17.05.02. Cases in which contingent fee are inappropriate

There are two types of cases in which a contingency fee is inappropriate:  criminal cases and domestic relations cases.

 In Criminal Cases

Rule 1.5(d)(2) provides that a lawyer shall not enter into a contingency fee agreement “for representing a defendant in a criminal case.”  That means that a lawyer and client cannot agree to make the lawyer’s payment contingent on the outcome of a criminal matter.  For example, a lawyer cannot agree to charge $1,000 if there is a plea bargain, $10,000 if the case goes to trial and they lose, and $15,000 if they go to trial and the defendant is found not guilty.  You should be able to see that this could raise a conflict of interest between the lawyer and the client – the lawyer has an incentive to go to trial to recover as much money as possible – even if going to trial would not be in the client’s best interests.  Of course, as a matter of constitutional law, a criminal defendant that cannot afford a lawyer will be appointed one (and therefore would not need a contingency fee agreement to have representation). 

In Domestic Relation Cases

Rule 1.5(d)(1) provides that a lawyer may not enter into a contingency fee agreement in a domestic relations case where the lawyer’s fee is contingent upon:  (1) the client obtaining a divorce; (2) the amount of alimony or child support the client will receive; or (3) what will be in a property settlement.  The justification for this prohibition is based in public policy.  If the fee agreement said that the lawyer would only get paid if the client obtained a divorce, the lawyer would have an incentive to take steps to make sure that the client obtained the divorce – and the lawyer may even attempt to dissuade the client from reconciling with their spouse in order to get paid.  Because, as a matter of public policy reconciliation is favored, creating such incentives on behalf of the lawyer is prohibited.

There is an important caveat to this restriction, however.  The concern that the lawyer could have an incentive to discourage reconciliation does not exist after the divorce is granted.[1]  If a dispute arises post-judgment, a lawyer may take the claim on a contingency fee basis.

Lisa Lawyer represented Wendy Wife in her divorce of Harry Husband.  The fee agreement provided that Lisa would be entitled to “$500 upon entry of a divorce in which Wendy received at least $100,000 in the property settlement.”  Thereafter, a divorce decree was entered which gave Wife $100,000 in the property settlement.  Wife paid Lawyer $500.  Husband was supposed to transfer the $100,000 into a separate bank account within 30 days of the divorce decree.  Sixty days pass and Husband has not deposited the money.  Wife comes to Lawyer who agrees to bring a claim against the Husband to recover the $100,000, and the fee agreement provides:  “Lawyer is entitled to 25% of any funds that she recovers.”  Are either of these fee agreements ethical? [ABA Rule 1.5 and Comment [6]]

The first fee arrangement is unethical and the second is ethical.  The first contingency fee is to obtain a divorce.  That agreement is prohibited by Rule 1.5(d)(1).  The second fee arrangement is ethical.  A lawyer may enter into a contingency fee agreement to recover post-judgments amounts due in a domestic matter.

[1] ABA Rule 1.5, Comment [6].