Proposed Opinions

Rules, Procedure, Comments

All opinions of the Ethics Committee are predicated upon the North Carolina Rules of Professional Conduct. Any interested person or group may submit a written comment – including comments in support of or against the proposed opinion – or request to be heard concerning a proposed opinion. The Ethics Committee welcomes and encourages the submission of comments, and all comments are considered by the committee at the next quarterly meeting. Any comment or request should be directed to the Ethics Committee at Comments@ncbar.gov no later than April 6, 2026.

Council Actions

At its meeting on January 23, 2026, the State Bar Council adopted a proposed amendment to Rule 1.10 of the North Carolina Rules of Professional Conduct. The proposed amendment would permit the North Carolina Department of Justice and public defender offices to resolve certain imputed conflicts of interest by timely screening the disqualified lawyer and providing written notice as described in the Rules. The proposed amendment will be sent to the Supreme Court for approval. The council did not adopt any new formal ethics opinions this quarter.

Ethics Committee Actions

At its meeting on January 22, 2026, the Ethics Committee considered a total of seven inquiries, including the proposed amendment to Rule 1.10 referenced above. Three inquiries were sent to subcommittee for further study, including an inquiry concerning permissible administrative expense fees, an inquiry addressing attorney obligations in response to a data breach, and an inquiry exploring attorneys’ obligation to provide clients with electronic copies of documents. The committee also published three proposed formal ethics opinions for comment, including a revised version of Proposed 2025 FEO 3, Client Consent to Annual Rate Increase, which was previously published in 2025. The proposed opinions are found below. The Ethics Committee welcomes comments on the proposed formal ethics opinions. Comments may be submitted by email to comments@ ncbar.gov.

Proposed opinion clarifies when and how a lawyer may increase the billing rate for services during the representation.

Inquiry #1:

Client seeks to retain Lawyer for representation in a domestic case. Lawyer presents Client with a fee agreement outlining, among other things, the scope of the representation and the hourly billing rate Lawyer’s firm will charge Client for legal services during the representation that are provided by Lawyer, other lawyers at the firm, and support staff. Lawyer’s fee agreement also contains a clause that states the following:

The billing rate may change during the course of the representation. At least once each calendar year, the billing rates of all firm employees are reviewed and may be increased. Client will be notified on the client’s billing statement when these billing rate changes occur.

Client and Lawyer signed the fee agreement, and Lawyer’s representation of Client began.

Over the next year, Client received billing statements from the law firm charging Client the hourly rates stated in the fee agreement. Client timely paid each bill. One year into the representation, Client received a bill for the law firm’s services. The bill contained a 20% increase in the billing rate for the various firm employees that worked on Client’s case. Client received no advance notice of the increase before it was imposed. Client contacted Lawyer and objected to the imposed increase. Lawyer informed Client that Client had the right to terminate the representation if the rate was unacceptable to Client. Lawyer also explained that Client agreed to the potential increase in billing rates in the fee agreement, and that Client would still be responsible for the bill if Client terminated the representation because the services had already been provided. Desiring to not start over with a new lawyer, Client accepted the rate increase and paid the bill.

One year later, law firm increased the hourly billing rates again and imposed the increase on Client’s latest billing statement without notice to Client. Client again objected to the increase; Lawyer again noted that Client agreed to the potential increase in the original fee agreement and suggested Client terminate the representation if the rate was unacceptable.

May Lawyer increase the hourly rate billed to Client per the fee agreement?

Opinion #1:

No.

Rule 1.5 requires a lawyer to communicate to a client “the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible...preferably in writing, before or within a reasonable time after commencing the representation.” Rule 1.5(b); see Rule 1.5, cmt. [2]. Generally, after the representation begins, a lawyer may attempt to renegotiate a fee agreement with a client during the course of the representation, but a lawyer may not abandon or threaten to abandon a client to “cut the attorney’s losses or to coerce an additional or higher fee.” Rule 1.5, cmt. [5]. As noted in the comment to Rule 1.5:

Once a fee agreement has been reached between attorney and client, the attorney has an ethical obligation to fulfill the contract and represent the client’s best interests regardless of whether the lawyer has struck an unfavorable bargain. An attorney may seek to renegotiate the fee agreement in light of changed circumstances or for other good cause, but the attorney may not abandon or threaten to abandon the client to cut the attorney’s losses or to coerce an additional or higher fee. Any fee contract made or remade during the existence of the attorney-client relationship must be reasonable and freely and fairly made by the client having full knowledge of all material circumstances incident to the agreement. If a dispute later arises concerning the fee, the burden of proving reasonableness and fairness will be upon the lawyer.

