OS NEGOTIATING FOR F E : TO WHAT EXTENT D E AN ES ATTORNEY'S FREEDOM TO CONTRACT PROTECT HIM? Lawyers, like the general public, have a great deal of freedom to contract, especially in fee arrangements. This freedom is tempered, however, by professional codes of ethics designed to protect clients and attorneys from the appearance of impropriety and the reality of malpractice suits. Problems arise when the guidelines, which must nec- essarily be general, are not specific enough to be of assistance to attor- neys. How much protection can the freedom to enter into contracts give a lawyer who comes close, but does not actually violate, the letter of the ethical codes? This comment will view this question in the area of contingent fees and media rights contracts as fees in criminal cases. In a recent case, State v. Lab~nville,~ Supreme Court of New the Hampshire was asked to rule on whether a court-appointed attorney had failed to give effective assistance of counsel because of a fee ar- rangement the attorney made with his indigent client. The client was accused of conspiracy to commit first-degree murder of her husband. When the defendant claimed she was not comfortable with represen- tation by an attorney from the Public Defender Program, the court ap- pointed her former attorney to represent her. The attorney and de- fendant signed a retainer agreement whereby if the defendant was acquitted of the criminal charge, she would pay the attorney his regular fee of $85 per hour for out-of-court time and $100 per hour for in- court time. If the defendant was convicted, the agreement stipulated the attorney would recover from the state alone at the rate of $20 per hour for out-of-court time and $30 per hour for in-court time. The par- ties decided the higher fee for acquittal would come from the pro- ceeds of two life insurance policies on the client's husband. The de- fendant was convicted, and the attorney recovered $1,500 from the state for his services and $900 for expenses. The defendant appealed on the grounds of ineffective assistance of counsel because her attor- ney represented her in a criminal matter under a contingent fee ar- 1. State v. Labonville, 126 N.H. 451, 492 A.2d 1376 (1985). 200 The Journal of the Legal Profession rangement.l She claimed the attorney had an economic incentive to go to trial and had failed to plea bargain effectively for her.3 The state supreme court, in affirming the conviction, ruled that although contin- gent fee arrangements in criminal cases were contrary to the Code of Professional Responsibility for New Hampshire lawyers, it did not follow that representation under such an arrangement was necessarily ineffec- tive assistance of counsel under the state con~titution.~ This case poses interesting ethical questions which this comment addresses. 11. CANONS OF ETHICS AND MODEL RULES The American Bar Association Canons of Ethics addresses the issue of contingent fees generally in Canon Two: "A lawyer should assist the legal profession in fulfilling its duty to make legal counsel a~ailable."~ The Canons are general expressions of the standards of profes- sional conduct expected of lawyer^.^ However, they give only broad standards of conduct. Ethical considerations which accompany the Ca- nons provide more specific objectives and goals. "Public policy prop- erly condemns contingent fee arrangements in criminal cases, largely on the ground that legal services in criminal cases do not produce a res with which to pay the fee."' The Disciplinary Rules, on the other hand, R serve as mandatory minimum standards for all attorneys. D 2-106(c) specifically prohibits a lawyer from entering into a contingent fee ar- rangement with a criminal defendant.B The ABA has accepted a new set of model rules which are being considered for adoption by various state bars. Rule 1.5(d)(2) states: "A lawyer shall not enter into an arrangement for, charge, or collect a con- 2. Id. at 454, 492 A.2d at 1377-78. 3. The state offered the defendant a prison sentence of four t o eight years if she pled guilty. The defendant ultimately rejected this offer, went t o trial, and received a sentence of seven and one-half t o fifteen years. Although testimony differed as to the advice the attorney gave the defendant about the guilty plea, both parties agreed the attorney had said he did not believe the judge would accept the recommended lesser sentence. 4. Labonville, 126 N.H. at 456, 492 A.2d at 1379. 5. Model Code of Professional Responsibility Canon T w o (1982) [hereinafter Model Code]. 6. Code of Professional Responsibility of the Alabama State Bar and the Rules of Disciplinary Enforcement Preliminary Statement (1974) [hereinafter Alabama Prof. Code]. 7. Model Code EC 2-20 (1982). 