New York Law (NYLE) Practice Exam

What must a lawyer disclose regarding financial arrangements with clients?

1. The potential for increased legal fees

2. Any referral fees involved

3. All expenditures related to the case

4. The average cost of similar cases

The correct answer is: Any referral fees involved

A lawyer is required to disclose any referral fees involved in financial arrangements with clients to ensure transparency and maintain trust in the attorney-client relationship. This disclosure is rooted in the ethical obligation to avoid conflicts of interest and to provide clients with all pertinent information regarding fees that could influence their decisions about legal representation. By informing clients of referral fees, a lawyer allows them to fully understand any financial arrangements that could impact the cost of their legal services or the lawyer’s representation. This is particularly important in maintaining ethical standards and ensuring that clients can make informed decisions about their legal representation. The other options, while they may be relevant in a broader discussion about fees and transparency, do not have the same explicit requirement for disclosure according to the ethical rules governing attorneys. For instance, the potential for increased legal fees and the average cost of similar cases do not specifically pertain to the need for disclosure compared to referral fees. Additionally, while a lawyer should be aware of expenditures related to the case, it is not a formal requirement to disclose every single expense as part of financial arrangements unless otherwise stipulated by specific agreements or legal ethics rules.