Id.; see also RPC 166; cf. ABA Formal Ethics Op. 11-458 (2011) (Model Rule 1.5 does not have language in its comment that is similar to North Carolina’s Rule 1.5, cmt. [5]).

Here, Lawyer executed a fee agreement with Client setting forth the hourly rate to be billed for legal services provided, including a provision that permits Lawyer to increase the billing rate in an unspecified amount on an unknown, periodic basis. While not exactly a renegotiation of a fee agreement due to the consent of Client to some type of fee increase structure, if Lawyer desires to increase the billing rate under this agreement, Lawyer may not unilaterally increase the billing rate without reasonable notice to Client regarding the intended increase. Regardless of Client’s purported consent, Lawyer’s inclusion of a provision in the fee agreement that grants Lawyer the authority to unilaterally increase the billing rate without notice to the client and without limitation on the increase does not comply with Lawyer’s obligation to communicate to Client the basis or rate of the fee “before or within a reasonable time after commencing the representation.” Rule 1.5(b). Accordingly, Lawyer may not increase the billing rate under the fee agreement as described.

Importantly, whether Lawyer’s 20% increase to Client’s billing rate is permissible depends on whether the increase results in a fee that is clearly excessive. Pursuant to Rule 1.5(a), “[a] lawyer shall not make an agreement for, charge, or collect an illegal or clearly excessive fee or charge or collect a clearly excessive amount for expenses.” A number of factors must be considered in determining whether a fee is clearly excessive, including the time and labor required, the novelty and difficulty of the representation, the fee customarily charged in the locality for similar services, and the experience, reputation, and ability of the lawyer(s) providing legal services. Rules 1.5(a)(1) – (8). Prior to charging Client any fee—be it an initial fee or a proposed increase to the original fee or billing rate—Lawyer must determine that the fee to be charged is not clearly excessive.

Inquiry #2:

Same facts as Inquiry #1. Client refused to pay the increased hourly billing rate, and instead paid law firm the rate that was originally set out in the fee agreement. Lawyer informed Client that if Client did not pay the outstanding bill in full at the increased hourly rate, Lawyer would move to withdraw from the representation.

May Lawyer withdraw from representing Client based on Client’s refusal to pay the increased hourly rate?

Opinion #2:

Yes, provided the withdrawal complies with Rule 1.16 and the client received adequate notice of the proposed increase. Lawyer “may not abandon or threaten to abandon the client to cut the attorney’s losses or to coerce an additional or higher fee.” Rule 1.5, cmt. [5]; see Opinion #1. Although Lawyer may withdraw from the representation based on Client’s refusal to pay the increased hourly rate if Client receives adequate notice and the increased fee is not clearly excessive (see Opinion #3, below), Lawyer may not immediately withdraw under these circumstances due to the coercive effect withdrawal may have on Client. See also Virginia Ethics Op. 1705 (1997) (“[Changes to existing fee agreements] are permitted so long as they reflect a fairly negotiated agreement by the client and lawyer to modify or supplant their original understanding on fees, and are not the result of any undue influence or coercion by the lawyer.”).

Notably, Lawyer retains the ability to withdraw as provided in Rule 1.16(b).

Inquiry #3:

Same facts as Inquiry #1, except Client was notified of the specific intended increase to the hourly rate 30 days prior to the imposition of the increased hourly rate. If Client does not object to the proposed increase, may law firm increase the hourly rate?

Opinion #3:

