LEO: Fees - Overhead Charge LE Op. 1056
Fees - Overhead Charge.
March 22, 1988
You advise that your firm charges a four percent overhead charge, based
upon the amount of the fee for items such as telephone expenses (local and
long distance), telecopier charges, postage, routine duplicating, local
travel (including tolls and parking), routine secretarial overtime and
deliveries made by your firm personnel. Your firm does not otherwise bill
these expenses. You also advise that prior to charging the overhead fee, a
written fee agreement is executed by the client.
You wish to know (1) whether the surcharge is ethical in any case, and (2)
whether the surcharge is ethical in a contingency fee situation. LE Op.
710 we believe is dispositive of your inquiries.
In LE Op. 710, the Committee opined that it is not improper in matters
not involving litigation to charge a client a predetermined percentage of
the legal fee as administrative costs, provided that the attorney explains
fully to the client the method by which the client's bill will be
calculated and the client consents.
In matters involving litigation, the client must pay the actual cost
associated with the case file. Accordingly, the Committee opines that it
would be improper for you to charge the client a percentage of overhead in
Following the rationale of LE Op. 710, the Committee opines that this "
administrative charge" would be improper in contingent fee matters. In a
contingent fee matter that you describe, should there be no recovery, the
client would not be responsible for the costs associated with the case
file; this would be improper pursuant to DR:5-103(B).
Committee Opinion March 22, 1988
See also LE Op. 1237.