8. Model Code DR 2-106(c) (1982). Negotiating For Fees 201 tingent fee for representing a defendant in a criminal case."O 111. POLICY CONSIDERATIONS The public policies behind limiting contingent fee contracts in crimi- nal cases are simple. "The courts tend to focus on the corrupting ten- dency of these contracts; attorneys should not have a financial in- centive to secure" convictions or reduce guilty pleas.lo Given the restrictions on the types of fee arrangements an attorney can have with a criminal defendant, the best solution is to demand payment before legal services are rendered. This procedure not only insures payment, but also protects a lawyer in a criminal case from a client's shift in attitude after the trial has ended. For example, if a client is found innocent, he may refuse to pay his attorney the proper fee, claiming he was innocent all along and never really needed counsel. If he is con- victed, he may not pay because he has no money, or because he feels the attorney did not do an adequate job representing him since he was not acquitted.ll IV. CONTRACTS PAYMENTS FOR A great deal of litigation has occurred regarding fee contracts be- tween an attorney and a client. Each party has a great deal of freedom to contract; the only limitation on the attorney's right to contract is that his fee must not be excessive.12 The terms of the fee agreement or contract should be contained in a retainer agreement which the attor- ney and defendant each sign at the beginning of the lawyer's involve- ment with the case.13 Usually courts review cases on either constitu- tional grounds, to determine whether the contract prejudiced the rights of the defendant, or on contract principles. 9. Model Rules of Professional Conduct Rule 1.5(d)(2) (1983) [hereinafter Model Rules]. 10. Aronson, Attorney-Client Fee Arrangements: Regulations and Review, 68 ABA JOURNAL286 (1982). 11. 13 AM. JUR. TRIALS 5 (1967). See also S. SPEISER,ATTORNEYS' Cj 20:16 (1973). Cj FEES 12. ABA Comm. on Professional Ethics and Grievances, Form. Op. 190, Feb. 17, 1939. The attorney should consider factors such as time and labor involved, the cus- tomary fee in the location, the urgency of the matter, the experience and reputation of his practice and the certainty of compensation. See Gettazard, Jr., ETHICS IN THE P A TC R CI E O LAW 97 (1978); W.M. Trumbull, Materials in the LAWYER'S F R S N I IIY EP PROFESSIONAL O SBLT 267 (1957). 13. SPEISER,supra, note 11 at 535. The Journal of the Legal Profession A. Constitutional considerations In Labonville, the defendant signed a retainer agreement to pay the attorney a higher hourly rate if she was acquitted. The attorney agreed to accept the lower fee, which the state would pay if she was convicted. The court found this arrangement to be a contingent fee, but said the defendant failed to prove the conflict of interest adversely affected her lawyer's performance.14 The court refused to accept the argument that the fee arrangement necessarily made representation in- effective. Since the defendant failed to show her attorney's representa- tion under the agreement was constitutionally defective, the court up- held the defendant's c o n v i c t i ~ n . ~ ~ However, in Simon v. Murphyf16 a federal district court in Pennsylvania held that a contingent fee arrange- ment similar to the one in Labonville, did create a conflict of interest for the attorney which resulted in prejudice to the defendant. In Simon, the defendant was charged with the murder of her hus- band. The attorney agreed to accept payment for his services from the proceeds of an insurance policy o n the husband. The attorney failed to advise the defendant of a plea bargain offered by the prosecution until it was too late to accept. In Pennsylvania, the recovery of the insurance award, and thus the attorney's fees, was contingent on an acquittal of the defendant.17 A guilty plea to a lesser offense would eliminate the insurance company's obligation to pay. The court's opinion stated: "A plea of guilty would not only destroy relatrix' right to the insurance proceeds, but also counsel's hope for further compensation. It is hard to imagine a more striking example of blatant conflict between personal interest and professional duty."lB The court refused to accept the argu- ment that the defendant had not been prejudiced because she had also asserted self-defense as a defense. The judge focused on the lack of proper counseling and how it affected the choice of defenses presented to the defendant.19 14. Labonville, 126 N.H. at 454, 456, 492 A.2d at 1377-79. 15. Id. See also Schoonover v. State, 218 Kan. 377, 543 P.2d 881 (1957) (The f Supreme Court o Kansas held the conduct of a court-appointed attorney to be unpro- fessional when the attorney entered into a contingent fee arrangement with a criminal defendant; however, the court held that this did not, of itself, establish ineffective assis- tance of counsel). 