Yes, as long as the resulting fee is not clearly excessive per Rule 1.5(a). As noted above, Lawyer may have an existing contract that provides for a fee increase (see Opinion #4, below) or seek to renegotiate the fee with Client “in light of changed circumstances or for other good cause,” and “[a]ny fee contract made or remade during the existence of the attorney-client relationship must be reasonable and freely and fairly made by the client having full knowledge of all material circumstances incident to the agreement.” Rule 1.5, cmt. [5]. Changed circumstances that may warrant revisiting an existing fee agreement include changes related to the factors used to determine whether a fee is clearly excessive, such as the time and labor required for the representation, market forces reflecting the fee customarily charged in the locality for similar legal services, and the experience and reputation of the lawyer performing the services. Rule 1.5(a)(1)-(8); see ABA Formal Ethics Op. 11-458 (“Changes in circumstances, including changes in the factors listed in Rule 1.5(a), occurring after the client-lawyer relationship was formed may cause the client, the lawyer, or both, to seek to revisit the fee arrangement.”). Furthermore, the reasonableness of an amended fee agreement with a client will depend on the context and circumstances of the representation and the attorney-client relationship, as well as a variety of considerations including but not limited to the sophistication of the client, the practice area and its related customs, the length of the representation and the complexity of the issue(s), and the history of interaction between the client and the lawyer. See ABA Formal Ethics Op. 11-458 (“The reasonableness of a modified fee agreement should therefore be assessed in relation to the circumstances at the time of the modification.”).

Here, Lawyer notified Client of the potential for an intended increase in the original fee agreement, then provided Client with reasonable notice of the specific intended increase prior to charging the increased rate. Client has “full knowledge of all material circumstances” regarding the fee agreement and the proposed increase, and Lawyer has provided sufficient reasonable notice to permit Client to make an informed decision about continuing or terminating the representation. Rule 1.5, cmt. [5]. Under these circumstances, if Client does not respond to Lawyer’s notice regarding the intended increase, Lawyer may infer Client’s acceptance of the modified fee agreement and impose the intended increase as described in the notice. ABA Formal Ethics Op. 11-458 (2011).

Inquiry #4:

Same facts as Inquiry #1, except the original fee agreement limits any increase in hourly rates to occur no more than annually and to be no greater than a set percentage. May Lawyer increase the hourly rate billed to Client based upon the fee agreement, regardless of any notice provided to Client?

Opinion #4:

Yes, provided the resulting rate is not clearly excessive. Under these facts, Lawyer has informed Client of “the basis or rate of the fee and expenses for which the client will be responsible...before or within a reasonable time after commencing the representation[,]” including any increase to the billing rate, in the fee agreement to which Client consented. Rule 1.5(b). If the resulting rate is not clearly excessive, Lawyer may increase the billing rate as set forth in the fee agreement. Rule 1.5(a). Although not required under these circumstances, Lawyer is encouraged to provide Client with reasonable notice prior to the imposition of any increased billing rate.

Inquiry #5:

Same facts as Inquiry #4. Client refused to pay the increased hourly billing rate, and instead paid law firm the rate that was originally set out in the fee agreement. May Lawyer withdraw from representing Client based on Client’s refusal to pay the increased hourly rate?

Opinion #5:

Yes. A lawyer may withdraw from representing a client for a variety of reasons, including if “the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled[.]” Rule 1.16(b)(6). Under these circumstances, the provision in the fee agreement describing the potential increase in fees was appropriate under the Rules of Professional Conduct, and therefore Client’s refusal to comply with the terms of the fee agreement constitutes Client’s “fail[ure] to substantially fulfill an obligation to the lawyer regarding the lawyer’s services[.]” Id. Provided Lawyer reasonably notifies Client about Lawyer’s withdrawal if Client refuses to comply with the fee agreement, Lawyer may withdraw from the representation based on Client’s refusal to pay the increased hourly rate.

Inquiry #6:

Same facts as Inquiry #1, except Client has requested or directed Lawyer to include the language set out in Inquiry #1 in the fee agreement. Does the analysis change if Client—rather than Lawyer—requests or insists upon the inclusion of language permitting a periodic, unspecified fee increase such as that set out in Inquiry #1?

Opinion #6:

Yes. The analysis set out in Opinions #1-5 addresses the scenario where Lawyer is requesting or requiring Client agree to the fee increase language as a condition of representation; the analysis also presumes Client is an infrequent or unsophisticated user of legal services. Under these facts, Client has requested or insisted upon the inclusion of broad language permitting Lawyer to increase fees on a periodic basis without advance notice, indicating Client’s understanding, consent, and desire for such an arrangement, presumably for the convenience of Client. As noted in Opinion #3, above, the reasonableness of an amended fee agreement with a client will depend on the context and circumstances of the representation and the attorney-client relationship. The inclusion of such fee increase language originating from Client, rather than Lawyer, is a relevant consideration in determining the provision’s permissibility. Accordingly, Lawyer may include the provision in a fee agreement permitting a periodic, unspecified fee increase when Client, on Client’s own initiative, requests or instructs Lawyer to include such language. Additionally, the notice required—if any—when implementing the fee increase may follow the terms of the provision requested by Client in the fee agreement. Any increase in fees under these circumstances must still not be clearly excessive pursuant to Rule 1.5(a). See Opinion #1.

