I. GETTING AND KEEPING CLIENTS
II. TYPES OF ADVERTISING
III. WHO IS THE LAWYER FOR THIS CLIENT?
IV. FINANCIAL ARRANGEMENTS WITH THE CLIENT
V. STATUTORILY LIMITED FEES AND ILLEGAL FEES
VI. COLLECTING FEES
VII. SERVING THE CLIENT THROUGH ALTERNATIVE DISPUTE RESOLUTION

BUSINESS DEVELOPMENT;
FEE AGREEMENTS

I. GETTING AND KEEPING CLIENTS

A. The Traditional Ways

1. Professional Notices, Letterheads, Offices and Law Lists. Rule 7.5.

2. Friends, Family and Acquaintances.

Building a Reputation and Getting Exposure.

a. Through community activities including service clubs, churches and synagogues and charitable works.

b. Through educational and public relations programs about our legal system.

3. Former Clients.

Through demonstrated professional competence including thorough preparation, familiarity with applicable law and timely delivery of services (e.g., returned phone calls).

4. Other Lawyers.

5. Through Concentration of Practice.

B. Advertising and Marketing of Services

1. A Phenomenon of the Last Three Decades.

a. Bates v. State Bar of Arizona, 433 U.S. 350 (1977), declaring lawyer advertising within the category of constitutionally protected commercial speech.

i. Blanket suppression of advertising by attorneys violates the free speech clause of the First Amendment.

ii. False or misleading advertising can be restrained. Rule 7.1(a).

b. Economic considerations underlying Bates.

i. Restrictions on advertising serve to perpetuate market position of established lawyers. Proper advertising is now allowed so as to aid the new competitor-attorney in penetrating the market.

ii. Proper advertising serves to inform the public of the availability, nature and price of professional services.

iii. By informing the public, lawyer advertising allocates resources in the free enterprise system.

c. Virginia after Bates.

i. A lawyer may advertise through written, recorded or electronic communications, including public media. Rules 7.1 and 7.3.

ii. Advertising must not be false or misleading. Advertising or other claims that convey an impression that the ingenuity of the lawyer rather than the justice of the claim is determinative are likely to be misleading. Rule 7.1, Comment 2.

iii. Advertisements may be false or misleading if they contain misleading fee information; state or imply that the outcome of a legal matter is not related to its facts or merits; make comparisons which cannot be factually substantiated; create unjustified expectations about the results the lawyer can achieve; contain specific or cumulative results without a disclaimer that such results do not predict a similar result in the future. Rule 7.1 and Comments 1 through 5.

iv. Are further limitations consistent with Bates v. Arizona? Yes, if excesses rise to the level of misleading or deceptive advertising.

v. All lawyer advertisements must include the name and office address of a Virginia licensed attorney responsible for its content or in the alternative, the firm may place the name of the responsible attorney on file with the Virginia State Bar. Rule 7.1 (c).

2. The Standing Committee on Lawyer Advertising and Solicitation.

a. The Standing Committee on Lawyer Advertising and Solicitation was created by the Supreme Court of Virginia in 1992 and sunsetted in 2010.  During the course of their existence, the Advertising Committee  issued advisory legal ethics opinions in the areas of lawyer advertising and solicitation.  The responsibility of monitoring and enforcing the rules regarding lawyer advertising and solicitation was transferred to the Standing Committee on Legal Ethics and the Office of Bar Counsel in those cases where disciplinary enforcement is deemed necessary.  Much of the monitoring of lawyer advertising is staff generated and includes reviewing all media including print, television, radio, and Internet.  The key component of the monitoring process is a non-compliance letter that informs the lawyer that his or her ad does not comply with an applicable rule.  Staff requests the lawyer to rectify the non-compliance problem in exchange for closing the informal investigation which creates no disciplinary record for the lawyer.  This “proactive” approach keeps lawyer advertising out of the disciplinary process except in rare cases of recalcitrant lawyers who refuse to rectify the problem informally or lawyers who engage in a pattern of repeated violations of the same rule.

b. The Standing Committee issued a compendium opinion, LEO 1750, in March 2001 summarizing twelve advertising opinions that it has issued between April 1993 and February 2000. This opinion reviews the requirements of Rules 7.1 through 7.5, holding that:

i. Use of Actors in Lawyer Advertising: use of actors as employees in a law firm is misleading and deceptive absent a clear disclosure that the actor is not a member or employee of the firm or that the depiction is a dramatization.

ii. Use of "No Recovery, No Fee" Advertising that promises "no recovery, no fee" is misleading without additional language that litigation or court costs are payable regardless or outcome; "guarantee to win" or "we are paid only if you collect" are also misleading because there is no explicit reference to a legal "fee." This language implies that the client will not have to pay fees or costs and expenses regardless of outcome.

iii. Use of Fictitious Name: It is misleading and deceptive for an attorney or firm to advertise using a fictitious name, such as "AA Attorneys", unless the attorney or firm actually practices under that name and displays it on its letterhead and office sign. (See also LEO 1492, holding

that is improper for a sole practitioner to use the term "Attorneys at Law" on his or her letterhead.) See also LEOs 935 and 937.

iv. Advertising that an Attorney Must be Consulted: It is a violation of Rule 7.1 to advertise that a person injured in an automobile accident must consult with a lawyer before speaking to the insurance company because there is no such legal requirement.

v. Participation in Lawyer Referral Service: A lawyer may advertise in lawyer referral services and joint marketing arrangements provided such advertising is not false, fraudulent, misleading or deceptive. See also LEOs 926, 1348 and 1543.

vi. Advertising Specific or Cumulative Case: It is misleading to advertise specific case results, whether individual or cumulative, because the results obtained in specific cases depend on a variety of factors and each legal matter consists of circumstances peculiar or unique to that specific case.  Rule 7.2(a)(3) now allows the advertising of specific or cumulative case results with an appropriate disclaimer that explains these distinctions and sets specific guidelines for placement, color and type face of the disclaimer. Also use of statements or claims such as "the best lawyers" and "the biggest earnings" are self-laudatory and amount to comparative statements which cannot be substantiated and violate Rule 7.1 (a)(3).

vii. Testimonials and Statements by Third Parties: Statements made by third parties about a lawyer or law firm such as "they are the best" or "they will get you quick results" are improper comparative statements unless the comparison can be factually substantiated.

Note: Although LEO 1750 retains its vitality, Rules of Professional Conduct 7.1 through 7.5 then in effect, have been revised, effective July 1, 2013. Other than specific or cumulative case results, examples of statements or claims considered to be “false or misleading” have been taken out of Rule 7.1 and the now-deleted Rule 7.2, and placed in the Comments to Rule 7.1.

c. A multi-jurisdictional law firm complies with Rule 7.5 (b) by noting on its letterhead with an asterisk placed next to the name of those lawyers in the law firm not admitted in Virginia with a notation reading "Admitted to a bar other than Virginia" in small print. LAO A-107

d. Though truthful, a law firm’s claim that "we have obtained the largest verdict in the city" is inherently misleading and thus violates Rule 7.2(a)(3) without the appropriate disclaimer. LAO A-109.Note: Rule 7.2 was deleted, effective July 1, 2013. See Rule 7.1, Comments 3 and 4.

e. Lawyer advertising and solicitation on the Internet is subject to regulation under Rule 7.1 of the Rules of Professional Conduct. LAO A-110. See also Rule 7.3(c)’s requirement that solicitation or advertising sent by e-mail must have “ADVERTISING MATERIAL” at the beginning and ending of any recorded or electronic communication unless the recipient is another lawyer, has a family, personal, or prior professional relationship with the lawyer, or has had prior contact with the lawyer. In Hunter v. Virginia State Bar, Record No. 121472 (2013), the Virginia Supreme Court held that Mr. Hunter’s blog posts, available on his firm’s website, detailing his victories in court, were commercial speech subject to regulation, and that the disclaimers required by the Virginia Rules of Professional Conduct were thus applicable, rejecting his argument that he was not subject to discipline because his blog posts were political speech fully protected by the First Amendment.

f. Where an attorney has an L.L.M. in Taxation and is a CPA and a certified financial planner, she may advertise as a "tax specialist" so long as the advertisement contains the disclaimer required by Rule 7.4 (d) that the Virginia State Bar has no mechanism in place to certify specializations. LAO A-111.

g. A lawyer may not circumvent the prohibition against comparative statements by using client testimonials. LAO A-113. See, Rule 7.1, Comment 6.

h. Claims such as "the best," even though based on an attorney’s inclusion in a publication entitled "The Best Lawyers in America," are nevertheless self-laudatory and amount to comparative statements which cannot be factually substantiated. A firm cannot suggest that it is "the best" merely because one or two attorneys are listed in such a publication. Such statements are misleading and deceptive to the public.  A truthful statement that a lawyer is included in a publication such as The Best Lawyers in America is permitted LAO A-114.

C. Legitimate Restraints on Advertising

Decisions involving specific statements and targeted mail.

1. Bates v. Arizona, supra, involved a newspaper advertisement that the attorneys were operating a "legal clinic" offering "legal services at very reasonable fees."

2. Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985), upheld the attorney's right to place newspaper copy advertising his availability to handle DWI criminal cases and Dalkon Shield civil cases. Such advertising was held not to involve prohibited pressure or coercion on a prospective client. Because it contained truthful, non-deceptive information regarding the legal rights of prospective clients, it could not be restrained.

a. However, the Court upheld the State's reprimand of counsel for stating "full legal fee [would be] refunded" if the client was convicted of drunk driving because

i. Ad implied a contingent fee based on outcome of criminal case.

ii. Ad did not mention likelihood of plea bargain in which client would not be convicted of "drunk driving," hence would owe full fee.

b. Court upheld reprimand because the civil ad failed to mention that "costs" would be owed by client in Dalkon Shield case, even if no fees were payable.

3. Shapero v. Kentucky Bar Association, 486 U.S. 466 (1988), held that direct mail solicitation, targeted to persons with specific legal problems (property about to be foreclosed upon) was constitutionally protected. However, in a recent case Florida Bar v. Went for It, 514 U.S.618 (1995), the Supreme Court upheld a 30 day ban on direct targeted mailings by lawyers as Florida had produced evidence that such mailings caused harm. Attempts in other states to regulate targeted mail solicitation have met legal challenge.

A Maryland statute prohibiting direct mail solicitation within 30 days of a person’s arrest for a criminal misdemeanor traffic offense violates the First Amendment. Ficker v. Curran, 950 F. Supp. 123 (D. Md. 1996), aff’d 119 F.3d 1150 (4th Cir. 1997).

New Mexico amended its rules of professional conduct to completely ban all attorney direct mail advertisements to personal injury victims and family members of wrongful death victims. A federal court found the rule was unconstitutional and the Tenth Circuit affirmed. Revo v. Disciplinary Board of the Supreme Court of New Mexico, 106 F.3d 929 (10th Cir. 1997).

4. Solicitations mailed or delivered in writing to a potential client must contain the words “ADVERTISING MATERIAL” on the outside envelope unless the recipient is another lawyer, has a family, personal, or prior professional relationship with the lawyer, or has had prior contact with the lawyer. See, Rule 7.3(c).

5. LEO 862 . “A solicitation letter sent to all persons recently charged with criminal offenses states that the soliciting attorney works ‘primarily with DWI’s, traffic infractions, and criminal offenses.’ The committee opines that this is not a per se statement of some limited expertise. The committee is without facts to enable it to opine as to whether or not the soliciting attorney has made a ‘false, fraudulent, misleading or deceptive statement or claim’ as prohibited by Rule 7.1(a). The solicitation letter also states that ‘I am sure you will find that my fees are substantially lower than the normal rates of this community.’ The committee opines that this statement is improper, noting that only factual assertions should be made in advertisements and personal communications.” Note: Rule 7.1(a), amended by the Virginia Supreme Court effective July 1, 2013, refers only to “false or misleading” communications rather than “false, fraudulent, misleading, or deceptive” statements or claims contained in the prior version of the Rule.

6. LEO 904. "It is not improper for an attorney to solicit by mail individuals whose homes are subject to foreclosure provided the solicitation letter complies with the provisions of Rule 7.1(c) [now Rule 7.3]." See also LEOs 470, 579, 862, 1001, 1098. Shapero v. Kentucky Bar A’ssn, 486 U.S. 466 (1985) (state may not absolutely ban truthful targeted solicitation letters to prospective clients).

D. In-Person Solicitation

The State or the Bar constitutionally may discipline a lawyer for soliciting a client in person under circumstances likely to pose dangers that the State has a right to prevent. Ohralik v. Ohio State Bar Assn., 436 U.S. 447, 56 L.Ed.2d 444 (1978). In Ohralik, the lawyer contacted the parents of one of the drivers injured in an automobile accident after hearing about the accident from another source. He approached the daughter in the hospital and offered to represent her. He subsequently entered into a contract to represent her. Upholding Ohio's suspension of the lawyer, the Court held:

1. A lawyer's solicitation of business through direct, in-person communication with a prospective client has long been viewed as inconsistent with the profession's ideal of the attorney-client relationship and as posing a significant potential of harm to the prospective client. Ohralik, at 454.

2. The State does not lose its power to regulate commercial activity deemed harmful to the public simply because speech is a component of that activity. Id. at 455-56.

3. A lawyer's procurement of remunerative employment is only marginally affected with First Amendment concerns. While entitled to some constitutional protection, appellant's conduct is subject to regulation in furtherance of important state interests. Id. at 457-59.

4. The State bears a special responsibility for maintaining standards among members of licensed professions, especially members of the Bar. Protection of the public from those aspects of solicitation that involve fraud, undue influence, intimidation, overreaching and other forms of "vexatious conduct" is a legitimate and important state interest. Id. at 460-62.

5. The absence of proof of harm or injury to the person solicited is immaterial. The application of the Disciplinary Rules to appellant, who solicited employment for pecuniary gain under circumstances likely to result in the adverse consequences the State seeks to avert, does not offend the Constitution. Id. at 462-68.

E. In-Person Solicitation Not Per Se Unethical Under the Virginia Rules of Professional Conduct.

1. The Rules of Professional Conduct have no blanket prohibitions of in-person solicitation. The prohibition of in-person solicitation of personal injury and wrongful death claims of potential clients was eliminated by amendment to Rule 7.3, effective July 1, 2013. However, no direct solicitation of employment from a potential client, in person or otherwise, for any legal services is permitted if

a. The potential client has made known to the lawyer a desire not to be solicited by the lawyer; or

b. The solicitation involves harassment, undue influence, coercion, duress, compulsion, intimidation, threats or unwarranted promises of benefits. See, Rule 7.3.

2. In-person solicitation for pecuniary gain is seen as having much greater potential for ethical abuse than direct mail contact. The attorney must be sensitive to the difference and act in a way consistent with the Rules of Professional Conduct because in-person solicitation is:

a. More likely to involve exertion of pressure;

b. Often demands an immediate response without opportunity for comparison or reflection on important issues, such as need for counsel, nature of services to be rendered or availability and costs of attorney's services;

c. May provide one-sided presentation to encourage speedy and uninformed decision-making;

d. May be an inherent conflict of interest; and

e. Usually involves a witness other than the client and lawyer as to what took place.

3. Attorneys are not just "self-employed businessmen," but "trusted agents of their clients and assistants to the Court in search of a just solution to disputes." Cohen v. Hurly, 36 U.S. 117, 124 (1961).

4. Risk of overreaching and undue influence is enough to support State's interest in regulating in-person contact because state and federal laws have recognized abuse inherent in "direct selling" and have regulated to a recognized degree: cooling off periods, bait and switch laws, disclosure laws.

5. Attorney solicitation is onerous particularly where prospective client is seriously ill, physically or mentally, or is a grieving family member.

6. Although an attorney may delegate certain tasks to non-lawyer employees, in-person solicitation of a prospective client does not fall into that category. Rule 5.3 (a) & (b). LEOs 1290, 1572. Rule 8.4 (a) states that: “It is professional misconduct for a lawyer to violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another.”

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II. TYPES OF ADVERTISING

A. Advertising and Solicitation of Clients for an Attorney by Others

In 1956 the Virginia General Assembly expanded the statutory provisions outlining solicitations of legal business (running and capping) to include as a "runner" or "capper" an agent for an individual or organization which retains a lawyer in connection with an action to which it was not a party and to which it had no pecuniary right or liability.

In NAACP v. Button, 371 U.S. 415, 9 L.Ed.2d 405, the Supreme Court held the expanded provisions unconstitutional in its application to the NAACP, which would locate and retain attorneys for persons seeking vindication of constitutional rights. Virginia's claim that it was regulating the traditionally illegal practices of barratry, maintenance and champerty had to yield to the First Amendment's protection of vigorous advocacy.

An attorney may not participate in a referral group where one of the primary purposes of the organization is to trade referrals as this potentially violates the rules regarding undisclosed conflicts of interest, may compromise a lawyer’s professional independence, and risk violation of the solicitation rules. LEO 1846

B. Legal Services Plans

Lawyers may participate in prepaid legal services plans so long as the services performed and the communications made are appropriate under Rules 7.1 and Rule 7.3.

1. The attorney may license the plan with the state, administer the plan and provide all its legal services. He or she may market the plan through non-attorneys who will receive commissions based on the income derived from subscribers. LEO 875.

2. Virginia Code Section 38.2-4400, et seq. defines "Legal Services Plan." That statute contains, inter alia, the following definition:

"Legal services plan" or "plan" means a contractual obligation or an arrangement, whereby legal services are provided in consideration of a specified payment consisting in whole or in part of prepaid or periodic charges, regardless of whether the payment is made by the subscribers individually or by a third person for them.

C. Non-Profit Organizations

According to Rule 7.3(b), lawyers may pay the usual charges of not-for-profit qualified lawyer referral services to recommend the lawyers’ services.:

Comment 6 to Rule 7.3 states, in pertinent part, that

Not-for-profit lawyer referral services are consumer-oriented organizations that provide unbiased referrals to lawyers with appropriate experience in the subject matter of the representation and afford other client protections, such as complaint procedures or malpractice insurance requirements. Consequently, this Rule permits a lawyer to pay only the usual charges of a not-for-profit lawyer referral service

D. Lawyer Referral Services and Group Advertising Plans

1. Participation in lawyer's referral services of the Virginia State Bar and local bar associations is widely accepted as proper. Rule 7.3(b); LEOs 926, 1348. Rule 7.3(b) provides that a lawyer shall not give anything of value to a person for recommending the lawyer’s services except that a lawyer may: (1) pay the reasonable costs of advertisements or communications permitted by this Rule and Rule 7.1; (2) pay the usual charges of a legal service plan or a not-for-profit qualified lawyer referral service;(3) pay for a law practice in accordance with Rule 1.17; and (4) give nominal gifts of gratitude that are neither intended nor reasonably expected to be a form of compensation for recommending a lawyer’s services.

