Find content from our “Ethics” issue of Communiqué (December 2017) featuring select articles to read online now:
- “What are “Reasonable Attorney’s Fees” According to the State and Federal Courts in Nevada?” By John M. Naylor, Esq.
- “The Age of Internet Defense – ABA Formal Opinion 477R and Its Applicability to Nevada Legal Practice” By Ryan Ellis, Esq.
- “The Fee Dispute Committee Ruled Against Me! What Now?” By Joseph A. Liebman, Esq.
- “The Handshake” By Frank M. Flansburg III, Esq.
Find more event more content in the print/PDF edition:
- “Can I Bill For That?” By Joshua P. Gilmore, Esq. ***This is a CLE article to read and complete test that offers 1 Ethics CLE Credit for Nevada Lawyers!***
- “Time to Express Gratitude” By CCBA President Tami D. Cowden, Esq.
- “Nevada Appellate Court Summaries” by Joe Tommasino, Esq.
- “Pro Bono Corner: Messages of Gratitude Can Sometimes Mean More than a Fee” By Noah Malgeri, Esq.
- “19th Annual William S. Boyd School of Law Client Counseling Competition” By Steph Abbott
- “Supporting The Leukemia & Lymphoma Society” By Steph Abbott
- “Volunteering at Three Square” By Tiffany Welt Doctors, Esq.
- “Family Bench Bar Chili Wars Highlights” By Steph Abbott
- “Sidebar: Legal Support Staff Are Not Attorneys (How Far Is Too Far?)” By Melinda Vereen-McDuffie
© 2017 The following articles were originally published in Communiqué, the official publication of the Clark County Bar Association. (December 2017). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, 717 S. 8th Street, Las Vegas, NV 89101. Phone: (702) 387-6011.
What are “Reasonable Attorney’s Fees” According to the State and Federal Courts in Nevada?
By John M. Naylor
In seeking attorney’s fees in litigation in Nevada, practitioners should be mindful of the different approaches by the state and federal courts, as well as the Nevada Rules of Professional Conduct (“NRPC”).
NRPC 1.5 prohibits unreasonable fees
Model Rule 1.5 of the Professional Rules of Conduct prohibits an attorney from charging unreasonable fees. Adopted in Nevada in 2006, this rule has been the subject of little discussion. Most of the Nevada cases referring to the rule are disciplinary proceedings in which it is mentioned with little or no analysis. To determine reasonableness, Nevada state courts rely heavily on the “Brunzell factors,” while the federal courts rely on the “lodestar analysis.” These two approaches differ most when it comes to determining what is a reasonable hourly rate.
The starting point is NRPC 1.5, which lists eight non-exclusive factors to consider. One of the factors is the fees “customarily charged in the locality for similar legal services.” NRPC 1.5(a)(3). The drafters recommend that “[i]n a new client-lawyer relationship, however, an understanding as to fees and expenses must be promptly established. Generally, it is desirable to furnish the client with at least a simple memorandum or copy of the lawyer’s customary fee arrangements . . . .” Model Rule 1.5(a)(3), Comment 2 (Nevada did not adopt the comments; however, attorneys and courts may look to them for guidance. NRCP 1.0A). Attorneys should include that discussion and a statement of the hourly rates in their engagement letters.
The comments suggest that the attorney may charge whatever rate is agreed upon with a client. Perhaps this is not without limit because on at least on one occasion, the Supreme Court of Nevada looked askance at an attorney who, among other things, entered into a flat fee arrangement of $125,000, payable in advance and deemed earned upon payment, and attempted to withdraw from the representation 30 days later.
The Brunzell factors as a test of reasonableness
While the majority of cases citing NRPC 1.5 concern disciplinary matters, attorneys know that the issue of reasonableness most often arises in connection with fee applications. As noted, Nevada courts rely on the Brunzell factors, which largely overlap the factors listed in NRPC 1.5. Cf. NRPC 1.5 and Brunzell v. Golden Gate National Bank, 85 Nev. 345, 455 P.2d 31 (1969).
Missing from Brunzell is any mention of the prevailing community rates. Though the Brunzell factors are not exclusive, most state courts generally focus on the four that are listed. Using these factors, Nevada state courts have recently approved hourly rates at least as high as $750 for local attorneys with approximately 30 years of experience in commercial litigation cases and $350 an hour for senior associates. Nevada state courts have also approved rates for out-of-state attorneys approaching $1,000 an hour. An informal survey of state court decisions suggests that the analysis focuses primarily on the quantity and quality of work (and advocacy) rather than the hourly rate.
Can block billing be reasonable and can reasonable fees include support staff?