Inquiry #7:

Corporate Client is a large corporate entity that regularly uses legal services, and whose constituents have regularly entered agreements with lawyers on behalf of Corporate Client for legal services. Law Firm has previously been retained by Corporate Client on multiple occasions, and Corporate Client now wants to retain Law Firm for assistance with a particular aspect of its business; Corporate Client and Law Firm intend the relationship to be ongoing and anticipate the representation will last multiple years. Law Firm proposes the fee agreement include a provision permitting Law Firm to increase fees on a periodic basis and in an unspecified amount for the lawyers assigned by Law Firm to work on Corporate Client’s matters; Law Firm does not intend to provide advance notice of any increase, but will inform Corporate Client when the increase is implemented. Corporate Client agrees to this fee increase structure. Does the analysis set out above change under these circumstances?

Opinion #7:

Yes.

Again, as set out in Opinion #3, the reasonableness of an amended fee agreement with a client will depend on the context and circumstances of the representation and the attorney-client relationship, as well as a variety of considerations including but not limited to the sophistication of the client, the practice area and its related customs, the length of the representation and the complexity of the issue(s), and the history of interaction between the client and the lawyer. See ABA Formal Ethics Op. 11-458 (“The reasonableness of a modified fee agreement should therefore be assessed in relation to the circumstances at the time of the modification.”). The Rules of Professional Conduct and prior ethics opinions have recognized that the level of client sophistication and familiarity with the engagement of legal services is a relevant consideration when determining a lawyer’s professional responsibility in a given situation. See, e.g., Rule 7.3(b)(3) (creating an exception to the general prohibition on direct solicitation for legal services when the potential client is a “person who routinely uses for business purposes the type of legal services offered by the lawyer.”); Rule 5.7, cmt. [8] (recognizing that, when offering law-related services, “a sophisticated user of law-related services, such as a publicly held corporation, may require a lesser explanation than someone unaccustomed to making distinctions between legal services and law-related services”); 2009 FEO 11 (explaining that a lawyer seeking consent to a conflict from an unsophisticated individual client may need to provide more disclosure and explanation to effectively obtain the client’s consent).

As previously stated, the analysis provided in Opinions #1-5 presumes the client is not a regular or sophisticated consumer of legal services. Here, Corporate Client is a sophisticated and frequent user of legal services that has agreed to the proposed periodic fee increase structure at the outset of the representation. To impose the same notice requirements on Corporate Client as an unsophisticated consumer or infrequent user of legal services would be impractical, if not a hinderance to the consistent provision of legal services and effective maintenance of the attorney-client relationship. Accordingly, Law Firm is not required to adhere to the notice requirements set out above when engaging with a sophisticated or regular user of legal services. Law Firm must, however, ensure that Corporate Client understands the terms of the fee agreement, including the proposed fee increase structure, and Law Firm must ensure any implemented fee increases are not clearly excessive. Rule 1.5.

Comment on this opinion.

Proposed opinion rules that a lawyer may not refer a client in a closing transaction to a title agency in which the lawyer’s law partner has a financial interest.

Background:

Attorney A is a real estate lawyer and a partner with Law Firm X. Attorney B is also a real estate lawyer and a partner with Law Firm X. Attorney B owns a financial interest in Title Company.

Inquiry #1:

May Attorney B own a financial interest in Title Company?

Opinion #1:

Yes.

Nothing in the Rules of Professional Conduct prohibits a lawyer from owning a financial interest in Title Company. See RPC 185 (“This opinion does not prohibit a lawyer from owning stock in a publicly traded title insurance company.”). Whether Attorney B is legally permitted to own a financial interest in Title Company is a question outside the scope of this inquiry.

Inquiry #2:

Client Smith retained Attorney B to serve as closing attorney for a real property transaction. May Attorney B recommend Title Company to Client Smith and prepare a title opinion for obtaining title insurance through Title Company?

Opinion #2:

No.

