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

litigation matters.


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.