2. It is not per se improper for an attorney to participate in a lawyer referral service that is a profit-making lay organization or corporation. LEO 910. Nor is it improper to participate in an arrangement with a trade association under which the association refers its members to the attorney, as long as there is no division of fees or other compensation by the attorney to the association. LEO 1497. Nor is it improper for a non-profit lawyer referral program of a local bar association to impose a contingent or percentage fee upon participating attorneys. LEO 1751.

3. Attorneys may advertise participation in lawyer referral services and joint marketing arrangements so long as the advertising is not false, deceptive or misleading. LAO A-0105. Advertising programs must take care not to mislead potential clients as to sponsorship: Comment 7 to Rule 7.3 states, in pertinent part: [A]dvertising must not be false or misleading, as would be the case if the communications of a group advertising program or a group legal services plan would mislead potential clients to think that it was a lawyer referral service sponsored by a state agency or bar association.

4. Attorneys may also advertise in on-line directories as long as they comply with the advertising rules.  LAO A-0017.

E. Referrals to Lawyers—Participation in Lead Sharing Organizations.  LEO 1846 (Feb 2, 2009)

Lawyers may not join a lead-sharing organization in which membership “is often dependent on the number of leads a member passes,” because such “reciprocal” referrals amount to a “quid pro quo payment for services” in violation of the prohibition on providing something of value in return for a referral; such participation puts the client’s interest at risk because the lawyer “may be obligated to refer a client to a particular member specialist when a non-member specialist may be better suited to meet the client’s needs”; the lawyer faces a personal conflict of interest because the lawyer may not feel free “to choose the most appropriate specialty provider for a client”; “[t]he mere disclosure of a client’s name and specific need in certain circumstances may be enough to violate the Rule without consent of the client.” A lawyer may own an interest in a company that is such a lead-sharing organization “as long as the lawyer is not a member.” Lawyers may also engage in voluntary referrals to other lawyers and professionals, but may not join “a hypothetical organization that bases membership on the commitment to provide referrals.”

F. Prohibited Indirect Solicitation

Selection of a lawyer by a layperson should be made on an informed basis. Advice and recommendation of third parties — relatives, friends, acquaintances, business associates, or other lawyers — and publicity and personal communications from lawyers may help to make this possible. A lawyer should not compensate another person for recommending him or her, for influencing a potential client to employ him or her, or to encourage future recommendations. Rule 7.3, Comment 5.

G. Communication of Fields of Practice and Certification

1. Rule 7.4. Lawyers may state, announce or hold themselves out as limiting their practice in a particular area or field of law so long as the communication of such limitation of practice is in accordance with the standards of Rules 7.1, 7.3 and Rule 7.4 as appropriate. A lawyer shall not state or imply that the lawyer has been recognized or certified as a specialist in a particular field of law except as follows:

a. A lawyer admitted to engage in patent practice before the United States Patent and Trademark Office may use the designation "Patent Attorney" or a substantially similar designation;

b. A lawyer engaged in Admiralty practice may use as a designation "Admiralty," "Proctor in Admiralty" or a substantially similar designation;

c. A lawyer who has been certified by the Supreme Court of Virginia as a specialist in some capacity may use the designation of being so certified, e.g., "certified mediator" or a substantially similar designation;

d. A lawyer may communicate the fact that the lawyer has been certified as a specialist in a field of law by a named organization, provided that the communication clearly states that there is no procedure in the Commonwealth of Virginia for approving certifying organizations.

2. As with any form of advertising, the overriding concern is that the information disseminated to the public not be misleading, false or deceptive. Rather than stating that an attorney "specializes" in a certain area of practice, it is more appropriate and less misleading to use the phrase "areas of practice are limited to . . .," provided that the attorney's practice is in fact limited to those areas. LEO 1231.

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III. WHO IS THE LAWYER FOR THIS CLIENT?

A. Office-Sharing and Actual Partnerships

1. A number of situations give rise to the question: Who is my lawyer or who are my lawyers in this matter? The problem areas include:

a. A lawyer shares office space with one or more other lawyers. Are there any practices which suggest that the other lawyers in the space are this client's lawyer?

b. Does the sign on the door suggest the existence of a partnership?

c. Does the receptionist answer the telephone as though a partnership exists?

d. Do other attorneys cover motions or other legal proceedings for the client?

e. Does the retainer agreement clearly set forth that only Lawyer A is responsible for the management and oversight of this matter?

2. If the attorney is employed by a professional corporation or a partnership, does the client understand that others within the professional corporation or partnership are going to work on his or her case? If so, who is the attorney principally and ultimately handling this client matter? Does the client understand that non-lawyers such as paralegals and law clerks may perform services on the case for which the client may be economically responsible? LEO 1850

3. If two firms want to use the terms “associated” or “affiliated” to describe their relationship with each other the terms much not be false or misleading. In order to meet that requirement the firms must adhere toapplicable rules regarding disclosure of confidential information and conflicts of interest as if they were a single firm. LEO 1813

4. In addition, if a lawyer becomes “of counsel” to a firm, all conflicts are imputed from the lawyer to the firm and vice versa. This imputation cannot be avoided by screening the lawyer from other cases in the firm or otherwise limiting the information available to him; Rule 1.10(a) provides for an absolute imputation of conflicts between lawyers who are currently associated in a firm. See, LEO 1866.

B. Law Firms with Lawyers Licensed in Different Jurisdictions

1. A client approaches a lawyer in the District of Columbia who is not licensed in Virginia, but who has associate attorneys in his or her law firm who are licensed in Virginia. Can the District of Columbia lawyer be the lawyer for the client in this matter? If so, what disclosures must he or she make to his or her client, if any?

2. A lawyer in the District of Columbia has no partners or associates licensed to practice in Virginia. He or she retains local counsel in Virginia. What are the responsibilities of foreign counsel in the case? What are the responsibilities of local counsel in the case?

The Virginia Supreme Court held that Virginia local counsel owed a duty to the District of Columbia chief counsel to exercise reasonable care, skill and diligence in performing the tasks for which the chief counsel had employed him. Ortiz v. Barrett, 222 Va. 118 (1981). Local counsel also had an implied obligation to the clients to exercise the same degree of care in performing such professional services as the chief counsel required of him. However, the standard of due care only applied to the work assigned to Virginia local counsel by the District of Columbia chief counsel. Local counsel had no duty to second guess, overrule or independently advise the client on the management of the case under Virginia law.

3. Multi-state Law Firms. A law firm’s letterhead should indicate the jurisdictional limitations of any of the listed lawyers’ practices. LEO 1143. A multi-state law firm must indicate on its letterhead which lawyers are members of the Virginia State Bar and which are not, and may include a footnote indicating that the non-Virginia lawyers are admitted in other states. LEO 858. If a law firm lists different states where its lawyers are licensed, the names of the lawyers should be included. A statement indicating that the law firm “serves” three jurisdictions might give the erroneous impression that each lawyer is licensed in those jurisdictions. LEO 1026. See, Rule 7.5(b).

4.  Multi-jurisdictional Practices (MJP). A recent trend is for state bars to consider allowing foreign lawyers (both out-of-state and those from foreign countries) certain practice rights within the state. The breadth of this issue reaches to the core of the unauthorized practice rules and pro hac vice admission rules in each state and especially impacts in-house counsel and lawyers and law firms maintaining offices and practicing in multiple state and federal jurisdictions. The American Bar Association commission on MJP has issued recommendations and proposed rule amendments to provide direction and guidance to state bars.

The Virginia Supreme Court approved amendments to Rules 5.5 and 8.5 of the Rules of Professional Conduct effective March 1, 2009.

Rule 5.5 - Temporary Practice by a Foreign Lawyer

Rule 5.5 regulates unauthorized practice of law in Virginia by non-Virginia licensed attorneys, both those from other U.S. jurisdictions and those licensed in foreign countries. Prior to the adoption of this rule, unauthorized practice of law by attorneys or non-attorneys was regulated and monitored by the Virginia State Bar’s Standing Committee on the Unauthorized Practice of Law (“the UPL Committee”) and governed by Virginia’s Unauthorized Practice of Law Rules, the Definition of the Practice of Law in Virginia, and Part 6, §I (C), Rules of Supreme Court of Virginia. Rule 5.5 now makes practice by non-Virginia licensed lawyers, other than as authorized by the rule, a disciplinary matter.

Rule 5.5 authorizes a Foreign Lawyer to provide legal services in Virginia on a “temporary and occasional basis” if they are: (1) undertaken in association with a licensed Virginia lawyer who actively participates in the matter; (2) related to a pending or potential proceeding in Virginia or another jurisdiction if the lawyer is authorized to appear or expects to be so authorized; (3) related to mediation or arbitration in Virginia or another jurisdiction if such services are related to the lawyer’s practice in his/her licensing jurisdiction and do not require pro hac vice admission; or (4) related to representation of a client in the foreign lawyer’s licensing jurisdiction or which are governed by international law.