Lawyers are prohibited from engaging in concurrent conflicts of interest. Rule 1.7. “A concurrent conflict of interest exists if...the representation of one or more clients may be materially limited...by a personal interest of the lawyer.” Rule 1.7(a)(2). The Ethics Committee has long concluded that it is a conflict of interest for a lawyer to serve as a closing attorney in a real property transaction while also serving as the title agent for the purpose of obtaining title insurance based upon the lawyer’s personal interest in both roles, and that this conflict of interest cannot be waived. See, e.g., RPC 185; 2009 FEO 14. RPC 185 states:

Even an insubstantial interest in a title insurance agency, however, could materially impair the judgment of a closing lawyer. RPC 49 addresses a closing lawyer’s duty to his or her client when the lawyer owns shares in a realty firm that will realize a commission upon the closing of the transaction. RPC 49 states that the conflict of interest is too great to be allowed even if the client wishes to consent. This conflict is also present when a title agency, and, therefore, indirectly the closing lawyer who owns an interest in the title agency, will receive compensation from the client as a result of the closing of the transaction. The lawyer’s personal interest in having the title insurance agency receive its compensation could conflict with the lawyer’s duty to close the transaction only if it is in the client’s best interest.

In 2009 FEO 14, the Ethics Committee concluded that the personal interest conflict identified in this scenario is also present when the lawyer’s spouse has the ownership interest in the title company:

The lawyer’s personal interest in having his spouse’s title insurance agency receive its compensation may conflict with the lawyer’s duty to close the transaction only if it is in the client’s best interest. In addition, the lawyer’s personal relationship with the owner of the title insurance company will influence the lawyer’s choice of the spouse’s company as the insurer, as well as the vigorousness of the lawyer’s negotiations with the title company on his client’s behalf. Issues of title insurance coverage may have to be negotiated between the closing lawyer and the insurer. The lawyer’s client and the insurer will necessarily have competing interests as to the extent of the coverage and the amount of the premium.

2009 FEO 14. The opinion goes on to conclude that

[t]he conflict of interest is too great to be allowed, even with the client’s informed consent. A closing lawyer must be able to make an independent recommendation of a title insurance company to his client, unbiased by any personal interest. In addition, a lawyer opining on title to property should be independent from the title insurance agency issuing the title insurance in reliance upon that opinion. This is consistent with the emphasis that the North Carolina legislature has placed on the professional and financial independence of the closing lawyer from the title insurance agency. See, e.g. N.C.G.S. § 58-26-1(a) (title insurance company may not issue insurance as to North Carolina real property unless the company has obtained the opinion of a North Carolina licensed attorney who is not an employee or agent of the company) and N.C.G.S. § 58-27-5(a) (lawyer who performs legal services incident to a real estate sale may not receive any payment, directly or indirectly, in connection with the issuance of title insurance for any real property which is a part of such sale).

Id.

The Ethics Committee agrees with these prior opinions and concludes again that it is a non-waivable conflict of interest for Attorney B to serve as closing attorney while also recommending Title Company—in which Attorney B has a financial interest—to Client Smith and preparing a title opinion for obtaining title insurance through Title Company.

Inquiry #3:

Client Smith retained Attorney A for a real property closing transaction. May Attorney A recommend Title Company to Client Smith and prepare a title opinion for obtaining title insurance through Title Company while Attorney B remains a partner at Law Firm X and retains a financial interest in Title Company?

Opinion #3:

No.

A conflict of interest pursuant to Rules 1.7 and 1.9 experienced by one attorney at a law firm is imputed to the other members of the law firm. Rule 1.10(a). Generally, however, a conflict of interest based upon a personal interest of the prohibited lawyer is not imputed to the other members of a law firm so long as “the prohibition does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.” Id. The comment to Rule 1.10 provides the following example of such a scenario:

[I]f an opposing party in a case were owned by a lawyer in the law firm, and others in the firm would be materially limited in pursuing the matter because of loyalty to that lawyer, the personal disqualification of the lawyer would be imputed to all others in the firm.

Rule 1.10, cmt. [3].