16. Simon v. Murphy, 349 F. Supp. 818 (E.D. Pa. 1972). 17. Id. at 825. 18. Id. at 823. 19. Id. at 823. Negotiating For Fees 203 B. Contract principles Other courts have also ruled arrangements like that in Labonville invalid. The holdings in these cases did not hinge on conflict of interest principles, but rather on contract principles. In Commonwealth v. the W~rrnsley,~~ Supreme Court of Pennsylvania ruled that court-ap- pointed attorneys for an indigent criminal defendant, who was con- victed by the trial court, could not contract with others for fees and expenses related to his appeal. The court held, "[Tlhe fee paid [the attorneys] by the county must be their exclusive compensati~n."~~ This rule was reiterated by the Supreme Court of New Mexico in Hale v. .~~ B r e ~ s t e rIn Hale, the court ruled that a note executed by the de- fendant to pay his court-appointed attorney was invalid for lack of con- sideration because the attorney was already bound, by virtue of his appointment, to perform the contract.23 The ABA has issued opinions to help attorneys act ethically in es- tablishing fee contracts. Counsel for criminal defendants cannot require clients to sign a form contract which provides for full payment and stipulates that by signing and promising such, the fee is nonrefundable. The ABA has held that contracts must be created on a case-by-case basis; attorneys may not use a standardized form which does not take various factors about each client into c~nsideration.~~ However, the Illi- nois State Bar Association Committee on Professional Responsibility has determined when an attorney represents a client on both a criminal and a civil matter stemming from the same set of facts, the attorney may contract to handle both cases for a fee to be paid from the pro- ceeds, if any, of the civil action. The Illinois Committee based its deci- sion on the fact that a successful civil action would produce a res with which to pay the attorney. This position mitigates some of the general public policy concerns against contingent fees in criminal l i t i g a t i ~ n . ~ ~ V. MEDIA RIGHTS Some cases have posed dual problems of constitutional prejudice 20. Commonwealth v. Worrnsley, 294 Pa. 495, 144 A. 428 (1928). 21. Id. at 429. 22. Hale v. Brewster, 81 N.M. 342, 467 P.2d 8 (1970). 23. Id. at , 467 P.2d at 10-11. 24. Kansas Bar Ass'n Professional Ethics Cornm. Advisory Section Op. 84-12 (1984). See also Model Code DR 2-106(B) (1982). 25. Illinois Bar Ass'n Standing Cornm. on Professional Responsibility, Op. 84-9 (1985). 204 The Journal of the Legal Profession to a criminal defendant's rights and contract principles. These cases deal with a type of fee contract in criminal cases wherein a criminal defendant signs over to attorneys the rights to his life story, complete with entertainment and commercial righb26Usually, such criminal cases involve particularly heinous murders or serial crimes. Canon Five of the ABA Code of Professional Responsibility states that "A lawyer should exercise independent professional judgment on behalf of a client."27The ethical considerations which accompany Ca- non Five point out that if an attorney is allowed to receive a beneficial ownership in his client's publication rights, the attorney "may be tempted to subordinate the interests of his client to his own anticipated pecuniary gain."28 For example, a lawyer in a criminal case who obtains from his client television, radio, motion picture, newspaper, magazine, book, or other publication rights with respect to the case may be influenced, consciously or unconsciously, to a course of conduct that will enhance the value of his publication rights to the prejudice of his client. To prevent these potentially differing interests such arrangements should be scrupulously avoided prior to the termina- tion of all aspects of the matter giving rise to the employment, even though his employment has previously ended.2B Disciplinary Rule 5-104(B) says: Prior to conclusion of all aspects of the matter giving rise to his employment, a lawyer shall not enter into any arrangement or un- derstanding with a client or a prospective client by which he ac- quires an interest in publication rights with respect to the subject matter of his employment or proposed empl~yrnent.~~ The ABA has adopted a new set of model rules which also ad- dresses media rights. Rule 1.8(d) states: "Prior to the conclusion of rep- resentation of a client, a lawyer shall not make or negotiate an agree- ment giving the lawyer literary or media rights to a portrayal or account based in substantial part on information relating to the repre~entation."