Archive for June, 2013

18
Jun
13

Unusual Fee Agreements

There is a lot of chatter in legal publications on “alternative fee” agreements. Lawyers essentially have three recognized forms of fees: plaintiffs sometimes have contingency fee agreements; minor criminal and transaction attorneys have a set fee, and most of the rest of us work on an hourly rate. But sometimes clients seek to control costs, predictability or other goals by seeking alternatives.

100% of 0 is …

I was recently asked to opine on the ethical implications of a “reverse contingency” fee agreement. The concept of a reverse contingency is that a defendant’s fee is the difference between the judgment or settlement and a set figure, perhaps based upon the demand or the prayer in the complaint.

The only contingency fee agreements that are considered per se unethical are in divorce and criminal cases. Thus, the implication is in all other applications, contingency fees are at least potentially ok.

Georgia does not have a court or bar opinion on reverse contingency fees, though Rule 1.5 provides for the general rule that contingency fees are allowed but not in divorce and criminal cases.

The bottom line is that reverse contingency fees are potentially ethical (except maybe in Iowa if the case is an unliquidated tort case – Wunschel Law Firm v. Clabaugh, 291 N.W.2d 331 (Iowa 1980) – this appears to be an outlier opinion in its public policy holding). The most discussed opinions are from the ABA and the DC Bar. No Bar or Court opinion on the subject (except maybe Iowa as mentioned) seems to be of the opinion that they are per se unethical.  Other discussions can be found here and here.

The times such agreements have not been enforced is with unsophisticated clients where there was a concern over “reasonableness” of the benchmark figure from which you measure the % (this fact pattern includes the Iowa opinion).  If you are doing the deal with an insurance company, that is obviously not a concern.

The ABA opinion is fine with the agreement subject to the reasonableness issues and actually mentions that doing one with an insurance company would be fine since it would probably know better than the attorney what a good benchmark figure would be.

Don’t forget that under Rule 1.5, all contingency fee agreements must be in writing.

Advertisements



Kim Jackson Cleans Up The Mess

Follow Attorney Defender on Twitter

Post Topics