Title insurance, while not required in all real property transactions, is frequently a required and critical component that must be obtained to carry out the goals of the representation (to wit: to successfully complete the closing in the client’s best interests). Here, Attorney B has a personal interest conflict that prohibits him from representing Client Smith in the underlying transaction based upon Attorney B’s financial interest in Title Company. Although personal interest conflicts are generally not imputed to the rest of the firm, the combination of Attorney B’s financial interest in Title Company, Attorney B’s relationship with Law Firm X, and the important (if not required) role of title insurance in completing the representation “present[s] a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm” such that the personal interest conflict is imputed to the other members of Law Firm X, including Attorney A. Similar to the example from the comment to Rule 1.10, other members of Law Firm X may be materially limited by their loyalty to Attorney B when exercising their independence during closing in selecting a title insurance company and negotiating the terms of title insurance. Accordingly, Attorney B’s conflict of interest in the underlying matter pursuant to Rule 1.7 (see Opinion #2) is imputed to the other members of Law Firm X, including Attorney A, and Attorney A may not refer Client Smith to Title Company. Additionally, this conflict cannot be waived. See Opinion #2.

Notably, this opinion and the described imputation of a personal interest conflict under these circumstances is limited to the issue of title insurance due to the important and often necessary role title insurance plays in carrying out the goals of the representation. This opinion does not address a lawyer’s ability to refer a client to other ancillary services—in which a lawyer may have a financial interest—that are related to the legal services provided but the absence of which does not impact the lawyer’s ability to carry out the goals of the representation. A lawyer may continue to make referrals to such services provided the referral is permissible under the Rules; this opinion does not overrule any prior ethics opinion addressing those different circumstances.

Inquiry #4:

Does the answer to Inquiry #3 change if Attorney A is an associate with Law Firm X rather than a partner?

Opinion #4:

No. Attorney A’s subordinate status to Attorney B in this scenario creates a greater material limitation on Attorney A’s representation of Client Smith given Attorney A’s personal and professional interest in maintaining a positive, productive, and personally beneficial relationship with a law firm partner. See Opinion #3.

Comment on this opinion.

Proposed opinion rules that when a lawyer is required by the rules to refund an unearned fee, the lawyer may not condition the resolution of a fee dispute on the client’s agreement to release claims related to the representation and/or refrain from publishing negative comments about the lawyer or the law firm and may not include the same or similar language in a fee agreement.

Inquiry #1:

Lawyer represented Clients in a civil matter. At the end of the representation, Clients filed a petition for resolution of a disputed fee with the State Bar’s Fee Dispute Resolution Program. In the petition, Clients allege that Lawyer did not perform legal services diligently or competently and did not earn the fee they paid. Lawyer is participating as a respondent in the mandatory fee dispute resolution process. Lawyer denies that she did not perform legal services diligently or competently, and denies that she did not earn the fee paid. Lawyer indicates that she is nonetheless willing to resolve the fee dispute by refunding a portion of the fee—to buy her peace—in exchange for Clients’ execution of a release that reads:

We, [Clients], do hereby release [Lawyer and Lawyer’s law firm] from any and all liability for [the representation]. We also agree not to publish any negative comments about [Lawyer] or her law practice.

The consideration for this release is $750 from [law firm]. A check for that amount shall be mailed once this contract is signed in the presence of a notary and sent back to [Lawyer].

As a condition for resolving a fee dispute, may Lawyer obtain a collateral benefit—such as requiring Clients to sign a release of all liability claims arising from the representation—in exchange for a partial refund of the legal fee?

Opinion #1:

It depends.

Under Rule 1.5(a) of the Rules of Professional Conduct, a lawyer may not charge or collect an excessive fee. If, at the conclusion of the representation, Lawyer knows or should know that a portion of the fee collected was unearned, Lawyer must refund the unearned portion. Upon termination of representation, a lawyer shall surrender property to which the client is entitled and refund any advance payment of fee or expense that has not been earned or incurred. Rule 1.16(d). In such circumstances, Lawyer may not obtain a collateral benefit and condition the refund on Clients’ agreement to release all liability claims arising from the representation.

However, if after reviewing the circumstances Lawyer reasonably believes that competent and diligent representation was provided but the Clients are dissatisfied, the fee is properly considered disputed. In that situation, and subject to the requirements of Rule 1.8(h), Lawyer may offer a partial refund in exchange for Clients’ execution of a release of all liability claims arising from the representation.

Rule 1.8(h)(2) provides that “a lawyer shall not settle a claim or potential claim for such liability with an unrepresented client or former client unless that person is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel in connection therewith.” Accordingly, before negotiating a release of potential claims, Lawyer must:

1. Advise Clients in writing of the desirability of seeking independent counsel; and

2. Provide Clients a reasonable opportunity to consult such counsel.

Provided that these requirements are satisfied, Lawyer may include in a settlement agreement resolving the fee dispute filed with the State Bar a release of all claims related to the representation. Notwithstanding the foregoing, the release may not include language that prohibits Clients from filing a grievance with the State Bar. See RPC 84.