~' 26. Maxwell v. Superior Court of Los Angeles County, 30 Cal. 3d 606, 639 P.2d 248, 180 Cal. Rptr. 177 (1982). 27. Model Code Canon Five (1982). 28. Model Code EC 5-4 (1982). 29. Id. 30. Model Code DR 5-104(B) (1982). 31. Model Rules, Rule 1.8(d) (1983). Negotiating For Fees 205 Although this new rule is substantially similar to DR 5-104(B), it re- fers more specifically to "literary or media rights" than the older rule's reference to "publication" rights.32It also prohibits the attorney from negotiating such agreements with a client. This is more restrictive lan- guage. The Comments to Rule 1.8 explain that: An agreement by which a lawyer acquires literary or media rights concerning the conduct of the representation creates a conflict be- tween the interests of the client and the personal interests of the lawyer. Measures suitable in the representation of the client may detract from the publication value of an account of the repre~entation.~~ Thus, the new rule and the comment are more restrictive than the ABA's previous standard. The extent to which the rules protect a client can be seen in the case of People v. Corona,34 a 1978 California Court of Appeals deci- sion. Juan Vallejo Corona was convicted by a jury for 25 counts of first- degree murder. All the victims were migratory farm workers, killed by a knife or machete, buried in the same general area, and also buried in a similar, if not identical, manner.35 The defendant was represented at trial by Richard E. Hawk, a privately retained sole practitioner. Since Corona could not actually afford such services, Hawk entered into a contract for attorney's fees, whereby Hawk would have exclusive liter- ary and dramatic rights to Corona's life story, including the trial for mur- der. As part of the contract, Corona waived the attorney-client privi- lege, insuring Hawk the right to publish the most intimate details of his life and trial. The contract was irrevocable and binding in perpetuity on Corona, "his heirs, executors, legal representatives and assigns." Also, all of the income from any publication was to go exclusively to Hawk.36 During the trial, Hawk hired a professional writer, who sat at the coun- sel table during the proceedings, and signed a publishing contract with MacMillan Publishing Company. The book, Burden o f Proof, The Case o f Juan Corona, was published shortly after the Corona appealed his conviction on two grounds: first, the trial counsel refused to raise adequate defenses, namely an insanity de- 32. Id. Model Code Comparison. 33. Model Rules Comment to Rule 1.8 (1983). 34. People v. Corona, 80 Cal. App. 3d 684, 145 Cai. Rptr. 894 (1978). 35. Id. at 693-694, 145 Cal. Rptr. at 897-898. 36. Id. at 703, 145 Cal. Rptr. at 903-904. 37. Id. 206 The Journal of the Legal Profession fense, and second, a conflict of interest made the trial inherently un- fair.a8 The court held the trial counsel had grossly neglected his basic duty by failing "to conduct the requisite factual and legal investigation in an effort to develop fundamental mental defenses available for his client and as a result of his negligence, crucial defenses were with- drawn from the case."39 The trial court concluded that the decision not to raise any mental condition defenses was either the result of igno- rance of the law or "deliberate intentional withholding of a crucial de- fense," given the nature of the murders, the defendant's previous mental history, and reports of psychiatrist^.^^ In addition, the court found the literary contract had influenced the attorney's decision to prevent a mental defense from being raised. The contract created a situation where the attorney had "two masters," each with conflicting interests - "his pocketbook and the best interests of his client." The attorney's conduct in not presenting crucial defenses not only reduced the trial to a farce, but, in actuality, put the lawyer in a position virtually adverse to his client, in that he took steps t o deliberately thwart the development of viable defenses available to the accused.41 Thus, the court found that a conflict of interest between the attorney and his client existed, and that the conflict resulted in manifest prejudice t o the defendant. "Such conduct constituted not only an outrageous abroga- tion of the standards which the legal profession has set for itself and upon which clients have the right to rely, but also rendered the trial a farce and mockery calling for reversal of the conviction and requiring a new The Corona case shows an extreme extent t o which an attorney's conduct can be compromised by a literary conflict. Other courts, not faced with obvious breaches, have not been as willing to reverse con- victions and allow new trials. In People v. Fullerj43the court refused to invoke a per se conflict of interest rule and t o reverse Fuller's convic- tion upon the showing of a literary rights contract with an attorney. Thomas Fuller pled guilty and was convicted of killing five children, ages 5 to 16 years. He was represented at trial by a public defender and a second court-appointed attorney, Whitney Hardy. Hardy prepared a 38. Id. at 704-705, 145 Cal. Rptr. at 905. 