Laura W. Morgan, Executive Editor, Divorce Litigation

As divorce practioners are well aware, attorneys may not charge a contingency fee in family law matters, subject to certain exceptions, discussed below. See generally ABA/BNA Lawyers’ Manual on Professional Conduct § 41:914-917 (1994).

The Model Code of Professional Responsibility, EC 2-20 provides,

Because of the human relationships involved and the unique character of the proceedings, contingent fee arrangements in domestic relations cases are rarely justified.

The Model Rules of Professional Conduct, Rule 1.5(d) provides,

(d) A lawyer shall not enter into an arrangement for, charge or collect:

(1) Any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof.

The rule does not prohibit contingency fees of the collection of arrears in support, as opposed to the initial "securing" of the "amount" of support. See, e.g., Fletcher v. Fletcher, 591 N.E.2d 91 (Ill. App. 1992). Under the same logic, contingency fees are not barred in a suit to enforce property division orders, as opposed to securing equitable distribution. Committee on Professional Ethics of the Illinois State Bar Association, Opinion 95-16 (5/17/96); Professional Ethics Commission of the Maine Board of Bar Overseers, Opinion157 (3/5/97); Maryland Committee on Professional Ethics, Opinion 97-39 (8/28/97); Chief Disciplinary Counsel of the Missouri Supreme Court, Informal Opinion 970217 (undated). The rule does, however, prohibit a contingency fee for modification of support, as that is securing an amount of support. E.g., In re Jarvis, 869 P.2d 671 (Kan. 1994).

The rule also does not prohibit contingency fees in cases that are deemed outside the gamut of "domestic relations" matters, such as paternity cases, suits between cohabitants, and tort actions between spouses that can be brought outside the dissolution of marriage arena. E.g., Committee on Professional Ethics of the New York State Bar, Opinion 690 (5/13/97).

Many reasons have been put forth for the prohibition of contingency fees in domestic relations cases. First is that public policy that favors reconciliation in divorce cases; a contingency fee may prove too strong an inducement to an attorney to ignore the possibility of reconciliation and press the dissolution of marriage. See McCarthy v. Santangelo, 78 A.2d 240 (Conn. 1951) (and cases cited therein). Second is that the court’s statutory authority to award counsel fees eliminates the risk that an attorney will not be paid by a client. See Glascock v. Glascock, 403 S.E.2d 313 (S.C. 1991). Third is that the law must protect clients from overreaching lawyers who might take advantage of the divorce client. See Barelli v. Levin, 144 Ind. App. 576, 247 N.E.2d 847 (1969). Fourth is that a contingency fee creates a conflict of interest between the lawyer and the client: the lawyer might want to maximize property values for greater recovery, while the client might want to minimize property values. See In re Cooper, 81 N.C. App. 27, 344 S.E.2d 17 (1986); see also Roberds v. Sweitzer, 733 S.E.2d 444 (Mo. Ct. App. 1987) (the existence of a contingency fee arrangment might provide an incentive to conceal property). Finally, one court has suggested that a contingency fee agreement might paint a false financial picture of the parties to the court, for money that was intended as support might end up in the attorney’s pocket. In re Cooper, 81 N.C. App. 27, 344 S.E.2d 17 (1986).

One way attorneys have sought to avoid the ban on contingency fees is to have fees pegged to "results obtained." See Brett R. Turner, Recovery of "Results Bonuses" in Florida Under Post-Rosen Case Law, 9 Divorce Litigation 216 (Nov. 1997). One noted author has stated the distinction between a contingency fee and a "results obtained" fee thus:

It often appears that confusion exists between this criterion [results obtained] and the ban against contingency fees in divorces. The probable distinction that should be drawn is that a contingency fee is usually subject to the element of whether a judgment in the client’s favor will occur at all, while a "results obtained" fee focuses more on the content of the judgment and its relationship to the client’s goals.

