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Adding Surcharges to LegalResearch.com Fees

Adding Surcharges to LegalResearch.com Fees

The overwhelming weight of authority recognizes that a practitioner can permissibly charge his or her client a premium or reasonable measure of profit in excess of what LegalResearch.com charges the practitioner, so long as the total charges are reasonable and the LegalResearch.com Research Attorney is under the “direct supervision” of the practitioner. The American Bar Association Committee on Ethics and Professional Responsibility has emphasized that a practitioner may ethically recognize a reasonable profit on all legal services performed on her behalf, so long as the client’s reasonable expectations that she has “adopted that work as her own” have been met. ABA Comm. on Ethics and Prof’l Responsibility Formal Op. 00-420 (2000).

The rationale for allowing the practitioner to charge a reasonable premium over and above his or her direct cost is that:

It is fair and reasonable to add to the rate charged a client an amount for profit and overhead when the law firm incurs basic overhead expenses when using a contract or temporary attorney. The differences between the contract attorney and the law firm’s associates are not great. Using contract attorneys allows a law firm to handle Workload variations without increasing its overhead. The requirement that fees be reasonable does not require the law firm to incur a loss, which would result if the law firm were reimbursed for the amounts paid the contract attorney as a cost or disbursement when it provided secretarial and other support. The charge, however, must not be unreasonably high in light of the service and the amount customarily charged in the community for the service.

ABA Comm. on Ethics and Prof’l Responsibility Formal Op. 96-1 (1996).

Other state ethics committees have recently examined various questions with respect to temporary or contract attorneys, and their conclusions clearly indicate that it may be proper for a practitioner to charge his or her client at a higher rate for an outside attorney’s services than he or she pays for such services. See ABA Formal Op. 88-356 at 10–11 (“assuming that a law firm simply pays the temporary lawyer reasonable compensation for the services performed for the firm and does not charge the payments thereafter to the client as a disbursement, the firm has no obligation to reveal to the client the compensation arrangement with the temporary lawyer. . . . The requirement of Rule 1.5(a) that the total fee be reasonable is, of course, a restriction only on the fee charged to the client and not on how much is paid to the temporary lawyer”); Calif. State Bar Ass’n Formal Op. 1994-138 at 4–5 (where practitioner pays outside lawyer $50 per hour but bills client $70 per hour for those services there is no improper division of fees because “the amount paid to the outside lawyer is not tied to specific legal fees received by the law office. The law office must pay the outside lawyer whether or not the client pays the law office. The payments to the outside lawyer are thus similar to compensation paid to non-lawyer employees such as law students and paralegals. For such non-lawyer employees, the law office may bill these services at whatever rates are specified in the contract between the law office and client, so long as these rates are accepted by the client, and conform to [the rule regarding unconscionability of fees]. . . . Assuming there is no division of fees, and that the law office does not charge the outside lawyer’s compensation to the client as a disbursement, the law office has no obligation to reveal to the client the compensation arrangement with the outside lawyer whether that attorney is paid by salary or on an hourly basis.”); accord, Va. State Bar Legal Ethics Op. 1712 (1998) (“the hiring law firm may simply bill the client for services rendered in an amount reflecting its charge for the Lawyer Temp’s time and services . . . Since the charge is not represented to be the hiring law firm’s actual disbursement of funds for client-reimbursement, the hiring firm does not thereby misrepresent as an out-of-pocket disbursement what is actually its out-of-pocket disbursement plus a mark-up.”); S.C. Bar Ethics Advisory Op. 10-08 (2010); see also ABA Comm. on Ethics and Prof’l Responsibility Formal Op. 00-420 at 6 (2000) (If the costs associated with contracting counsel’s services are billed as an expense, they should not be greater than the actual cost incurred, plus those costs that are associated directly with the provision of services, unless there has been a specific agreement with the client otherwise).

Only two state ethics opinion were found that state that outside legal research services should be billed at no more than cost. One of those opinions involved a fact situation in which no outside research services were performed at the requesting attorney’s offices. See Md. Bar Ass’n Ethics Comm. Op. 92-19 at 1 (1991). The other stated that a premium for a non-firm attorney’s services could be charged if the fees charged were proportional to the services performed or the joint responsibility for representation, the client gave written consent to the terms of the fee, and the total fee was not unconscionable. Texas State Bar Op. 577 (2007).

In sum, in the vast majority of cases, a practitioner may earn a reasonable measure of profit from collaborating with LegalResearch.com, typically limited only by an ethical standard of overall reasonableness.

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