1.5(a), under which a fee is excessive when, after reviewing the facts, a reasonable lawyer would have a definite and firm conviction that it is excessive, considering factors such as time and labor, novelty and difficulty, the customary local fee, and the lawyer's experience and ability. The committee could not resolve excessiveness because it did not involve the inquirer's own conduct, and it noted that a high fee is not necessarily an excessive one: a fee roughly double the customary amount is not per se excessive, especially given the transaction's nuances and the unknown experience and ability of the bank's lawyer.

The opinion then concludes that even if the fee were excessive, the inquirer could still participate in the transaction. Rule 8.4(a) bars assisting or inducing another to violate the Rules, but the inquirer provided no such assistance or inducement; he did not cause or encourage the bank's lawyer to charge the fee and in fact tried to negotiate it down (the committee analogized to Opinion 809). As for reporting, Rule 8.3(a) requires a lawyer to report another lawyer only for a violation that raises a substantial question as to that lawyer's honesty, trustworthiness, or fitness. So even if the inquirer concluded the fee was excessive, he would be obligated to report only if, under all the circumstances, the fee-setting reflected adversely on the other attorney's fitness or involved dishonesty; he is, of course, permitted to report it.

In practice

Under this opinion, a lawyer can complete a transaction in which the lawyer's client must pay the other side's attorney's fee even when that fee looks too high, because the lawyer neither set nor induced it. The opinion holds that, under New York's rules as they stood at the time, mandatory reporting under Rule 8.3 is not triggered by every possible rule violation but only by misconduct that raises a substantial question about the other lawyer's honesty, trustworthiness, or fitness; an arguably excessive fee does not automatically meet that threshold. The opinion also stresses that whether a fee is excessive under Rule 1.5(a) is a fact-specific determination and that a high fee is not necessarily excessive.

Common questions

Q: Can I keep representing my client if the other side's attorney is charging an excessive fee my client must pay?

A: Yes. The opinion concludes the lawyer is not ethically prohibited from participating, because the lawyer did not assist or induce the other attorney's fee under Rule 8.4(a); the lawyer here even tried to negotiate the fee down.

Q: Does a fee that is double the usual amount count as "excessive"?

A: Not automatically. The opinion concludes a high fee is not necessarily excessive; Rule 1.5(a) requires weighing all the relevant factors, including the matter's difficulty and the lawyer's experience, which the committee could not assess on these facts.

Q: Do I have to report the other attorney for an excessive fee?

A: Only if it crosses Rule 8.3's threshold. The opinion concludes reporting is mandatory only when the conduct raises a substantial question about the other lawyer's honesty, trustworthiness, or fitness; otherwise the lawyer may, but need not, report it.

Background and rules framework

The opinion applies New York Rule 1.5(a) (a lawyer shall not charge an excessive fee; defining excessiveness and listing factors; cf. Model Rule 1.5), Rule 8.4(a) (no assisting or inducing another to violate the Rules; cf. Model Rule 8.4(a)), and Rule 8.3(a) (mandatory reporting of misconduct raising a substantial question as to honesty, trustworthiness, or fitness; cf. Model Rule 8.3). The committee drew an analogy to Opinion 809, where a lawyer dealing with the counter-party's non-lawyer representative did not thereby assist unauthorized practice.

Citations and references

Rules of Professional Conduct:

• New York RPC 1.5(a) (excessive fees and the factors; cf. Model Rule 1.5)
• New York RPC 8.4(a) (assisting or inducing a violation; cf. Model Rule 8.4(a))
• New York RPC 8.3(a) (mandatory reporting of serious misconduct; cf. Model Rule 8.3)

Other opinions cited:

• N.Y. State 809: a lawyer dealing with the counter-party's non-lawyer agent did not assist unauthorized practice

See also

• NY State Bar Op. 1092: Duty to Disclose Co-Counsel's Malpractice
• NY State Bar Op. 1091: Reporting an Out-of-State Lawyer's Unauthorized Practice
• NY State Bar Op. 1099: No Duty to Report Judicial Misconduct

Source

• Landing page: https://nysba.org/ethics-opinion-1004/