Finally, the facilitators of the State Bar Fee Dispute Resolution Program have no authority to determine when a fee has been earned. When there is a legitimate dispute over whether the fee was earned, the fee dispute process will conclude in an impasse. Lawyer and Clients may, however, negotiate settlement terms—including any release—outside of the State Bar fee dispute process.

Inquiry #2:

Same facts as Inquiry #1. As a condition for resolving a fee dispute, may Lawyer obtain a collateral benefit—such as including a non-disparagement clause in a settlement agreement —in exchange for a partial refund of the legal fee?

Opinion #2:

It depends. If it is clear that Lawyer owes a refund, she may not condition the settlement of the fee dispute with a requirement that Clients sign the release containing a non-disparagement clause. If the fee is truly in dispute, Lawyer may negotiate a settlement that results in the lawyer receiving the collateral benefit of a narrowly tailored non-disparagement clause. See Opinion #1.

A broadly worded non-disparagement clause—particularly one that bars a client from making any negative public comment—could impermissibly restrict the client’s rights, including the ability to file a grievance with the North Carolina State Bar or to provide truthful public commentary about their legal experience. Such a clause can appear to coerce silence and deter clients from reporting legitimate concerns, which undermines the public interest in the regulation of the legal profession.

While it is understandable that Lawyer wishes to protect her professional reputation, that interest must be balanced against the client’s rights and the lawyer’s ethical obligations under the Rules of Professional Conduct. Any restrictions in a fee-dispute settlement agreement must therefore be narrowly tailored. A non-disparagement clause is permissible so long as it:

1. Does not interfere with the client’s ability to file a grievance with the North Carolina State Bar or any other regulatory authority, or to participate in the disciplinary process;

2. Is not coercively presented as a condition of resolving the fee dispute; and

3. Does not limit the client’s access to the Fee Dispute Resolution Program or other disciplinary procedures.

Lawyer and Clients may negotiate settlement terms—including a narrowly tailored non-disparagement clause—outside of the State Bar fee dispute process. See Opinion #1.

Inquiry #3:

Lawyer entered into a representation agreement with Client, reading in part:

You and the Firm agree and request that this retainer agreement will remain confidential, and the parties agree that all matters involving the representation or any communications between attorney and client are to remain confidential on both sides. It is agreed by client that he/she shall refrain from any type of internet postings or public internet communications of any kind including social media, review sites, etc., with regard to any aspect of this representation, and that any such postings may operate to waive confidentiality and expose certain amounts of client’s information to the public. Full confidentiality by both sides is hereby confirmed before, during, and after the representation and is a condition to employment being accepted by lawyer.

May Lawyer include this provision in the representation agreement?

Opinion #3:

No. The Consumer Review Fairness Act (CRFA) of 2016 generally applies to lawyers and law firms, as it prohibits businesses from using non-disparagement clauses in form contracts that restrict consumers’ ability to post honest reviews. Consumer Review Fairness Act of 2016, Pub. L. No. 114-258, 130 Stat. 1355, sec. 2(b)(1)(A) (2016). This means that if a law firm uses a standardized contract with a clause preventing clients from leaving negative reviews, that clause is likely void under the CRFA. Id.

Lawyers have a professional responsibility to review the law to determine if a non-disparagement clause can be included in the written fee agreement as a condition of employment of the lawyer. Lawyers must follow the law; failure to follow the above-referenced law in this scenario would be prejudicial to the administration of justice in violation of Rule 8.4(d). If the law prohibits the use of language in a fee agreement to prevent clients from posting comments about the lawyer and her services, the lawyer cannot include a non-disparagement clause in the written fee agreement.

Inquiry #4:

May Lawyer condition her representation of Client upon Client’s execution of a representation agreement containing this provision?

Opinion #4:

No. See Opinion #3.

Inquiry #5:

Same facts as Inquiry #3. May Lawyer enforce the provision described in Inquiry #3 against Client by civil action for damages, termination of services, claim of offset for unearned fees, or other remedy available at law or in equity?

Opinion #5:

No. See Opinion #3. 

Comment on this opinion.