Additional Info

00/01-01 – An attorney-client relationship is established between the city public defender and in-custody defendants during the brief arraignment meetings the public defender conducts with each such defendant

Summary of Facts Provided

When arraigning in-custody defendants, a municipal court tells the defendants that if they plead not guilty they will meet with a city public defender within a few hours. In such cases, the city attorney writes a plea offer and gives it to the city public defender. The city public defender then meets with the defendant for five to ten minutes. The city public defender explains to the defendant his or her right to trial, right to bond, and the nature of the plea offer. If the defendant is an immigrant, the city public defender inquires of his or her status, and advises the defendant of the possible consequences of a conviction upon his or her immigration status. Regarding that status, the city public defender also tells the defendant that without additional information, it is uncertain which of the possible consequences will occur. Generally, there is little or no time to discuss the defendant's entire side of the case during this initial meeting.

If the defendant subsequently pleads guilty, no further services are provided to the defendant. If the defendant pleads not guilty, a file is opened by the city public defender and the city public defender represents the defendant at the bond hearing.

If the defendant remains in custody, the city public defender is appointed to represent him or her. If the defendant is released from custody, the defendant returns to court the following day and may apply for a city public defender.

Issues and Conclusions

Is an attorney/client relationship established by these short meetings with a defendant? If so, what parameters, if any, may the city public defender establish regarding the extent of the advice given? Is it ethical to act primarily as an option-provider and not as legal advisor during these five to ten minute meetings? Is the immigration advice ethically sufficient?

An attorney/client relationship is established by these short meetings between the city public defender and a defendant. The city public defender may limit the scope of future representation by time and custody status of the defendant. During the initial meeting, the city public defender is ethically required to provide competent representation, to act with reasonable diligence, to protect the confidentiality of information, and to exercise independent professional judgment. The advice provided concerning the defendant's immigration status may not be legally adequate and therefore may not be ethically adequate. The defendant should be informed that he or she should not enter a plea until the likely immigration consequences are known.

00/01-02 – A lawyer or law firm may pay bonuses or similar profit-sharing compensation to non-lawyer/employees based upon earnings in excess of predetermined levels of income or net profits, and the employees' respective compensation or length of service,

Abstract 00/01-02

Summary of Facts Provided

To increase productivity, a law firm wishes to pay bonuses to non-attorney staff members based on the law firm's net income. The bonus program would involve the payment of a bonus to each employee based on the amount by which the firm's income or net profits exceed predetermined levels. The proposed bonus program would not be a deferred compensation profit-sharing arrangement, such as a pension and profit sharing plan or 401(k) plan, but would involve current compensation to the firm's employees.

Issues and Conclusions

Does the payment of compensation to non-attorney staff members based on the income, or net profits, of a law firm constitute an impermissible fee splitting or fee sharing arrangement?

Rule 5.4(a)(4) of the Colorado Rules of Professional Conduct, provides that a lawyer or law firm shall not share legal fees with a non-lawyer, except that a lawyer or law firm may include non-lawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement. Rule 5.4(a)(4) suggests that it is permissible to base current compensation for non-lawyer employees, as well as deferred retirement plan compensation, in whole or in part on a profit-sharing arrangement, but does not indicate whether there are any limitations on such compensation plans.

C.R.C.P. 265 II, E, concerning legal professional service companies, establishes those limitations. It provides that a professional company may adopt retirement, pension, profit-sharing (whether cash or deferred), health and accident insurance, or welfare plans for all or some of its employees, including lay employees, provided that such plans do not require or result in the sharing of specific or identifiable fees with any lay employees, and provided that any payments made to lay employees or into any such plan on behalf of lay employees are based upon their compensation or length of service or both rather than upon the amount of fees or income received.

Accordingly, the Committee believes that a lawyer or law firm may ethically pay bonuses, or similar cash profit-sharing payments, to layperson staff members as current compensation based upon the lawyer or firm's exceeding predetermined income or net profit levels, provided the bonus or other profit sharing compensation is based upon the staff members' regular compensation or length of service, or both, and is not based on a percentage of the fees, income or revenues of the lawyer or law firm, or any specific or identifiable fees. For example, in the Committee's opinion, it is permissible for a law firm to allocate a certain percentage of the firm's profits as a fund from which bonuses will be paid to layperson staff members, and then to distribute bonuses from the allocated percentage to individual staff members based upon each staff person's regular compensation, position, length of service or similar factors. It is also permissible to pay a layperson staff member a bonus equal to a certain percentage of his or her regular compensation, or a specific amount. It is not permissible, however, to pay an individual layperson staff member a bonus or other current compensation based upon fee revenue from a specific case or cases.