Two additional issues regularly crop up when considering fees. The first is block billing, which is defined as, “the time-keeping practice whereby a lawyer enters the total daily time spent working on a case and lists all of the tasks worked on during the day, rather than separately itemizing the time spent on each task.” In re Margaret Mary Adams 2006 Trust, No. 61710, 2015 WL 1423378, *2 (Nev. March 26, 2015) (unpublished), (citing Welch v. Metro. Life Ins. Co., 480 F.3d 942, 945 n.2 (9th Cir. 2007)) (Note NRAP 36(c)(3)).
Courts recognize that block billing is a common practice. See, e.g., Daniele v. Puntillo, 97 A.D.3d 512, 513 (N.Y.App.Div. 2012). The Supreme Court of Nevada determined that the district courts can analyze block billed time entries under the Brunzell factors. Margaret Mary Adams 2006 Trust at *2. Rejecting the notion that across-the-board reductions of block billing were proper, the Court found that district courts must separately analyze each time entry. Id. The Supreme Court of Nevada has held that entries containing two to four tasks are amendable to analysis under Brunzell. Id. If the district court needs additional information, it should request it from the billing attorney. Id. Thus, the attorney should be prepared to provide additional information.
The second issue that regularly comes up is the billing of non-attorney time. State courts are typically willing to consider billed paralegal time, but what about those staff members who spend time doing basic work, such as organizing documents and exhibits? Their time is also part of reasonable attorney’s fees. Las Vegas Metropolitan Police Department v. Yeghiazarian, 129 Nev. Ad. Op. 81, 312 P.3d 503, 509 – 10 (2013) (analyzing NRS 17.115(4)(d)(3)). Again, attorneys are well advised to include this in their engagement letters.
The federal courts’ Lodestar analysis can produce different results
The federal courts take a similar approach to reasonableness, but with a much different result when it comes to hourly rates. Federal courts use the “lodestar analysis” which “is calculated by multiplying the number of hours the prevailing party reasonably expended by a reasonable hourly rate.” U.S. v. Pivaroff, No. 2:13-cv-01498-JCM-PAL, 2015 WL 6149217, at *2 (D. Nev. Oct. 19, 2015) (citing Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008). Reasonable hourly rates are “those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Id. (citing Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984)). Unlike Nevada state court decisions, the U.S. District Court for Nevada has made specific findings as to what is a reasonable hourly rate. Reviewing a number of these types of cases going back to 2012, the court in Pivaroff determined that $450 for a partner and $250 for an experienced associate was reasonable. Pivaroff, No. 2:13-cv-01498-JCM-PAL, 2015 WL 6149217, at *2. Until newer decisions come along, this appears to be the current “cap” for rates in federal matters regardless of what the state courts are doing.
In contractual disputes governed by Nevada law, a prevailing party clause may afford relief from this line of cases. In those instances, the federal courts will analyze fees under both the Brunzell factors as well as LR 54-14(b), which includes analysis of “the customary fee.” Branch Banking and Trust Company v. Estate of Saiid Forouzan RAD, et al., Case No. 2:14–cv–01947–APG–PAL, 2017 WL 2636487 (June 16, 2017), at p. *2.
In conclusion, the fees that a practitioner may be awarded could differ significantly depending on whether the case is in state or federal court in Nevada. Further, simply because an engagement letter with the client allows for certain fees does not mean the court will find those fees reasonable. Courts not only need to analyze the fees requested under Brunzell or the lodestar analysis, depending on the forum, but must also take into account NRPC 1.5, which prohibits the charging of unreasonable fees.
John M. Naylor has been licensed for 30 years and is a cofounder of Naylor & Braster, a Las Vegas law firm specializing in business litigation. Prior to founding the firm, he was a partner at Lionel Sawyer & Collins. Between 1995 and 1999, he was a judge advocate in the U.S. Air Force. He specialized in criminal prosecution and defense matters as well as representing the Air Force in contract disputes before the Armed Services Board of Contract Appeals.
The Age of Internet Defense – ABA Formal Opinion 477R and Its Applicability to Nevada Legal Practice
By Ryan Ellis, Esq.
In an age where Equifax data breaches and identity theft are commonplace, the internet feels like a modern wild west. The internet is a functionally lawless space where anything can (and does) occur. Given recent public exposure of large quantities of supposedly private data, businesses and organizations have begun to adopt new network security protocols. The law is no different. Where previous ABA ethics opinions freely allowed the use of email and the internet to store sensitive private data, there is new concern about the safety of client information. In May 2017, the ABA responded to these concerns with a new rule: Formal Opinion 447R.
The Background and Findings of ABA Formal Opinion 447R
In 1999, the ABA Standing Committee on Ethics and Professional Responsibility wrote Formal Opinion 99-413. That opinion concluded that attorneys have a reasonable expectation of privacy in email communications and may freely use electronic communications to discuss privileged matters with clients without disturbing attorney ethics requirements. Had technology not rapidly evolved over the last decade and a half, the 1999 rule would likely still govern electronic communications. However, due to the rapid development of new technologies, the ABA’s ethics committee wisely decided to author a new opinion.