39. Id. at 706, 145 Cal. Rptr. at 906. 40. Id. at 709, 718, 145 Cal. Rptr. at 907, 914. 41. Id. at 720-721, 145 Cal. Rptr. at 915-916. 42. Id. at 727, 145 Cal. Rptr. at 920. 43. People v. Fuller, 21 111. App. 3d 437, 315 N.E. 2d 687 (1974), habeas corpus den'd 421 F. Supp. 582 (E.D. 111. 1976). Negotiating For Fees 207 contract that Fuller and his mother signed. Hardy promised to protect Fuller's "common law" rights in Fuller's unpublished writings- three books and a diary- and video tapes of a psychiatric e~amination.~~ In return, Hardy was to receive a contingent fee of one-third of any royal- ties received upon publication. Fuller requested the contract to be ter- minated after his sentencing, and Hardy did so. Fuller appealed, claim- ing a mandatory reversal of his conviction due to the per se conflict of interest on Hardy's part.45The court held the per se rule in Illinois ap- plied only where the counsel's conflict of interest arose from a commit- ment to others. The court refused to apply the rule in Fuller's case since the conflict was not explicitly covered by the rule.4eHardy's conduct was a violation of Illinois Code of Professional Responsibility, Canon 5, DR 5-104(3), but his conduct did not invoke the per se rule since no commitment to others was involved. The court also focused on the fact that the public defender who represented Fuller was not subject to any conflict of interest; thus, Fuller's sixth amendment right to counsel was not denied.47 Sometimes, courts have held a defendant's full disclosure of con- flicts is a factor which may be considered a constituting a waiver. In s Maxwell v. Superior Court,48 the Supreme Court of California refused to affirm the trial court's decision to recuse the defendant's counsel. Defendant Bobby JoeMaxwell had retained the attorneys he wished to represent him in a trial on four counts of robbery and ten counts of murder. The murders allegedly occurred in Los Angeles' Skid Row, and the media had named the killer the "Skid Row Stabber." Maxwell faced the death penality if convicted. He chose to use the media notoriety to help finance his defense.4Q agreed their fee would be "any and all He rights, title, and interest, of any kind, nature and description throughout the world in and to the story of [his] entire life."50 The contract also allowed Maxwell the right to 15 percent of the net amount, and he, in turn, promised to "cooperate in the exploitive efforts and not to dis- 44. Id. at , 315 N.E.2d at 687-688. 45. Id. at , 315 N.E.2d at 688-689. Under the per se conflict of interest rule, showing of prejudice was not necessary. 46. Id. at , 315 N.E.2d at 690-691. 47. Id. at , 315 N.E.2d at 691. 48. Maxwell v. Superior Court of Los Angeles County, 30 Cal. App. 3d 606, 639 P.2d 248, 180 Cal. Rptr. 177 (1982). 49. Note, Maxwell v. Superior Court: Buying Counsel of Choice or Ineffective As- L. sistance?, 71 CALIF. REV. 1348 (1983). 50. Maxwell, at , 639 P.2d at 249-250, 180 Cal. Rptr. at -. 208 The Journal of the Legal Profession close his story to other^."^' The more disturbing clauses of the contract included a waiver of all defamation and invasion of privacy claims, as well as the attorney-client privilege. The attorneys were not obligated to undertake an appeal, and the terms of the contract specifically stated possible conflicts of interest and prejudice. Also, "[ilt declares that counsel may wish to (1) create damaging publicity to enhance ex- ploitation value, (2) avoid mental defenses because, if successful, they might suggest petitioner's incapacity to make the contract, and (3) see him convicted and even sentenced to death for publicity value."52 The trial court found the fee contract resulted in a conflict of interest which violated constitutional guarantees of effective counsel and ethical stan- dards and "jeopardized the integrity of the judicial process."53 O n ap- peal, the California Supreme Court failed to accept this broad ruling, and focused on much more narrow grounds: W e stress that our opinion connotes no moral or ethical approval of life-story fee contracts. We have addressed only this narrow question: May a criminal defendant (here charged with capital crimes) be denied his right to representation by retained counsel simply because of potential conflicts or ethical concerns even when he has asserted, after extensive disclosure of the risks, that he wishes to proceed with his chosen lawyers and no others? Our answer is No.