00/01-03 – An attorney may charge clients a flat percentage of the attorney's total hourly billings to compensate for the client's expenses provided the attorney and each client agree in advance to such a billing arrangement

Abstract 00/01-03

Summary of Facts Provided

An attorney's fee agreement states that clients will be billed expenses equal to a flat percentage of the attorney's total hourly billings. The attorney does not separately itemize expenses for computerized legal research, long distance, photocopying, or similar out-of-pocket expenses.

Issues and Conclusions

The issue presented is whether it is ethical for an attorney to include in a fee agreement a charge equal to a flat percentage of the attorney's total hourly billings to compensate for the client's expenses.

If the attorney and the client both agree in advance to this billing arrangement and it is reasonable, an attorney may charge clients a flat percentage of the attorney's total hourly billings to compensate for the client's expenses. Rule 1.5(a) of the Colorado Rules of Professional Conduct states that an attorney's fee must be reasonable. In establishing an attorney-client relationship, the attorney should promptly establish an understanding of how fees will be computed, including an identification of any hourly charges or fixed amounts that will be part of the attorney's fee.

ABA Formal Ethics Opinion 93-379 (1993) addressed the ethical considerations of charging clients for overhead expenses and other out-of-pocket expenses. In that opinion, the American Bar Association was troubled where an attorney submitted a bill to a client that included charges for general office overhead, but stated that such a practice may be reasonable if the client was informed of the attorney's practice of charging for general overhead expenses before receiving a bill. The opinion also concluded that an attorney may pass onto the client reasonable charges for expenses incurred on the client's behalf, such as photocopying and computer research, provided both parties agree in advance to the amount charged. In the absence of an agreement between the parties, a lawyer may charge only the direct cost associated with the service (i.e., the actual cost of making a copy on the photocopier) plus a reasonable allocation of overhead expenses associated with the provision of the service (e.g., the salary of the person operating the photocopier).

Viewing Rule 1.5(a) in conjunction with ABA Formal Ethics Opinion 93-379, an attorney would ultimately be required to demonstrate that the flat percentage basis for computing expenses was reasonable. If the attorney can justify the reasonableness of the charges and the client agrees to this billing arrangement before the attorney begins employment, expenses may be billed as a flat percentage of the attorney's total hourly billings, but the Committee believes the attorney should disclose to the client the types of expenses incurred in the operation of a law practice that will be subsumed within the flat percentage so that the reasonableness of the fee can be justified.

00/01-04 – A lawyer serving as in-house counsel for Company A and its subsidiary may provide separate legal services for a vendor of Company A's subsidiary, provided the lawyer complies with rules pertaining to multiple client representations and fee arran

Abstract 00/01-04

Summary of Facts Provided

Lawyer serves as inside counsel for Company A and its wholly-owned subsidiary, Company S, which provides technology services to its customers. One of S's most important customers - Company C - also buys technology services from other, unrelated vendors pursuant to written contracts. C's technology purchases from these vendors relate to the services performed for it by S. Although C has its own legal counsel, due to the press of time it sometimes asks Lawyer to provide legal advice with respect to its contracts with those vendors.

Issues and Conclusions

Can Lawyer ethically provide legal services to Company C concerning these third-party vendor transactions?

By advising C about its vendor contracts, an attorney-client relationship is created. People v. Bennett, 810 P.2d 661 (Colo. 1991). Because Lawyer does not regularly represent C, Colo. RPC 1.5(c) requires a written communication to C of the basis or rate of Lawyer's fee. Because Lawyer is an employee of Company A, there is potential concern and confusion about whether Company A and/or Company S are engaging in the unauthorized practice of law contrary to Colo. RCP 5.5(b) and C.R.C.P. 265. See, CBA Formal Op. No. 17. This presents a legal question beyond the purview of the Ethics Committee, but which Lawyer should analyze carefully.

Because Lawyer's salary is paid by Company A, Lawyer's duty of loyalty to C may be compromised. It is not improper for Lawyer's fee to be paid by someone other than the client, but Lawyer should carefully review Colo. RPC 1.7 and 1.8(f) and the Comments thereto. And if after that review Lawyer determines to continue to provide such legal services to C, Colo. RPC 1.5(c) requires that the basis of the fee be communicated to C in writing. It may be prudent also to clarify in writing that Lawyer, and not Company A or Company S, is individually providing the legal services, to specify the fees, if any, to be charged, and the party responsible to pay such fees. In addition, Lawyer should carefully review Colo. RPC 1.6 and 1.7, in that providing legal services at the same time to A, S and C constitutes the representation of multiple clients in a related series of transactions, requiring extreme caution and special care to preserve the clients' confidential information. The potential for future conflicts of interest in the event of a later dispute among A, S and/or C also is present, and requires full prior disclosure and discussion with all three companies. See, CBA Formal Op. Nos. 57 and 68.