The perpetual march of technological advancement resulted in a pseudo-obsolescence of the spirit of many ethics rules. While the text of the rules still applied, the ethics situations became different. To account for these recent changes, the ABA altered the model rules in 2012. These “technology amendments” included further instructions in Model Rule 1.6, requiring reasonable protection of client data by preventing inadvertent disclosure. No published opinion has yet undertaken an extensive examination of the effect of these new amendments as they relate to a breach of confidentiality online. Formal Opinion 447R is an attempt to explain the 2012 “technology amendments.”
Formal Opinion 447R briefly addresses the duties of competence (Rule 1.1) and communication (Rule 1.4), but the bulk of the opinion focuses on confidentiality (Rule 1.6). The opinion interprets the amendment to Model Rule 1.6 as not providing specific standards, but rather requiring appropriate care on a case-by-case basis. Attorneys should employ more stringent safeguards where the information is sensitive and is likely to be sought by third parties. Attorneys should also consider the cost and difficulty of implementing safeguards as well as the extent to which stringent safeguards could impair effective representation.
Formal Opinion 447R and Nevada Practice
While Nevada has generally adopted the ABA model ethics rules, many rules were either not adopted in full or edited. Rule 1.6, discussing attorney-client confidentiality, is one of those rules; however, for the purposes of protecting non-criminal attorney-client confidences, the Nevada rule and the model rule are identical. See Nev. Rules of Prof’l Conduct R. 1.6 model rule comparison (2014). This includes the 2012 model rules revisions, which makes Formal Opinion 447R relevant in Nevada. Id. at (c).
Unfortunately, the only Nevada case interpreting Rule 1.6(c) does not specifically discuss electronic communications. See In re Toigo, 385 P.3d 585 (Nev. 2016) (suspending an attorney’s law license for leaving confidential client documents in his former home after his eviction). That said, Rule 477R does provide sufficient guidelines for Nevada attorneys to follow.
Electronic communications do need to be sufficiently safeguarded to protect client information. In general, unencrypted email communication is still permissible under the rule (although not always); however, chat rooms and other less secure systems are unadvisable. Attorneys should also do due diligence when purchasing electronic communication services from vendors and ensure the vendor is credentialed, employs secure information safeguarding policies, and has sound hiring practices. Additionally, the opinion encourages attorney-client communication about electronic-security. Where appropriate, attorneys and clients may choose to have a contract regarding an attorney’s use of safeguards. In the new technology world, the general rule is that no attorney can be too careful.
Ryan Ellis, a partner with Howard & Howard, focuses his practice on commercial litigation, entertainment law, and real estate. Mr. Ellis has experience in state and federal litigation, arbitration, mediation, and other forms of alternative dispute resolution.
The Fee Dispute Committee Ruled Against Me! What Now?
By Joseph A. Liebman, Esq.
Attorney-client fee disputes are an unfortunate, yet unavoidable, aspect of the practice of law. They can lead to a host of ethical concerns, including whether to assert and perfect a retaining or a charging lien under Chapter 18 of the Nevada Revised Statutes, whether to withdraw from further representation, and whether to sue your client for non-payment of fees.
In 1996, the Supreme Court of Nevada enabled the Board of Governors to create a Fee Dispute Committee. (Supreme Court Rule 86(12).) Although establishment and implementation of such a committee surely did not resolve all of the ethical issues associated with attorney-client fee disputes, it did provide a neutral, private, and cost-efficient forum to attempt to resolve them.
The State Bar of Nevada offers a useful step-by-step description of the fee dispute process on its website, which includes the fee dispute application, the adverse party’s response, mediation, arbitration, the arbitration hearing, and the arbitration award. Steps for Fee Dispute Arbitration, https://www.nvbar.org/lawyerreferral/dispute-resolution/feedispute/steps-fee-dispute-arbitration/, last visited October 30, 2017. Similarly, the rules of procedure for the Fee Dispute Committee are fairly extensive and provide substantial clarity regarding many aspects of the process. State Bar of Nevada Dispute Arbitration Committee Rules of Procedure, April 13, 2016, https://www.nvbar.org/wp-content/uploads/Fee-Dispute-Rules-of-Procedure_April-13-2016_FINAL-1.pdf, last visited October 30, 2017.
However, the State Bar of Nevada’s step-by-step process and the rules of procedure are unclear in one respect—an appeal. The state bar’s website leads an attorney or a party to believe that the “State Chair” of the committee will decide the appeal. The rules of procedure have one section dedicated to appeals, which states that a “party to the fee dispute may not file an appeal on the merits of the arbitration decision.” Rules of Procedure, Appeals, Section A. The rules of procedure list three narrow instances in which a party may appeal to the Executive Council of the Fee Dispute Committee—arbitrator disqualification, a substantial and material procedural error, or actual fraud by any of the arbitrators. Id.