Rule 5.5 prohibits a lawyer from establishing an office or other systematic presence in Virginia except as authorized by other Rules of Professional Conduct or other law. The rule retains the long-standing restrictions under the current Rule 5.5 regarding the employment of a lawyer whose license has been suspended or revoked. Paragraph (d)(5), which was added to the rule, specifically excludes a corporate counsel registrant practicing under Part II of Rule 1A:5 of the Rules of the Virginia Supreme Court, and excludes a foreign legal consultant practicing under proposed Rule 1A:7 of the Rules of the Virginia Supreme Court from being authorized to practice under Rule 5.5.

Rule 8.5 - Disciplinary Authority and Choice of Law

Rule 8.5 addresses disciplinary authority and choice of law in disciplinary cases and provides enforcement authority for new Rule 5.5. The new rule extends the Virginia State Bar’s disciplinary authority over any lawyer who provides or holds out to provide legal services in Virginia, regardless of where the lawyer is licensed. Under the new Rule 8.5, a lawyer not admitted in Virginia, who provides or holds out to provide legal services in Virginia, consents to appointment of the Clerk of the Supreme Court of Virginia as his/her agent for disciplinary service of notices. The choice of law to be applied in a disciplinary matter will be: (1) the rules of the court, agency or tribunal if the conduct in question occurred in connection with a matter before such court, agency or tribunal; (2) for any other conduct, the rules of the jurisdiction where conduct occurred; or (3) the Virginia Rules of Professional Conduct, if the lawyer provides or holds out to provide legal services in Virginia.

C. Partnership with or Influence by a Non-Lawyer

1. A lawyer may not form a partnership with a non-lawyer, Rule 5.4 (b), but may use the services of a non-lawyer and may incorporate the product of the non-lawyer into his or her work as long as the lawyer ultimately remains responsible. The non-lawyer is not permitted to counsel clients about legal matters, appear in court or permit any representation that the non-lawyer is a lawyer. Moreover, the lawyer is obligated to exercise a high degree of care to assure that the non-lawyer complies with the Rules of Professional Conduct. Rule 5.3. But see LEO 1584, regarding a Virginia lawyer as partner in a District of Columbia law firm, which jurisdiction permits law firms to have nonlawyer partners. The LEO opines that a lawyer licensed in both D.C.and Virginia could practice law through a partnership which includes a nonlawyer partner in the District of Columbia without being subject to discipline by Virginia. Also, the same lawyer could practice law in Virginia without being subject to discipline so long as no part of that lawyer's practice in Virginia is conducted through a firm with a nonlawyer partner. The committee opines that the D.C. firm, which includes a nonlawyer as a partner, may not engage in the practice of law in Virginia (through a licensed Virginia Bar member), if the nonlawyer partner is a partner in the firm.

2. A lawyer may not practice in an association with a non-lawyer where the non-lawyer has the right to direct or control the professional judgment of the lawyer. Rule 5.4(d) Accordingly, lawyers providing services under prepaid legal services plans, through non-profit organizations, or as house counsel or internal counsel to corporations and insurance companies, owe a duty to the client that is not subject to direction or supervision by the non-lawyer agency. See LEO 1276. A lawyer hired by an insurance company to defend the insured owes the insured the same duties as if privately retained by the insured. Norman v. Insurance Co., 218 Va. 718, 727 (1978). Consequently, an insurance defense lawyer cannot, without written consent of the client (insured) after full consultation, agree to terms or guidelines imposed by the insurance company that limit the attorney’s representation of the insured. LEO 1723.

3. Foreign Legal Consultants.
The Virginia Supreme Court approved Rule 1A:7 allowing a non-U.S. attorney to practice in Virginia as a Foreign Legal Consultant (“FLC”). This rule was the work product of the Virginia State Bar’s Task Force on Multi-jurisdictional Practice (“MJP Task Force”). The FLC rule carves out a rather limited role for the foreign legal consultant. The FLC rule provides access to foreign law expertise with accountability; FLCs are subject to the ethics rules and discipline system in Virginia. Also, a FLC may render any legal services only with regard to matters involving the law of the foreign nation(s) in which the person is admitted to practice, or international law. They cannot appear before any court. Finally, a FLC cannot hold him/herself out as a member of the Virginia State Bar.

4. Multidisciplinary Practices (MDPs). National debate continues over whether lawyers should be permitted to work in a firm which delivers, among other things, legal services to the public, where the non-lawyers haveequity ownership and controlling interests in the firm, and share legal fees with non-lawyers. Proponents of MDPs argue that consumer demand for MDPs is so strong that MDPs are inevitable and therefore Rule 5.4 should be amended so that lawyers may practice in MDPs. Opponents fear that MDPs threaten the “core values” of the legal profession and call for preservation of the current rules prohibiting non-lawyer control and ownership of firms that deliver legal services and fee-sharing with non-lawyers. So far, the VSB Council has rejected any proposals to revise the Rules of Professional Conduct to allow lawyers to practice law in entities controlled bynon-lawyers.

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IV.  FINANCIAL ARRANGEMENTS WITH THE CLIENT

A. Explanation of Fees

1. Fees shall be reasonable and adequately explained to client. Rule 1.5(a) and (b).

2. "When the lawyer has not regularly represented the client, the amount, basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation. " [Rule 1.5(b)] "A contingent fee agreement shall state in writing the method by which the fee is to be determined . . ." [Rule 1.5(c)]. No single area of the financial relationship between attorney and client has generated so much controversy, conflict, and misunderstanding as the failure of attorney and client to reach a prompt agreement as to the fees and costs to be incurred in the prosecution of the client's matter.

B. Contingent Fees vs. Flat Fees

1. If flat fee, is the fee or portions of it refundable in the event it is not fully earned?

a. It is the duty of an attorney to refund so much of an advanced fee as has not been earned by performance of the services for which the attorney was retained. Heinzman v. Fine, Fine, Legum and Fine, 217 Va. 958 (1977), serves as guidance in regard to the standard by which the earned portion of the retainer may be measured. See LEOs 646, 1246.

b. A fixed or flat fee is an advanced legal fee. It remains the property of the client until it is actually earned and must be deposited in the attorney's trust account. If the attorney-client relationship is ended before legal services are concluded, the client is entitled to a refund of that portion of the fee that has not been earned. LEO 1606.

2. If hourly fee, has the client been advised of the hourly rates to be charged by each of the lawyers and non-lawyers who may work on the client matter? Does the fee agreement set forth the kind of costs which will be billed to the client? Does the firm bill for word processing or computer services?

3. If the fees are contingent, does the client understand that the contingent fee is calculated on the gross amount received by way of judgment or settlement?

4. Contingent fees are rarely proper in domestic relations cases. Rule 1.5(d)(1).

a.   An arrangement for a contingent fee in a domestic relations matter has been previously considered appropriate only in those rare instances where:
(i) the contingent fee is for the collection of, and is to be paid out of (i) accumulated arrearages in child or spousal support; (ii) an asset not previously viewed or contemplated as a marital asset by the parties or the court; (iii) a monetary award pursuant to equitable distribution or under a property settlement agreement;
(ii) the parties are divorced and reconciliation is not a realistic prospect;
(iii) the children of the marriage are or will soon achieve the age of maturity and the legal services rendered pursuant to the contingent fee arrangement are not likely to affect their relationship with the non-custodial parent;
(iv) the client is indigent or could not otherwise obtain adequate counsel on an hourly fee basis; and
(v) the fee arrangement is fair and reasonable under the circumstances.


Rule 1.5 Comment [6]

b. The factors listed in paragraph 4(a) above reflect concern regarding the propriety of accepting domestic relations cases on a contingency fee basis. Such an arrangement is more likely to be deemed proper where there is little danger of affecting either a marital or familial relationship. Thus, where the parties are already divorced in an equitable distribution case or the non-custodial parent is deceased in a child support case, a contingency fee is more likely to be found permissible. See LEOs 1298 and 1174.

5. Difficulties in determining the fee owed when the contingent matter is disposed of by way of a structured settlement or payout.

a. Does the retainer agreement specify whether, in a structured payout, the fee is calculated as the percentage of the present value of the future income stream? If present value is used, is it the present value of all guaranteed future payments or does it include the present value of non-guaranteed monies?

b. Does the retainer agreement provide that the contingent fee shall be calculated based upon the cost of procuring any annuity to secure the future payment?

i. The defendant may not be obligated to disclose its cost of procuring the annuity.

ii. The cost of the annuity may be significantly less than the present value of the annuity and the client's interest in the difference may be significant.

6. In LEO 1748, the Ethics Committee stated that it is permissible for an attorney to represent a criminal defendant, on a contingency fee basis, whose property was the subject of a civil forfeiture proceeding having been seized incident to the client’s arrest on charges of possession of controlled substances with intent to distribute. Although Rule 1.5 (d) (2) prohibits contingent fees in criminal matters, the forfeiture proceeding is a civil matter, not criminal; there exists a res out of which a fee can be paid; and there is uncertainty as to the outcome.

7. In LEO 1766 the Ethics Committee looked at a situation that involved a mixed contingent fee combining an hourly rate with a percentage of the res and determined that there is nothing that specifically prohibits a mixed fee as long as the resulting total fee is reasonable.

C. Advancement of Litigation Expenses

Does the retainer agreement clearly indicate that the costs are the client's obligation and are not contingent?

1. A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation. [Rule 1.8(e)] See Shea v. Virginia State Bar, 236 Va. 442, 374 S.E.2d 63 (1988).

2. Attorneys may ethically advance court costs and expenses of litigation for the client, but the client ultimately must be responsible for their payment/reimbursement. Rule 1.8(e)(1).

