Can a personal injury firm charge for home or hospital visits on top of a contingency fee if it advertises free consultations?

Plain-English summary

A personal injury firm advertised free consultations and home or hospital visits, worked on contingency, and stated that costs would be billed separately. The firm asked whether and how it could charge clients for the out-of-office visits.

The opinion concludes the firm may charge the actual cost (mileage) of an out-of-office consultation in addition to the contingent fee, because a fee agreement may require the client to pay litigation costs and expenses on top of a contingent fee (Rule 1.5(c); RPC 235; 2004 FEO 8), so long as the total fee and expenses charged are not clearly excessive under Rule 1.5(a). It distinguishes charges for expenses from fees for legal services: the firm may not charge a set amount (for example, $200) for an expense regardless of actual cost, because Rule 1.5(a) bars charging a clearly excessive amount for expenses, and a $200 mileage charge for a short trip would be clearly excessive. The firm may charge a flat fee for legal services such as an initial consultation if the 2008 FEO 10 conditions are met, but where the firm advertises that consultations are free, the $200 necessarily would be an expense charge, not a fee, and so cannot be a flat amount divorced from actual expense.

On disclosure, the opinion concludes the firm must specifically disclose the out-of-office charge and get the client's consent to deducting it from any recovery before making the visit. It must also disclose any such charges in advertisements that say consultations are free, because Rule 7.1 bars false or misleading communications and advertising free consultations while intending to charge expenses for the visit is misleading (citing 2004 FEO 8). Finally, under Rule 1.5(c), the contingent fee agreement must be in writing and state the method of determining the fee, including expenses to be deducted, so the offsite-visit charge must appear in that agreement.

In practice

Under the North Carolina rules as they stood at the time, the opinion holds that a contingent-fee firm may pass through the actual cost of a home or hospital visit but may not impose a flat expense charge unrelated to cost, and must (1) keep total fees and expenses from being clearly excessive (Rule 1.5(a)), (2) disclose the charge and obtain consent before the visit, (3) disclose the charge in any advertising touting free consultations (Rule 7.1), and (4) state the charge as a deductible expense in the written contingent fee agreement (Rule 1.5(c)).

Common questions

Q: Can a contingency firm bill mileage for a home or hospital visit on top of the contingent fee?

A: Per Opinion #1, yes, if the agreement provides for it and the total fee and expenses are not clearly excessive under Rule 1.5(a).

Q: Can the firm charge a flat $200 for any out-of-office visit?

A: Per Opinion #2, no, where it is an expense charge; Rule 1.5(a) bars a clearly excessive expense charge, so a flat amount unrelated to actual cost is improper. A flat fee for legal services is allowed only under the 2008 FEO 10 conditions.

Q: Must the firm disclose the visit charge if it advertises free consultations?

A: Per Opinions #3 and #4, yes; the firm must disclose the charge in advertising and in the written contingent fee agreement and obtain the client's consent to deduct it from any recovery, because advertising free consultations while charging visit expenses is misleading under Rule 7.1.

Background and rules framework

The opinion interprets North Carolina Rules of Professional Conduct 1.5(a) (no clearly excessive fee or expense), 1.5(c) (written contingent fee agreements stating the method and deductible expenses), and 7.1 (no false or misleading communications about a lawyer's services). These correspond to ABA Model Rules 1.5 and 7.1. It applies prior NC opinions RPC 235, 2004 FEO 8, and 2008 FEO 10.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / NC Rule 1.5(a), 1.5(c) (fees; contingent fee agreements; clearly excessive)
• Model Rule 7.1 / NC Rule 7.1 (communications about a lawyer's services)

Other opinions cited:

• RPC 235 (costs and expenses in addition to a contingent fee)
• 2004 FEO 8 (advertising no fee without recovery; disclosure of repayment of costs)
• 2008 FEO 10 (conditions for charging a flat fee)

See also

• ABA Formal Op. 94-389: Contingent Fees
• OSB Op. 2005-124: Contingent Fees on PIP Benefits

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2010-formal-ethics-opinion-10/

Original opinion text

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

Inquiry #1:

A personal injury law firm (Firm) advertises that it will provide home/hospital visits to potential clients. Firm also advertises that it works on a contingency fee basis and that consultations are free. The fee agreement recites a contingency fee, and further states that costs will be billed separately and in addition to the contingency fee.

May Firm charge a client for the actual cost of the out-of-office consultation (mileage) in addition to the contingency fee?

Opinion #1:

Yes. A lawyer may enter into a fee agreement with a client that requires the client to pay court costs and expenses of litigation in addition to a contingent fee on any amount recovered for the client. See Rule 1.5(c); RPC 235; 2004 FEO 8. However, the fee and expenses that are ultimately charged and collected from the client must not be clearly excessive in violation of Rule 1.5(a).

Inquiry #2:

May Firm charge a flat fee for the out-of-office consultation irrespective of the actual costs of meeting with the client? For example, may Firm charge a $200 flat fee for any client that requests an out-of-office visit?

Opinion #2:

A distinction must be made between charges for expenses versus fees for legal services. Firm may not charge a set amount for an expense irrespective of the actual cost to Firm. Rule 1.5(a) provides that a lawyer shall not “charge or collect a clearly excessive amount for expenses.” If a lawyer travels only a short distance to visit a prospective client, it would be clearly excessive for Firm to charge the client $200 as a mileage expense.

However, lawyers may charge flat fees for providing legal services provided the requirements set out in 2008 FEO 10 are met. Lawyer at Firm may charge a flat fee for an initial consultation so long as the client understands and agrees that the flat fee is the entire payment for the specified legal work to be performed by the lawyer, regardless of the amount of time that it takes the lawyer to perform the legal work; the flat fee will be earned by the lawyer immediately upon payment; and when the lawyer’s representation ends, the client will not be entitled to a refund of any portion of the flat fee unless the legal work is not completed or it can be demonstrated that the flat fee is clearly excessive under the circumstances. Id.

If Firm advertises that consultations are free, the $200 charge necessarily must be a charge for expenses rather than legal fees. Firm may not charge $200 for every out-of-office consultation, irrespective of the actual expense Firm incurred.

Inquiry #3:

If the answer to Inquires #1 or #2 is “yes,” must Firm disclose the charge for the out-of-office consultation prior to meeting with a client?

Opinion #3:

Yes. Firm must specifically disclose the charge for the out-of-office visit, and get the client’s consent to the deduction of the expense from any recovery, prior to making such a visit.

In addition, Firm must clearly disclose any charges associated with out-of-office consultations in advertisements stating that Firm will provide out-of-office consultations and that consultations are free. Rule 7.1 provides that a lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. It is misleading for Firm to advertise that it will provide out-of-office consultations, and that consultations are free if Firm intends to charge clients for expenses related to the out-of-office visit. See 2004 FEO 8 (unless lawyer invariably makes the repayment of costs advanced contingent upon the outcome of each matter, advertisement for legal services that states that there is no fee unless there is a recovery must also state that costs advanced must be repaid at the conclusion of the matter).

Inquiry #4:

If the answer to Inquiries #1 or #2 is “yes,” must Firm disclose the charge for the offsite visit in its contingent fee agreement?

Opinion #4:

Yes. Rule 1.5(c) provides that a contingent fee agreement must be in writing and must state the method by which the fee is to be determined, including litigation and other expenses to be deducted from the recovery. Firm must disclose in the contingent fee agreement the charge for the offsite visit as an expense to be deducted from the recovery.