What can be done if the arbitration decision includes a factual or legal error (or errors) that adversely affected the attorney or the client? At first blush, the answer appears to be nothing. Thankfully, that is not the end of the story. The rules of procedure, while stating that a party cannot appeal the merits of the arbitration decision, do provide a vague reference to Supreme Court Rule 86(12). Rules of Procedure, Appeals, Section F. If the attorney or party is diligent enough to research that rule, it will find some very welcoming language in the very last sentence: “There shall be a right to de novo review in the district court of all awards arising out of any fee dispute system implemented pursuant to this rule.” Supreme Court Rule 86(12).
The Supreme Court of Nevada has confirmed that Supreme Court Rule 86(12) “plainly provides the right of de novo review in the district court” to a decision by the Fee Dispute Committee, and thus, “the district court … acts in an appellate or reviewing capacity….” Marquis & Aurbach v. Eighth Jud. Dist. Ct., 122 Nev. 1147, 1154, 146 P.3d 1130, 1135 (2006) (emphasis in original). According to the Supreme Court of Nevada, following the district court’s review, it “must either enter judgment on the committee’s award or modify the award in accordance with the conclusions reached during the de novo review and enter judgment on the modified award.” Id. Further, because the applicable standard of review is de novo, the much more stringent review standards under Chapter 38 of the Nevada Revised Statutes do not apply. Id. at 1155 n.8.
Thus, if the Fee Dispute Committee rules against you, do not fret. Ignore the limiting language in its Rules of Procedure and turn to Supreme Court Rule 86(12). The Supreme Court of Nevada was kind enough to provide everyone with the right to de novo review if the Fee Dispute Committee committed a factual or legal error (or errors) relating to the merits of the arbitration decision. But keep in mind that, once you file the petition for judicial review, your private fee dispute will now become a matter of public record. Yet, that is likely a small price to pay for a second bite at the apple.
Joseph A. Liebman, Esq. is a partner with Bailey Kennedy, LLP. He primarily practices within the areas of contract and real estate disputes, professional liability, and healthcare litigation.
By Frank M. Flansburg III, Esq.
From seven year old baseball to the practice of law, I am consistently reminded of the significance of a handshake. A handshake conveys professionalism and respect. Although most of us are taught to shake hands (particularly after an adversarial contest), the practice is often abandoned once we are professionals.
From an Early Age
As a young kid involved in sports or in arguments on the playground, disputes were resolved by a handshake. After every game, I shook hands with the other team. Shaking hands taught me to respect my competition and the rules of the game.
The Abandoned Practice
We often shake hands when we first meet someone, but not many of us shake hands after a hard fought appearance in court. To me, a handshake is important to show respect. A handshake does not mean that I am happy with the result; it conveys respect, professionalism, and decorum. I have worked to make it part of my practice that I shake hands before and/or after an argument. Win, lose, or draw, I want to demonstrate my respect for the Court, my respect for adverse counsel, and my respect for the rules.
Setting the Example
A handshake sets an example. I found myself in a strange position recently in a seven-year-old’s baseball game. One of the opposing coaches and I disagreed about a call; comments became argumentative. Keeping in mind that this was only seven-year-old baseball, I tried to diffuse the disagreement and held out my hand to shake his. Not only did he not shake my hand, he expressly refused, and walked away—in front of 24 seven-year-olds, their parents, and their families. In that moment, shaking my hand would not have meant that I was right; it would have simply meant that we respected one another and the rules.
I am pleased to report that no lawyer has refused when I have offered to shake hands after a contested court hearing. I have lost my fair share of hearings and after which, I always extend my hand to represent a good contest. I may wholeheartedly disagree with the decision, but above and beyond all things, I want to respect my adversary, the forum, and the rules.
Handshakes go even further to foster camaraderie between one another. When I was part of a larger firm, one of my partners suggested that whenever we see another partner we should shake each other’s hands to signal respect. I thought it was a good idea; but it never quite took flight. In my smaller practice, I can tell you that every single day has begun the same way: with my partner walking into my office and giving me a high five for a good start to the day. Maybe it is silly, but I look forward to that morning high five. It means that we are on the same team and in this together.
A handshake is simple. It is more than a salutation. So, if I shake your hand after a court hearing, feel free to make fun of me. That is fine. All that I am trying to express is good game, and I will get you next time.
Frank M. Flansburg III is a partner of Schwartz Flansburg, PLLC, where he is focused on helping his clients with commercial business disputes, contractual interpretation and formation, mechanics liens, partnership duties, real property disputes, business fraud, and more.
COMMUNIQUÉ is published eleven times per year with an issue published monthly except for July by the Clark County Bar Association, P.O. Box 657, Las Vegas, NV 89125-0657. Phone: (702) 387-6011.
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