May a Lawyer Renegotiate a Bad-Deal Fixed Fee Agreement?

Yes, as long as the renegotiation is fair and reasonable in light of circumstances unanticipated by the lawyer and the client at the commencement of the lawyer’s representation.

In September 2018, the Professional Ethics Committee for the Texas State Bar addressed this issue in a formal opinion:

May a lawyer renegotiate his fixed, flat fee for representing a client in litigation after the litigation is underway if the matter turns out to be greater in scope and complexity than the lawyer and client contemplated?

See Tx. Formal Op. 679 (Sep. 2018). The opinion advises that such a renegotiation is permissible if “fair under the circumstances.” See id. at 2. The fairness of such a transaction turns on several factors including the following:

  • The length of the lawyer-client relationship. The longer the relationship, the more likely the renegotiation is to be fair and reasonable.
  • The extent to which the lawyer and the client “could reasonably anticipate” a change in the scope of legal work to be provided by the lawyer. That the time required may exceed what the lawyer “might have earned if the lawyer instead billed by the hour,” is not a relevant consideration given that this is a risk “knowingly assumed” by the lawyer.
  • The client’s level of sophistication. The higher the level of client sophistication, the more likely the renegotiation is to be fair and reasonable.

Id. at 3-4. Finally, the committee noted that “the burden of proving fairness is the lawyer’s. Id. at 4.1

This recent Texas opinion is consistent with a 2011 ABA Formal Opinon, which addressed the more general issue of whether a lawyer may seek any midstream amendment of the lawyer-client fee agreement. According to the ABA, an amendment is not objectionable as long as it is “reasonable” under Rule 1.5(a). See ABA Formal Opinion 11-458 (Aug. 4, 2011) (entitled “Changing Fee Arrangements During Representation”). Modifications to existing fee agreements “are usually suspect because of the fiduciary nature of the client-lawyer relationship.” See id. at p. 1. Citing some of the leading commentators on professional responsibility, the ABA opinion states:

The courts are generally in accord that once the initial contract has been formed and the fiduciary relationship of client and lawyer has begun, any change in the contract will be regarded with great suspicion.” Charles W. Wolfram, Modern Legal Ethics § 9.2.1, at 503 (1986) (citing cases). “Thus, an agreement that is not made roughly contemporaneously with the formation of the client-lawyer relationship will have to bear an extra burden of justification.” Geoffrey C. Hazard & W. William Hodes, The Law of Lawyering § 8.11 at 8-26 (3d ed. 2001).

Id. at p. 1. Finally, the opinion notes that “absent an unanticipated change in circumstances, attempts by a lawyer to change a fee arrangement to increase the lawyer’s compensation are likely to be found unreasonable and unenforceable.” See id. at p. 3.

  1. The committee further noted that a fee renegotation is not a “business transaction” between a lawyer and a client that requires compliance with Rule 1.8(a). If applicable, that rule would require, among other things, that the lawyer advise the client in writing of the desirability of seeking and give the client a reasonable opportunity to seek the advice of independent legal counsel on the transaction.