=' The extensive pretrial disclosures about possible conflicts and the de- fendant's insistence on proceeding with his chosen counsel constituted an adequate waiver which precluded their removal.55 Even though the court allowed counsel t o remain, at least one jus- tice expected to see the Maxwell case on another appeal: "Although it appears to me that Maxwell has adequately waived any conflict inher- ent in the contract, I am under no illusion that, if convicted, he will not raise the conflict as a ground for reversal. It will have to be dealt with at that time."5'3 51. Id. 52. Id. at , . 639 P.2d at 250, 180 Cal. Rptr. at - 53. Id. at , 639 P.2d at 251, 180 Cal. Rptr. at -. 54. Id. at , 639 P.2d at 257-258, 180 Cal. Rptr. at -. 55. Id. at , 639 P.2d at 257, 180 Cal. Rptr. at . Maxwell was eligible to have an attorney appointed for him because he was indigent. He nevertheless wished to keep his chosen counsel even after the trial judge specifically questioned him about the clauses of the contract which disclosed possible conflicts. 56. Maxwell, 30 Cal. App. 3d at , 639 P.2d at 258, 180 Cal. Rptr. -(Kaus, I., concurring). Negotiating For Fees 209 Generally, courts are not willing to use conflicts of interest as evi- dence of a lack of a defendant's constitutional rights to representation. In Wojtowicz v. United States,=' the court held that the defendant had not received constitutionally defective counsel, even though the attor- ney had a financial interest in the client's movie rights. The defendant pleaded guilty to one count of armed bank robbery. JohnStanley Woj- towicz and two confederates tried to rob the Brooklyn Branch of Chase Manhattan Bank in New York. The unsuccessful attempt gave rise to the film "Dog Day A f t e r n o ~ n . " ~ ~ Wojtowicz asserted, on ap- peal, that he had not received effective assistance of counsel due to the fact "that counsel's fee and expenses" were to be paid from funds generated by the sale of the movie rights, which counsel helped to .~ a n e g ~ t i a t e In ~ short, terse statement on this issue, the court held, "While we do not regard this practice as worthy of emulation, we can- not say that it rendered counsel's representation constitutionally defective."60 This case shows the "disfavor" of a defendant's claim of ineffec- tive assistance due to a conflict of interest born out of a publication rights contract. Unless the facts show a gross conflict on the part of the representing attorneys, the defendant's claim will likely be denied on appeal. The previously discussed Corona case was such that no rem- edy short of a new trial would suffice. The defendant's conduct and history pointed to mental problems; and the attorney's action of not raising the defense suggested he did not want an unsuccessful mental defense to lessen the profits he would make, nor did he want a suc- cessful one to void the contract. Clearly, the conflict was too great to ignore. Even though the ABA Model Code has tried to restrict publication rights contracts, attorneys have continued to enter these contracts and have problems with them. These contracts arise most often in cases which deal with well-known defendants' bizarre crimes. Attorneys have problems in not capitalizing on the opportunity to make a profit on a case which carries so much media coverage. The old ABA rule prohib- ited an attorney from making an agreement or understanding with a client prior to the conclusion of his employment. The new rule forbids making or negotiating an agreement based substantially on the employ- 57. Wojtowicz v. United States, 550 F.2d 786 (2d Cir. 1979). 58. Id. at 787. 59. Id. at 792. 60. Id. 20 1 The Journal of the Legal Profession ment matter. Perhaps this stricter language will dissuade attorneys from entering a fee contract based on publication rights. VI. CONCLUSION Since the problems of attorneys contracting for fees are usually not a direct ethical violation, the "punishment" ranges from no action to public censure,61 reprimand,B2 and disbarment. Although attorneys have a great deal of latitude in establishing fees, they should use care not to skirt too closely to the ethical restrictions for setting fee con- tracts and retainer agreements. Doing so invites an appearance of im- propriety which can lead to embarrassing litigation between the attor- ney and client. This type of notoriety can cripple a trial lawyer's practice. An attorney should forego the temptation of entering into an attractive fee contract which might sour his business reputation. Debra K. Wilkinson 61. In re Steere, 217 Kan. 271, 536 P.2d 54 (1975). 62. In re Fasig, 444 N.E.2d 849 (1983).
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