Advisory Opinion:
2094
Year Issued:
2005
RPC(s):
RPC 1.5, 3.3, Published Informal Opinion 88-1, 76 A.L.R. Fed. 347
Subject:
Continency fee agreement
Factual Background:
This inquiry involves an attorney who represents a number of plaintiffs in contingency-fee employment cases where statutes provide for an award of attorneys fees. In many cases the principal amount that may be awarded is significantly less than the amount of statutory attorney fees that may be awarded. For that reason, the inquirer wants to know if it would be ethically improper for him to prepare a fee agreement that provides for a contingency fee on both the principal amount and on the statutory fee amount, with the remaining principal and statutorily awarded attorney`s fees going to the client?
For example – would it be improper for the fee agreement to provide that the attorney receive 1/3 of the principal sum and 2/3 of the statutory attorneys fees with the remaining amounts remitted to the client? The attorney states the purpose of this fee arrangement would be to benefit the client who receives a "windfall" since the client would share in the statutory attorney fee recovery that may be significantly more than what he or she actually would be entitled to on the principal sum.
Answer:
So long as the contingency fee agreement is reasonable, it does not appear to violate the RPCs. The client can determine how to split the fees awarded to it by statute.
Contingency fee agreements are subject to review and to a reasonableness standard under RPC 1.5 "Fees" (regardless of the terms of the agreement). At the very least we believe that RPC 3.3 "Candor Toward the Tribunal" may in some circumstances require the attorney to disclose the contingency fee agreement, or the existence of the agreement, to the court.
Contingency fee agreements and statutory fee awards are also discussed in: Published Informal Opinion 88-1 "Contingent Fee Agreements in Cases Where the Court Sets a Reasonable Attorney`s Fee". See also, US Supreme Court opinion C.I.R. v. Banks et al, 125 S.Ct. 826 (US 2005) (for a case finding the taxpayer liable for taxes on contingent attorney fees paid to his or her lawyer). Additionally, 76 A.L.R. Fed. 347 contains an overview of contingency fee agreements in cases where fees are awarded by statute entitled, "Effect of Contingent Fee Contract on Fee Award Authorized by Federal Statute."
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