3. A lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client. Rule 1.8 (e) (2).

4. An attorney who posts an appeal bond on behalf of a client in a civil matter is advancing an appropriate litigation-related expense which is permitted under Rule 1.8 (e) (1) since the client remains responsible to the attorney for reimbursement. LEO 1740.

D. Division of Fees

1. May attorney's fees be divided between lawyers not in the same firm? Yes, but only if the client is advised of and consents to the participation of all the lawyers involved; the terms of the division of the fee are disclosed to the client and the client consents thereto; the total fee is reasonable; and the division of fees and the client's consent is obtained in advance of the rendering of legal services, preferably in writing. Rule 1.5(e). LEO 1488. In LEO 1739, the Ethics Committee opined that the relaxed requirements of Rule 1.5 (e) permit a lawyer to charge a "referral fee" for referring a client to another lawyer outside the firm even though the referring attorney has no further responsibility to the client.

2. When an attorney leaves his firm before completion of a contingent fee case and takes the case to his new practice, may he divide the ultimate fee with the former firm absent client consent? Yes. As per Rule 1.5(f), there is no prohibition against the division of fees between attorneys who were previously associated in a law firm or between any successive attorneys in the same matter   (This overrules the finding in LEO 1760.)

3. May fees be divided with a non-lawyer? Only where money is paid to the estate of a deceased lawyer over a reasonable period of time or to the estate of a deceased lawyer for whom the living lawyer undertakes to complete unfinished legal business. A lawyer or law firm may include non-lawyer employees in a compensation or retirement plan based wholly or in part on a profit sharing arrangement. Rule 5.4.>

4. Does Rule 5.4's prohibition against sharing fees with a non-lawyer prohibit a lawyer from sharing or turning over court-awarded attorneys fees to the ACLU, NAACP or other non-profit organization that sponsored the litigation? In LEO 1744, the Ethics Committee said that Rule 5.4 (a) does not prohibit an attorney from sharing or turning over court-awarded attorneys fees to a non-profit public interest group which sponsored the litigation.

5. What is the appropriate procedure for an attorney handling funds paid by a finance company on behalf of a client where the attorney pays the finance company a portion of his fee? In LEO 1764, the Ethics Committee concluded that the attorney may not properly participate in this arrangement. An attorney may not share his legal fees with non-lawyers except within the parameters of three exceptions noted in Rule 5.4, none of which were applicable in this case. As the proposed arrangement involves the attorney allowing the finance company to keep a portion of the attorney's legal fees, the attorney may not participate in this arrangement.

E. Fees Owed When Client Prematurely Terminates Relationship

1. Those fees which have been earned to the date of termination.

2. If the matter was being handled on a contingency fee, then recovery of fee may be had quantum meruit. See Fary v. Aquino, 218 Va. 889 (1978); Heinzman v. Fine, Fine, Legum & Fine, 217 Va. 958 (1977); See also LEO 1244.

Quantum meruit fees are those determined to be reasonable under the circumstances and based upon "the amount and character of the services rendered; the responsibility imposed; and labor, time and trouble involved; the character and importance of the matter in which the services are rendered; the amount of the money or the value of the property to be affected; the professional skill and experience called for; the character and standing in their profession of the attorneys; and whether or not the fee is absolute or contingent, it being a recognized rule that an attorney may properly charge a much larger fee where it is to be contingent than where it is not so." County of Campbell v. Howard, 133 Va. 19, 51 (1922).

F. Fees Charged for Collection of Medical Expense Payments

Lawyers representing personal injury claimants may charge a non-contingent fee for the ministerial task of collecting medical expense payments from the insurance company. However, it is improper to use a contingent fee agreement for the recovery of such funds where the task is purely ministerial. LEOs 1696,1641, 1461.

G. Amendment of Fee Agreement During Course of Representation

Lawyers and clients may amend fee agreements as long as they do not involve "undue influence or coercion by the lawyer." A lawyer may enforce an amended fee agreement prepared after the client in extensive litigation over a cloud on a real estate title indicated that he could not continue to finance the litigation as originally agreed and instead offered to pay an additional $25,000 upon successful completion of the litigation "in consideration of payment not being made as originally agreed." The change from an hourly-based contract to a contingent fee agreement was not improper because the outcome was uncertain; the client could not continue to finance the litigation otherwise; and success would produce a "res" out of which to pay the fee. The extra $25,000 to be paid upon successful completion of the litigation was based on the lawyer's agreement to delay collection of the outstanding fees until the case ended. LEO 1705.

H. Fee Agreement Requiring Arbitration of Malpractice Claim by Client

Although a "lawyer's fiduciary duties extend to preliminary consultation by a prospective client with a view to engagement," it is not per se improper for a client engagement agreement to provide for binding arbitration of legal malpractice claims as long as there is adequate disclosure and consent. Like fee agreements, such initially-acceptable engagement agreement provisions might become improper given the "occurrence of unusual and extraordinary facts and circumstances not contemplated at the outset of the representation." The committee declined to require any specific disclosures or insist that the client actually consult another lawyer before entering into such an agreement (in LEO 638, the committee seemed to require that the client must be advised to seek independent counsel regarding an arbitration provision). Appropriate disclosures might include "waiver of trial by jury or by the court, discovery, evidentiary rules, arbitrator selection, scope of award, expense, appellate rights, finality of award, enforcement of award." LEO 1707. >

I. Payment of Fees Using Credit Cards

As early as November 16, 1974, the American Bar Association adopted Formal Opinion 338, allowing the use of credit cards subject to specific guidelines. This opinion has served as an impetus for virtually nationwide approval of the use of credit cards for the payment of legal fees and expenses by state and local bar associations. The Virginia State Bar Council approved an ethics opinion authorizing the use of credit cards for the payment of legal fees. LEO 186 A. A law firm may allow clients to pay with a credit card, as long as all payments are deposited in a trust account and the lawyer does not withdraw any fees until deposit checks have cleared. LEO 999. It should be noted that a retainer fee may be paid by the use of a credit card, but amounts received by the attorney from the credit card institution, in the same manner as all fees received in advance of the rendering of services, must be deposited and preserved in escrow in the trust account maintained by the attorney for his clients to the extent that such fees remain unearned. Charges made by any lawyer or law firm shall be only for the reasonable value of the services actually rendered regardless of whether a credit card is used. Virginia lawyers may pass along to their client the transactional costs/merchant fees charged by a credit card company when the client uses a credit card — as long as the lawyer explains the process to the client before the client uses the credit card. Such transactional/service fees may be deducted from the lawyers’ trust account, but lawyers using best practices should arrange for the fees to be deducted from the lawyers’ operating account. Lawyers must “monitor and personally replace any escrow funds that are subject to a charge back” by a credit card company, and lawyers using best practices should arrange for any charge backs to come from the lawyers’ operating account rather than trust account. LEO 1848 (2009) Rule 5.4(a)(4) provides that “a lawyer may accept discounted payment of his fee from a credit card company on behalf of a client” as one of the exceptions to the prohibition of sharing legal fees with a nonlawyer.

J. Discounting Fee to Client When Client is a Judge Before Whom Attorney May Appear in Future

It is not improper for the attorney to treat a judge, and longtime friend, no differently from other friends and colleagues to whom the attorney would extend the same professional courtesy of a discounted fee for legal services rendered by the attorney. Obviously, the attorney would have a conflict if he were representing the judge as a client while appearing before the judge on behalf of another client. Assuming the attorney has no matters before the judge, the discounted fee arrangement would not be viewed as an attempt to give something of value to the judge to improperly influence official action. Rule 3.5 (d). LEO 1730.

K. Mixed Fee Arrangement

May an attorney charge a contingent fee that calls not only for a percentage of the settlement, but also an hourly fee? Yes.

This type of contingent fee, involving some combination of a percentage and an hourly rate, is commonly referred to as a "mixed," "combined," or "blended" fee. While there is no per se prohibition against a mixed fee, the total amount must still be reasonable. Rule 1.5 sets out a number of factors to determine whether the fee charged is reasonable. LEO 1766.

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V. STATUTORILY LIMITED FEES AND ILLEGAL FEES

A. Workers' Compensation

The attorney may be entitled to no more fee than awarded by the Industrial Commission (now “Virginia Workers’ Compensation Commission”). See Hudock v. Virginia State Bar, 233 Va. 390 (1987). The Industrial Commission entered a settlement order, setting the attorney's fee at $2,500 and ordering that the remaining portion of $12,500 be paid to the client in one lump sum. The attorney had entered into a contingency fee arrangement with his or her client which called for one-third of the gross settlement as the legal fee. The Industrial Commission was never advised of this arrangement nor was a request for a specific fee made by the attorney at the time the settlement petition was submitted. After the entry of the Commission's order setting the attorney's fees, the attorney asked for and received an additional $2,500 from his or her client, bringing the attorney's fee total to $5,000. In a disciplinary proceeding, the State Bar Disciplinary Board found the attorney violated Rule 1.5(a) and (b) and ordered him publicly reprimanded. The Virginia Supreme Court affirmed.

B. Examples of Other Fees Set by Statute

1. Social Security

2. Veterans' claims

3. Federal Tort Claims Act

C. Civil Rights Cases

1. The federal courts in awarding attorney's fees in civil rights cases have enumerated a number of standards for the award of such fees.

