You have asked the Professional Guidance Committee for guidance as to your inquiry dated August 27, 1987. Your inquiry sets forth the following facts:
You are a Philadelphia law firm which concentrates its practice in plaintiff's personal injury litigation. All of your cases are handled pursuant to a written contingent fee agreement, which specifically states that the attorneys have accepted employment "without payment of an hourly fee for the investigation and legal work they will perform." Further, your present fee agreement provides that clients must pay "the expenses of suit, including deposition costs, investigation fees, costs of witnesses, expert witnesses (if any)."
You have recently installed a computerized legal research system in your office and wish to include in the "expenses of suit," for which the client is ultimately responsible, the reasonable costs of the computer-aided legal research. You have stated that the clients will not be billed for the attorneys' time, and that the charges will be identified by client and research topic.
You have asked whether there is any "ethical constraint" against such a practice, citing Wehr v. Burroughs Corporation, 619 F.2d 276 (3d Cir., 1980), which allowed recovery for the costs of computer-aided legal research.
Wehr involved a fee petition under the Age Discrimination in Employment Act, and did not address the issue of billing for such costs in the context of a contingent fee agreement. Arguably, legal research, even if computer-aided, is so close to "legal work" that clients should not be billed for this cost; however, your agreement specifically states that clients will not incur any charges for the "legal work" of the attorneys, and even computer research requires a lawyer's efforts in formulating and modifying requests and analyzing the results. You have stated that you will not charge for the attorney's time in performing these tasks.
All law firms, whether working on a contingent fee agreement or an hourly basis, routinely bill for telephone calls, postage and photocopying. Computer-aided legal research, like photocopying, is merely a technological advance which, as the Wehr opinion points out, "is certainly reasonable, if not essential, in contemporary legal practice."
There is, however, no provision in the Code of Professional Responsibility, nor in the Model Rules of Professional Conduct, which either prohibits or permits the practice of billing for computer time for legal research. DR 2-106, entitled "Fees for Legal Services," merely provides that a lawyer may not contract for or charge an "excessive fee"; fees must be reasonable. DR 5-103(B), entitled "Avoiding Acquisition of Interest in Litigation" provides:
... a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence, provided the client remains ultimately liable for such expenses.
[Emphasis added.] Thus, the Code does not provide a complete list of costs that may be charged to a client.
The Model Rules of Professional Conduct, which will become effective in Pennsylvania in April of 1988, also do not address this issue. Model Rule 1.5 provides in part:
A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted before or after the contingent fee is calculated.
Model Rule 1.8 merely permits a lawyer to advance expenses of litigation, and differs from the Code only in that the repayment of costs by the client may be contingent on the outcome of the matter.
No previous opinion issued by this Committee addresses the specific issue of whether computer-related costs for legal research may be included within the definition of "expenses of litigation." In fact, no ethics opinion in any jurisdiction has been found which addresses this issue. The only opinions that are tangentially relevant provide that overhead may not be included in costs. In the context of your question, you may bill the clients for the cost to you of computer time for that client's case and no more. Even though no ethical rule prohibits you from charging clients for these costs, a few cautionary words are offered here.
Due to the nature of your practice, it is likely that your clients will not be as legally sophisticated as those which employ the major law firms. Therefore, it is essential that your contingent fee agreement include a specific written disclosure of the charge, that clients be given a detailed and complete explanation of the charge, and that they consent to be billed for this cost. This method, of course, can only be used in the case of future clients. For those clients who have already signed a contingent fee agreement, a written disclosure and verbal explanation of this new item of costs must be provided the client.
Only if the present clients consent after explanation, and sign an addendum to the original agreement, may they be billed for computer-related charges. It should be noted that any present clients who refuse to consent should not be prejudiced by such a refusal. Computer-aided legal research should be used in those cases just as if the clients had agreed to be billed for the cost.
In summary, the practice of billing for computer-aided legal research is permissible in the contingent fee context as long as the fee agreement explicitly spells out that such costs will be billed to the client, and provides an explanation of the nature of computer-aided legal research.