LAWYER HAS DUTY TO REPORT UNREASONABLE LAWYER FEES

We lawyers in New Mexico have been reminded of our obligation to report lawyers who charge unreasonable lawyer fees. In an Ethics Advisory Opinion issued May 30, 2005 (State Bar Bulletin, Vol. 44, No. 21), the State Bar of New Mexico Ethics Advisory Committee referred to a case that was reported to it by an attorney representing an insurance company. The facts of the case were recited by the Committee:

“Two minor members of a family are injured in a motor vehicle accident. The lawyer representing the two injured parties requests from the insurance carrier immediate payment of one million dollars ($1,000,000.00) based on the lawyer’s understanding of the insurance policy limits. The insurance carrier, through no work of the lawyer representing the injured parties, informs the lawyer that the policy is actually three million dollars ($3,000,000.00), which the carrier immediately agrees to pay.”

The lawyer representing the insurance carrier questioned the reasonableness of a potential $1,000,000.00 contingent fee for work believed mostly involving phone calls, which was in an uncontested matter, and was not novel, difficult nor time-consuming.

The Committee gave the reported case as an example of the type of case that should be reported if a lawyer believes a fee that she charges, or the fee that another lawyer charges, is unreasonable because excessive. In other words, a lawyer should report herself if she charges an excessive fee; and she should report any other lawyer who charges an excessive fee. To fail to do so is a breach of a mandatory duty of a lawyer, and such failure also violates the public trust.

The question was posed as follows: "QUESTION PRESENTED: Does a lawyer have an obligation to report what the lawyer believes to be an unreasonable fee charged by another lawyer?" The answer was stated as follows: "SHORT ANSWER: Yes. A lawyer has a mandatory duty . . . to report professional misconduct. Charging an unreasonable fee is misconduct . . . ."

I understand and of course will be governed accordingly. Report yourself if you charge an excessive fee; report the other attorney if she charges an excessive fee.
I do have a question, however. It has to do with cases in which the lawyer represents the State of New Mexico or its political subdivisions in litigation (say suing the tobacco companies) or legal work (say handling bond issues), and purportedly gets her fees from a party other than the State or political subdivision.

For example, two firms are hired to assist the State in suing the tobacco companies. They negotiate a settlement as part of a national settlement. They get a fee of $24 million dollars for 18 months’ representation. They recover for the taxpayers, the sum of $1.5 billion. My question is not whether the $24 million fee is excessive, but whether it is a fee paid by the taxpayers. Some say it does not cost the taxpayers anything, because the tobacco companies pay it.

Another example. The lawyer is hired by the County Commissioners to handle a bond issue. The agreement is that the lawyer will get her fee from the company which seeks the backing of the Commission so the bonds can be issued to help the company with a project. Say it is an industrial revenue bond. Say it is a huge issue, and the company wants it so badly that the company is willing to pay millions to the County if the bond issue is approved by the Commission. The Commission, with the services of the lawyer, negotiates a deal. The deal is that the taxpayers get $86 million; and the lawyer gets $400,000. My question is not whether the lawyer did $400,000 worth of work, or whether the fee is excessive, but whether the fee is actually paid by the taxpayers. Some say it does not cost the taxpayers any money, that the developer (the company) pays it.

Before we attorneys can know whether to report what we consider to be excessive fees, it would help us to know whether the taxpayers are in essence being charged the fee in these cases. Does Big Tobacco care whether they pay the private counsel hired by New Mexico to assist the Attorney General in joining the national lawsuits, or whether they pay the taxpayers? Does Intel, for example, care whether it pays $400,000 to the attorney hired by Sandoval County Commissioners, or whether Intel pays the money to the taxpayers?