2. In Daly v. Hill, 790 F.2d 1071 (4th Cir. 1986), the Fourth Circuit Court of Appeals noted that the District Court, when considering petitioner's fee application, used twelve factors outlined in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974), and adopted by the Fourth Circuit in Barber v. Kimbrell's Inc., 577 F.2d 216, 226 (4th Cir.), cert. denied, 439 U.S. 934 (1978).

Note: A lawyer must always determine whether fees awarded by a tribunal are the statutory limit of what he or she is entitled to accept from or on behalf of a client in a legal matter and whether the value of the lawyer’s services, as opposed to the amount charged to the client, controls a claim for fees. In some instances, legal fees awarded are less than, or exceed, the client’s contractual obligation for fees, so the lawyer must understand his or her ethical and legal obligations under such circumstances.

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VI. COLLECTING FEES

A. Retaining Files

May the lawyer retain client's file as security for arrearages of fees and costs?

1. The file is the property of the client, not the law firm. LEO 1544. Thus, in most instances, the former client or a successor attorney is entitled to the file on demand. The delivery of the file to the client or his or her new attorney is required under Rule 1.16(e). This includes "work product" of the attorney. LEO 1366.

2.  The Standing Committee on Legal Ethics has issued numerous opinions regarding the retention of client files.  See LEOs 1101, 1124, 1171, 1176, 1357, 1366, 1418, 1485, 1544 and 1690.  Rule 1.16(e) is very clear regarding the fact that the lawyer can bill for copying of the file and seek to collect those costs; however, he cannot hold the client’s file pending receipt of the copying costs or for any other reason.

 3.  The lawyer only has to provide a complete copy of the client’s file one time; however, providing documents on an item-by-item basis does not meet this requirement.  Rule 1.16(e). ). See, also, LEO 1864, which opines that when a criminal defense attorney accepts “sensitive” materials from a prosecutor in excess of the discovery required by law, with the understanding that they not be given to the defendant,, the defense attorney should before accepting such materials obtain the informed consent of the client to return the materials to the prosecutor upon termination of the representation so that they are not deemed part of the client’s file under Rule 1.16(e).

B. Charging Interest on Uncollected Fees and Costs

It is not improper for an attorney to charge interest to his or her client on fees earned but not paid or on costs advanced but not reimbursed, provided that (1) such interest is charged pursuant to a prior agreement of the lawyer and client, (2) the client is capable of paying the same but desires that the payment be deferred for the client's convenience, (3) the interest rate does not violate the laws of the Commonwealth of Virginia and, (4) the client has the unrestricted right to prepay any balance of the fee or costs without penalty. See LEOs 186-B, 642 and 1247. But it is improper to require the client to agree up front in the fee agreement that the lawyer may charge a fixed collection fee of $500 in the event the lawyer has to file a collection suit against the client on an unpaid account. LEO 1667 citing DR 2-105(A) and DR 5-104(A). Now Rule 1.5(a) and Rule 1.8(a) respectively.

C. Non-Refundable Retainers or Minimum Fees

1. Distinguish between "retainer" and "advanced legal fee" as payment for specific legal services to be performed. LEO 1606.

2. A "retainer" is not a pre-payment for legal services to be rendered in the future. A "retainer" is a payment made to secure an attorney's employment for a legal matter which may arise in the future or to secure the attorney's unavailability to a potential adverse party. A "retainer" is earned when paid and becomes the property of the attorney on receipt and may not be deposited in the trust account.

3. If the employment agreement between the lawyer and client provides that the pre-payment is to be applied against future services to be rendered by the attorney, the fee is not a retainer, but rather an advanced legal fee which must be deposited in the trust account and may not be withdrawn until services are rendered. The advanced legal fee remains the property of the client until it is earned. Therefore, it is improper for an attorney to require a client to agree that an advanced legal fee is a minimum fee or non-refundable. LEO 1606.

D. Binding Arbitration of Fee Dispute Provisions in Retainer Agreement

A retainer letter requiring arbitration of fee disputes does not amount to a per se violation of the Code as long as: there is "full and adequate disclosure as to all possible consequences" of the agreement; the client consents; and the arrangement is not "unconscionable, unfair, or inequitable when made." LEO 1586.

E. Disciplinary Cases

1. Fee Agreements

Respondent’s agreement with Client stipulated that Respondent’s unpaid legal fees could not be discharged in bankruptcy and permitted Respondent to charge client for time spent defending and responding to bar investigation.  Held:  Violation of Rules 1.5, 1.7(a)(3) and 8.4.  In the Matter of Brian Gay, VSB Docket No. 08-222-073165 (VSB Disc. Bd. (Feb. 17, 2010).

2. Fees

Respondent violated Rule 1.5 by charging Client for time spent preparing and appearing on motion to withdraw from Client’s case.  In the Matter of Brian Gay, VSB Docket No. 08-222-073165 (VSB Disc. Bd. (Feb. 17, 2010).

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VII.  SERVING THE CLIENT THROUGH ALTERNATIVE DISPUTE RESOLUTION

A. Introduction

The term Alternative Dispute Resolution (ADR) refers to a variety of processes other than litigation that are used to resolve disputes. The Virginia Rules of Professional Conduct (VRPC) contemplate that attorneys will advise their clients about, and competently represent their clients in, the different forms of ADR, including collaborative problem solving, mediation and other processes. The value of ADR is apparent in the commentary of the VRPC Rules relating to competence, scope of representation, diligence, communication and advice.

This value is also apparent in recent recommendations of the Commission on Virginia Courts in the 21st Century, which support increased use of ADR in the courts in upcoming decades. In order to better serve the client each attorney should be familiar with these obligations and with the array of ADR processes available in Virginia.

B. The Ethical Duty To Advise The Client Regarding ADR

1. Lawyers in Virginia are required to advise a client about the appropriateness and availability of ADR.  Rule l.2 of the Rules requires that a lawyer “abide by a client’s decisions concerning the objectives of representation,” and “consult with the client as to the means by which they are to be pursued.” The interpretative comment to Rule 1.2 states that in the context of a client’s right to consult with the lawyer about the means to be used in pursuing the client’s objectives, the lawyer “shall advise the client about the advantages, disadvantages, and availability of dispute resolution processes that might be appropriate in pursuing these objectives.” Rule 1.2, Comment 1.

2. During the course of the representation, a lawyer must “keep a client reasonably informed” and “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. . . .” Rule 1.4 (a). “This continuing duty to keep the client informed includes a duty to advise the client about the availability of dispute resolution processes that might be more appropriate to the client than the initial process chosen.” Rule 1.4, Comment. 1. The Comment gives an example of where information obtained during a lawyer to lawyer negotiation may give rise to consideration of a process, such as mediation, where the parties themselves could be more directly involved in resolving the dispute.

3. In rendering “candid advice” to a client, a lawyer may refer “not only to law but to other considerations such as moral, economic, social and political factors that may be relevant to the client’s situation.” Rule 2.1. The Comment to this Rule cites “practical considerations, such as cost or effects on other people,” which might be more valuable to the client than “advice couched in narrowly legal terms,” which “could ignore, to the client’s disadvantage, the relational or emotional factors driving a dispute. In such a case, advice may include the advantages, disadvantages and availability of other dispute resolution processes that might be appropriate under the circumstances.”

C.   Collaborative Problem-Solving

The attorney’s representation of the client often calls for the collaborative problem solving skills central to mediation and ADR processes. 

After discussing subject matter skills, the Comments to Rule 1.1 (Competence) turn to process. “Another important skill is negotiating and, in particular, choosing and carrying out the appropriate negotiating strategy. Often it is possible to negotiate a solution which meets some of the needs and interests of all the parties to a transaction or dispute, i.e., a problem solving strategy.”  Rule 1.1, Comment 2a.

In discussing the meaning of diligence, the Comments to Rule 1.3 state: “Additionally, lawyers have long recognized that a more collaborative, problem-solving approach is often preferable to an adversarial strategy in pursuing the client’s needs and interests.  Consequently, diligence includes not only an adversarial strategy but also the vigorous pursuit of the client’s interest in reaching a solution that satisfies the interests of all parties. The client can be represented zealously in either setting.”  Rule 1.3, Comment 2.

D.    Dispute Resolution Options Available To The Client

1.    Choosing among dispute resolution options

Counsel should be able to assist clients in understanding their needs, interests and goals, as well as in deciding on the most appropriate dispute resolution process.  Some of the reasons that counsel may suggest that the client consider an ADR process rather than litigation include:

a. Where parties have a continuing relationship;

b. Where issues in dispute are related to or originating from communication problems;

c. Where parties desire to have significant control or decision-making power over dispute;

d. Where dispute seems based upon each party’s perceptions of facts; and

e. Where time and expense are significant concerns.

Where one or more of the factors listed above are relevant in a case, counsel has the opportunity to consider the array of dispute resolution options available ranging from negotiation, which does not involve a third party neutral, to mediation, where the neutral serves to facilitate the parties’ negotiation, to arbitration, where the neutral makes a decision for the parties.  Counsel and the client must assess the characteristics of the case that may make it more or less appropriate for one of the ADR processes described herein.

2. Preparing for Dispute Resolution

If an ADR process is elected, counsel should discuss the objectives of the process, the role of the neutral, the range of activities in which the neutral will engage, and the confidentiality of any discussions.   Prior to the session, counsel and client should discuss the client’s interests and objectives, the anticipated needs and objectives of the other side, the client’s preferred outcome as well as fall-back positions and concessions to which the client might agree, the respective roles of attorney and client in the ADR process, anticipated strategic behavior by either party, and the legal implications of reaching (and not reaching) a resolution.  To the extent possible, the attorney must prepare the client to be receptive to the idea that the purpose of the ADR process is not necessarily to win, but to resolve the dispute in a mutually satisfactory way, and that satisfaction may involve a variety of objectives, including mending relationships and bringing closure to hurt feelings and disruption of lives caused by ongoing litigation.  The attorney should discuss the obligation to participate in good faith, and the importance of taking full advantage of the opportunity that ADR offers to settle disputes.

