Advisory Opinion:
2046
Year Issued:
2003
RPC(s):
RPC 1.5
Subject:
Billings involving subcontractors
The inquirer asks if a lawyer may, when instructed by the client, ethically charge the client a 10 percent override (surcharge) on a subcontractor`s billing in payment of services for managing the subcontractor. (A “surcharge” is made when the lawyer charges the client more for the services of the subcontractor than the cost incurred by the lawyer for obtaining those services; in other words, a surcharge is profit.)
The lawyer was hired by a governmental entity pursuant to a written professional services contract. In addition to other services, the lawyer is required to hire a subcontractor (actuary), to monitor his performance and to scrutinize his billings. In exchange, the client wants the lawyer to charge the client a 10% surcharge on the actuary`s charges in addition to the lawyer’s other professional charges and to submit one billing for all services. The entity will issue one check to the lawyer from which the attorney is expected to pay the actuary.
The committee opined that the sine qua non of a lawyer`s fee is that it must be reasonable and the client must be informed. The criteria set forth in RPC 1.5 to be considered in determining a reasonable fee includes “. . . the terms of the fee agreement between the lawyer and client . . . and whether . . . the . . . agreement . . . demonstrates that the client has received a reasonable and fair disclosure of material elements of the fee agreement . . .” Accordingly, a lawyer may charge a fully-informed client a 10 percent surcharge on a subcontractor`s billing in payment of monitoring the subcontractor`s performance.
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