LEO #1667 COLLECTION OF UNPAID FEES; CLAUSE IN RETAINER AGREEMENT
          SETTING ATTORNEY'S FEE FOR COLLECTION

You have presented a hypothetical situation in which it is proposed
that an attorney's standard fee agreement with clients will include
a clause that a set fee of $500 will be due if the attorney must
institute collection proceedings to collect unpaid fees for legal
services.

Under the facts you have presented, you have asked the committee to
opine as to the propriety of including such clause in the fee
agreement.

The appropriate and controlling disciplinary rules relative to your
inquiry are DR 2-105(A) which requires that an attorney's fees be
reasonable and adequately explained to the client and DR 5-104(A)
which provides that a lawyer shall not enter into a business
transaction with a client if they have differing interests and if
the client expects the lawyer to exercise his professional judgment
for the protection of the client, unless the client has consented
after full and adequate disclosure and provided that the
transaction is not unconscionable, unfair or inequitable when made. 

In the facts you present, the committee believes that the automatic
imposition of a $500 collection fee in all fee agreements, in the
event that the attorney has to initiate collection proceedings
against the client for unpaid legal fees is violative of DR 2-
105(A).  In some instances, for example, the collection fee itself
could well exceed the unpaid balance owed by the client.  The
committee recognizes that such collection fee clauses are used
frequently by other professions or businesses.  However, our
Supreme Court has recognized the unique nature of agreements
between attorney and client, and has stated, in regard to fees in
general:

     It is a misconception to attempt to force an agreement between
     an attorney and his client into the conventional modes of
     commercial contracts.  While such a contract may have similar
     attributes, the agreement is, essentially, in a classification
     peculiar to itself.  Such an agreement is permeated with the
     paramount relationship of attorney and client which
     necessarily affects the rights and duties of each.

Heinzman v. Fine, Fine, Legum and Fine, 217, Va. 958, 962 (1977). 
Thus, as the committee has stated previously, regardless of the
agreed terms in a written contract of employment between attorney
and client, the lawyer cannot legitimize a fee that is otherwise
prohibited under the Disciplinary Rules.  Legal Ethics Opinion
1606.  Moreover, a determination of the reasonableness of a fee is
not necessarily limited to the circumstances existing at the time
of the agreement.  The occurrence of events not contemplated by the
parties at the outset of the representation may also be relevant to
the reasonableness of the fee.  In your hypothetical, for example,
it would not be known at the outset what, if any, unpaid legal fees
are due and owing to the attorney.  

Therefore, the committee is of the opinion that it would be
improper for an attorney to automatically impose in the initial fee
agreement with his clients a clause that imposes a flat fee if
collection proceedings are initiated to collect unpaid fees for
legal services.  However, it is not improper for an attorney to
place in the initial fee agreement a clause that permits recovery
of reasonable attorney's fees if collection proceedings are
initiated.

[DRs 2-105(A), 5-104(A); LEO 1606; Heinzman v. Fine, Fine, Legum
and Fine, 217, Va. 958, 962 (1977)]

Committee Opinion
July 8, 1996