3.Negotiation

Negotiation is the basic and most prevalent dispute resolution process. In conventional legal practice many people think of negotiation as adversarial, with arguments about the meaning of law and doctrine, the significance of facts, and the allocation of scant resources. But there are two models - adversarial and problem-solving negotiation.

The adversarial model is typically associated with litigation and lawyer to lawyer negotiation, often “on the courthouse steps” (just before or during trial) or “in the shadow of the courthouse” (looking primarily at possible outcomes in court). Adversarial negotiation 1) emphasizes maximizing individual gain, 2) assumes the parties desire the same goals, items and values, 3) conceals certain interests or facts (and assumes opponent will do the same), 4) attempts to persuade opponents to make concessions without reciprocating and 5) encourages “positional bargaining.”

The problem-solving model is typically associated with ADR - either a stand alone negotiation process or the core behavior in other voluntary ADR processes, such as mediation, conciliation and collaborative practice. The strategies of problem-solving negotiation include 1) focusing on the interests and needs of both clients rather than their “positions,” 2) creating value for joint gains, 3) balancing assertion of your own client’s interests with understanding the interests of the other party and 4) developing a heightened awareness of emotional and psychological barriers. The problem-solving model also relies more heavily on prior planning with and participation of the client in the negotiation process.

Negotiators will typically use strategies from both models, but the conscious choice of the problem-solving perspective, coupled with the predominant use of problem-solving strategies will in most cases produce a more positive and satisfying result for the client.

4. Mediation

a. Mediation is a dispute resolution process in which a neutral third person facilitates communication between the parties and, without deciding the issues or imposing a solution on the parties, assists them in understanding and resolving their dispute. Va. Code § 8.01-581.21, et seq. and § 8.01-576.4, et seq

b. A mediator is an impartial third party selected by agreement of the parties to a dispute to assist them in the mediation process. See Va. Code § 8.01-581.21. Although mediators are not required to be certified, the Office of the Executive Secretary of the Supreme Court of Virginia maintains a Directory of mediators who are certified to receive court-referrals. For a listing of court-certified mediators, see:  http://www.courts.state.va.us/drs/searchable_mediator_directory.html. Certified mediators are required to have had a sufficient level mediation training and experience to mediate such cases; in addition certified mediators must comply with the Standards of Ethics and Professional Responsibility for Certified Mediators (http://www.courts.state.va.us/drs/certification_process/home.html).

c. Initiating Mediation

Mediation may be initiated either by agreement of the parties, on motion of the parties or sua sponte by the court. Judges have the authority to refer any contested civil matter to a dispute resolution orientation session.  (Virginia Code § 8.01-576.5.) This is a no-cost preliminary meeting during which a mediator helps the parties assess the case and decide whether to pursue a dispute resolution procedure, like mediation, or continue with adjudication.  In domestic relations cases and other appropriate cases, the neutral will also screen the case for  domestic  violence and other factors, which may affect balance of power between the parties and make the case inappropriate for mediation.

The court will excuse the parties from participating in the dispute  resolution orientation session if within fourteen days after entry of the order of referral, a written statement signed by a party is filed with the court stating that the process has been explained to the party and he objects to the referral. (Virginia Code § 8.01-576.6) All parties must agree voluntarily to participate in a dispute resolution process, such as mediation, following the orientation session.  Parties may select a private mediator or elect to use a no-cost court-connected mediation service provider.

d. Process

The mediator is responsible for establishing trust and rapport with counsel and the parties and ensuring that everyone understands the mediation process and the role of the mediator.  Many mediators meet with counsel in a pre-mediation phone conference to confirm that the appropriate parties attend the session and that any pre-mediation briefs, if requested, are filed in a timely fashion.  The mediator, through a process of active listening, gathers information and identifies the parties’ underlying needs and interests.  The mediator facilitates the negotiation between the parties. Areas of common ground are highlighted and possible options are generated.  Ultimately the mediator guides the process to closure with a resolution that is acceptable to all parties in about 80-85% of all cases.

e. Advantages of Mediation

i. Reduces emotional toll of litigation and other dispute resolution process because parties have more control over process and outcome;

ii. Improves communication between parties;

iii. Provides an opportunity to deal with underlying interests and needs;

iv. Offers parties more settlement options and enables them to develop more creative outcomes;

v. Enables parties to control outcome and thus there is stronger ownership in agreement and a higher degree of commitment;

vi. Offers privacy;

vii. Provides a model for future conflict resolution;

viii. Provides an opportunity to vent in a safe environment;

ix. Reduces time and expense.

These benefits are also available in other dispute resolution processes, particularly interest-based negotiation and collaborative law processes. 

f. Circumstances Where Mediation Is Inappropriate

i. Where there is a significant imbalance of power due to lack of knowledge or resources to gain information by one party;

ii. Where a party’s physical or mental condition prevents a party from understanding or protecting his/her interests or analyzing options;

iii. Where there is ongoing domestic abuse or previous interactions between the parties resulting in one party controlling or abusing the other party to such an extent that the less dominant party cannot exercise independent judgment;

iv. Where parties seek to establish legal precedent.

g. Selection of the Mediator

In selecting a mediator, the attorney should determine whether the case is such to require the mediator have subject matter expertise. The mediator’s experience, reputation and cost are other important factors for consideration.  Also important is whether the mediator’s style is appropriate for the client and the case.  For example, some mediators offer a purely “facilitative” approach that is especially useful in promoting communication among the parties, helping the parties to understand their interests, and generating settlement options that will satisfy those interests.  This approach works especially well where the parties will have a future relationship or could develop creative settlements involving issues other than the payment of money.  Another mediator approach is more “evaluative”; here mediators supplement the facilitative approach with evaluative techniques that help the parties assess the value of their court case and the costs of pursuing it.  This approach is useful where the barrier to settlement lies in differences in opinion about the likely court outcome.  Under the Virginia Rules of Professional Conduct, the lawyer-mediator and the parties must consult about (i) the nature of the mediation process; (ii) the limitations on the use of any evaluation, if it is to be employed (i.e., that such evaluative approach must not interfere with the mediator's impartiality or the self determination of the parties), (iii) the mediator's approach, style and subject matter expertise; and (iv) the parties' expectations regarding the mediation process.  Rule 2.11 (d) & (e).  Then, the parties and mediator must enter into an agreement to mediate which references the choice and expectations of the parties, including whether the parties have chosen, permit or expect the use of neutral evaluation or evaluative techniques during the course of the mediation.  Rule 2.11(e)  Although this Rule expressly applies only to lawyers acting as mediators, it is a good practice for all counsel at the outset to clarify expectations about the process, including the lawyer’s role in the mediation.  >

5. Role of the Attorney in Mediation

The attorney should be involved in scheduling the mediation. The attorney needs to allow sufficient time for discovery, if appropriate and if not already conducted.  Some mediations may not require discovery or the client may be able to easily obtain the necessary documents. Counsel should review all discovery before the mediation. A well prepared case, and a client who is educated about the case and understands his/her goals will be more likely to succeed in mediation.

Early on in the case, the decision whether the attorneys will attend mediation sessions must be made. Cost and the nature of the dispute may be important considerations as to whether the attorney is physically present during the mediation or is merely consulted during the course of the mediation.

If the attorney is not going to attend, he should inform the client how the lawyer will be available by telephone, e-mail, and/or fax during the time of the mediation. This can be very helpful in moving the mediation forward if the client can obtain advice, or the attorney can review an e-mailed or faxed agreement while the parties are present with the mediator. If the mediation has multiple sessions, counsel should schedule time to discuss the mediation with the client before the next session. Counsel should answer questions about process and substantive issues as well as goals.

Attorneys should understand that there are variations in form and method of mediation. Usually the parties meet physically with the mediator, but telephone and even on-line mediations are conducted. It is possible to have “shuttle” mediation where the mediator goes back and forth between the parties who are in separate rooms. Prepare the client as to the mediator’s method and the role the attorneys will play in the mediation.

Before mediation, counsel should decide who will draft an agreement if the mediation is successful. Most mediators will draft as “scriveners only,” whether they are lawyers or not. A lawyer may prefer to draft the agreement for a variety of reasons. If so, this should be decided in advance with the mediator and a method chosen for terms of the agreement to be communicated to the attorney. Once any agreement has been reached, the final document should be prepared by counsel or, at the very least, reviewed by counsel.

6. Arbitration

Arbitration is a process in which one or more neutrals decide the outcome of a contested matter after hearing arguments and reviewing evidence provided by the parties.  See, Uniform Arbitration Act, VA Code Sections 8.01-581.01 et seq.  In arbitration, the parties to a dispute relinquish their decision-making right to the neutral party, or arbitrator, who renders a decision for them. By pre-agreement, the arbitrator's decision is either binding or nonbinding. If binding, the neutral's decision is final, and the winning party may enforce it against the losing party. If nonbinding, the neutrals' decision is advisory in aid of settlement. As to the benefits of arbitration, it is normally a private process where, by mutual agreement, the parties select qualified neutrals who sometimes have specific expertise relevant to the dispute. Such expertise is not always available by resort to the court system.  The process is ordinarily conducted in a less formal and rigorous setting, thereby enhancing the potential for a more expeditious resolution. Arbitration can be scheduled at the convenience of the parties and the arbitrator, thereby not being subject to the delays of traditional adjudication. The parties usually share the cost of the arbitrators fees, as well as administrative fees, but such costs normally are much less than those associated with a litigated case.

Limitations to arbitration include a lack of quality control, due to the fact that arbitrators are independently selected in individual cases, and are not generally accountable to any supervisory authority.  Other drawbacks to the process may include the lack of public norms, the lack of binding precedent, insufficient opportunity for full discovery, relaxed rules of evidence, usually no written reasons for decisions, no uniformity of decisions, and usually no opportunity for appeal.  Additionally, as to the time and expense of the proceedings, complex arbitration hearings can potentially last for weeks or months, thereby consuming more time and costing considerably more than the parties initially projected.

7. Conciliation

Conciliation is a process in which a neutral third party “facilitates settlement by clarifying issues and serving as an intermediary for negotiations in a manner which is generally more informal and less structured than mediation.” Va. Code § 8.01-576.4. In Virginia, conciliation is available in several courts (e.g., Fairfax County Circuit Court, Prince William County Juvenile and Domestic Relations Court) as a mechanism for helping parties resolve or narrow down pre-trial motions and disputes. A neutral conciliator confers with counsel or the pro se parties, either via telephone conference or in personal conferences at the courthouse. This process has the advantages of utilizing a neutral to assist with discrete aspects of the case, thereby enabling the matter to be resolved more quickly and efficiently than through the courts. Because of the informality and brevity of the typical conciliation, it may be less useful than mediation for reaching more global settlements of a dispute.

8. Neutral Evaluation

Neutral evaluation is a process in which a neutral provides a non-binding evaluation of a matter between parties in dispute based on information provided by the parties and governing law. In Virginia, neutral case evaluation is offered in several courts (e.g., Fauquier County Circuit Court and Fairfax County Circuit Court) and by private providers. Typically, counsel and the parties present abbreviated summaries of their cases (liability and damages) to the neutral evaluator, who is an attorney with experience in the subject matter and the jurisdiction in which the case is pending. The neutral evaluator helps assess the strengths and weaknesses of the case and gives an opinion of the case's worth and an estimate of a likely jury award (or range of awards). Where the primary obstacle to settlement is that the parties or their counsel have different assessments of the likely court outcome, neutral evaluation is a private, quick and inexpensive process that can lead to more realistic negotiations. On the other hand, where the parties are more concerned about issues other than the value of their court case, mediation (with or without an evaluative component) may be the more appropriate ADR process.

9. Collaborative Law

Collaborative law is an ADR process in which parties and their lawyers, trained in collaborative process, agree to seek a mutually acceptable settlement using interest based, problem-solving negotiation strategies without going to court or using court as a threat. The negotiations are conducted from the outset in meetings with the lawyers and the parties with input from neutral consultants as needed. Parties, advised and supported by their lawyers, agree in writing at the outset regarding the parameters of the process. If either party decides to resort to court, the process ends and the lawyers, by virtue of the collaborative law agreement, can no longer represent their respective clients. Like mediation, collaborative law is a future oriented process that provides the opportunity for a win-win outcome. The interests of the parties and the attorneys involved in the process are all aligned toward the goal of a quality settlement that serves the interests of both parties, and to that end, the participating attorneys are trained in interest based negotiation and collaborative law process. While the content of the negotiations remains private, full disclosure of all relevant information is required within the process. Additionally, a requisite transparency of legal advice allows both parties to hear legal explanations from both sides.

Collaborative law may save the clients time and money, allows for creative solutions not limited to the resolutions available by law, and is designed to preserve and even improve the relationship between the parties.  While there is an increased likelihood of compliance by the parties with any resolution that is reached, one limitation, as with all ADR processes, is that the process does not guarantee a resolution.  Other drawbacks include the fact that the process does not promulgate statements of legal precedent and is only for parties who desire full disclosure and transparency.  Additionally, if either party engaged in collaborative law process chooses to litigate, the collaborative attorneys must withdraw under the typical agreement governing the collaborative law process, adding to the clients’ expense.

10. Restorative Justice Processes

Restorative Justice is an ADR process, which begins with the understanding that crime harms victims, offenders, their families, and communities in measurable and often lasting ways.  Restorative Justice equates toughness on crime with holding offenders accountable directly to those whom their crimes have affected, with the intent that offenders attempt to right the wrongs they have inflicted on their victims and the community.  It responds to crime and wrongdoing by involving victims, offenders, communities and justice professionals.  A Restorative Justice process attempts to focus on the harms of wrongdoing rather than the rules that have been broken; empowers victims by giving them a voice, and addresses their needs in the justice system; shows equal concern for victims, offenders and communities, involving all in the justice process, and provides opportunities for dialogue between victims, offenders and their families and those affected by the crime.

11. Judicial Settlement Conference Program

The Judicial Settlement Conference program combines aspects of mediation and the traditional settlement conference.  The pretrial settlement conference has been available to Circuit Courts, for many years pursuant to Virginia Supreme Court Rule 1:19, but many courts have not utilized it because of insufficient time and resources as well as ethical concerns about judges providing settlement services in cases assigned to them for adjudication.  The Judicial Settlement Conference program addresses these issues by using trained retired Circuit Court judges who conduct the conference under the referring court’s auspices, but have no trial authority over the case.  When referral is made to a settlement conference, counsel may select a settlement judge from the Supreme Court of Virginia’s list at http://www.courts.state.va.us/jsc/home.html.  The Supreme Court will designate the judge for the settlement conference and the conference will be held a time convenient to the parties and the settlement judge.  The Settlement Conference program is free of cost to the parties.   This program has been very well received by counsel and successful in resolving a significant number of Circuit Court cases that would have taken several days to litigate.

E. Virginia State Bar Fee Dispute Program

1. Background

The Virginia State Bar recognizes that fee disputes present a significant problem for both clients and attorneys and contribute significantly to the current negative attitude of the public towards the legal profession. In 1992, the VSB Special Committee on Resolution of Fee Disputes recommended that the State Bar establish a voluntary procedure for resolving fee disputes in each of the 31 judicial circuits within the state and it created the Fee Dispute Resolution Program (the “FDRP”).  Currently there are 16 circuits that are served and programs are being developed in more circuits.  Since 2006, the Bar has offered arbitration and mediation of fee disputes.    

2. Process

The first step is for the attorney or client to contact the chair of the Circuit Committee on the Resolution of Fee Disputes (CCRFD), who administers the program in each respective locality. Virginia State Bar staff member Paulette Davidson, coordinates the Fee Dispute Hotline, at (804) 775-9423. The Petitioner, the party who contacts the program first, pays a one-time non-refundable fee of $20.00. This is the only administrative fee charged, whether the parties choose to mediate, arbitrate, or mediate first and then arbitrate. The CCRFD will not handle a fee dispute that has already been decided by a court. Also, the CCRFD will not handle a dispute that is pending before a court. Therefore, if both parties sign an agreement to participate in the program, either by mediation or arbitration, and nonsuit the case or ask the court for a stay in the proceedings, the FDRP can handle the case.

This is a voluntary program so, if there is no mutual agreement to mediate or arbitrate through the FDRP, the CCRFD cannot resolve the dispute.  The Virginia State Bar strongly encourages all attorneys and clients involved in a fee dispute to consider using the FDRP instead of resorting to court.  For more information on the fee dispute program, visit http://www.vsb.org/site/public/fee-dispute-resolution-program

Note that Comment 9 to Rule 1.5 states that “If a procedure has been established for resolution of fee disputes, such as an arbitration or mediation procedure established by the bar, the lawyer should conscientiously consider submitting to it.”

F. Conclusion

ADR is clearly an integral part of the legal landscape in Virginia. The Commission on Virginia Courts in the 21st Century: To Benefit All, To Exclude None, referred to as the Futures Commission, was initiated by Supreme Court of Virginia Chief Justice Hassell in the fall of 2005 to study the needs of the Virginia judicial system over the next 10-15 years. The Commission’s 2007 report supports the continued growth of ADR by recommending that: 1) ADR be encouraged by the collaborative efforts of the public and private sectors, 2) Education regarding ADR be increased, 3) The use of existing legislation providing for referral of litigants to ADR be by party choice, not by mandate, 5) Those who cannot afford ADR be given access, and 6) Restorative justice processes be a referral option in the criminal justice system.

To fulfill his/her ethical obligations and better serve the client, the Virginia lawyer should have a working knowledge of ADR processes. This can be done through continuing legal education programs provided by Virginia CLE, the Virginia State Bar or Virginia Bar Association and their Joint ADR Committee, the ADR courses offered at state law schools, and through a wide choice of ADR publications and continuing education offerings throughout the United States.  The Supreme Court of Virginia’s website www.courts.state.va.us has a great deal of information on mediation, brochures, and links to other local and national mediation organizations.  With this background Virginia lawyers will be better able to assist clients in determining their needs, interests and goals and in deciding on the most appropriate dispute resolution process. This will also enable a lawyer to engage the other party’s lawyer in a discussion about the most effective process to resolve the dispute.

 

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Copyright © 2014 Virginia State Bar. All rights reserved. Updated 11/ 01/14