Louis Parley, The Ethical Family Lawyer at 45-6 (American Bar Association 1995). Compare In re Marriage of Malec, 562 N.E.2d 1010 (Ill. App. 1990); Eckell v. Wilson, 597 A.2d 696 (Pa. Super. 1991) (allowing results obtained fee as being no more than a quantum meruit fee contract), with King v. Young, Berkman, Berman & Karpf, No. 96-2368 (Fla. Sup. Ct. 1998), 1998.FL.990 (http:www.versuslaw.com) (results obtained bonus to be determined at end of case based on "reasonableness" could not be enforced); Salerno v. Salerno, 575 A.2d 523 (N.J. Super. Ch. Div. 1990) (disallowing fee based on "results accomplished" as too vague to alert client what to expect in the nature of a final bill).

Thrown into this mix is the question of whether, if an attorney can’t charge a contingency fee and a "results obtained" fee is deemed too similar to a contingency fee, an attorney may charge a minimum fee and/or a nonrefundable fee. Lawyers generally may charge a minimum fee, that is, the least amount the lawyer will charge for the completion of the matter entrusted to the attorney’s care. Implicit in this definition is expectation that if the matter is not completed by the attorney, then any unearned portion of the fee still in the attorney’s possession will be reimbursed to the client. In re Cooperman, 591 N.Y.S.2d 855 (N.Y. App. Div. 1993). An attorney may not, however, charge a nonrefundable fee. A nonrefundable fee interferes with a client’s right to discharge an attorney and limits an attorney’s duty to refund promptly fees not yet earned, as required by ethical rule. Id. Other courts have reached the same result by reasoning that a nonrefundable retainer constitutes an "excessive" fee in light of the work performed. Bain v. Weiffenbach, 590 So. 2d 544 (Fla. DCA 1991); In re Biggs, 864 P.2d 1310 (Or. 1994).

Although the rules are complex, in that each situation must be analyzed to determine whether the matter is an initial securing of an award or a modification or an award on the one hand or an enforcement action on the other hand, whether the fee focuses on the content of the award, and whether the fee is refundable or nonrefundable, the rules are not beyond comprehension. Now, however, comes the case of Alexander v. Inman, No. 01-S-01-9705-CH-00103 (Tenn. Sup. Ct. 1998), 1998.TN.15067 (http://www.versuslaw.com). In this case, the court determined that even though a fee may walk like contingency fee and talk like a contingency fee, it may be, nonetheless, a result bonus.

In this case, after firing her first counsel, Julia Inman retained David Alexander and Maclin Davis in a hotly contested divorce action set for trial four weeks hence. Alexander and Davis entered into a fee agreement with Inman which provided for a $10,000 retainer, and a final fee to be reasonable, not too exceed 15% of the total sum in money and property awarded to the client, or 10% of such total sum awarded to the client by settlement. After sucessfully representing Inman on appeal, obtaining for Inman approximately $3.3 million in assets plus alimony and attorneys’ fees, Alexander and Maclin submitted a bill to Inman for $501,514 (15% of her $3.3 million award).

Drawing on the distinction noted above that a contingency fee is due only if a case is won, but a results obtained fee requires payment based on content of the final award, the court noted that in Inman’s case, the agreement made it clear that the attorneys would be paid regardless of the outcome of the case, win or lose; payment itself was certain, and only the exact amount was certain. Therefore, the agreement was in the nature of a results obtained fee, since the percentage of the total award merely marked the upward limit of the fee.

The ultimate result of the distinction between a contingency fee and a results obtained fee as expounded by Inman is that there is no such thing as a contingency fee in a divorce case, a result clearly not contemplated by the ethical rules. The courts have stated that a contingency fee is one pegged to whether there is any recovery at all, a win/lose type scenario possible in contract and torts cases. This win/lose scenario simply is not applicable to divorce cases. In a divorce case, each spouse will come out with something; the case where one spouse is awarded 100% of the assets, and the other spouse is awarded no assets, no support, and no other benefit is almost impossible to imagine. Therefore, every case can be a results obtained fee case, and every attorneys’ fee can be pegged directly, as a percentage, to the amount of the award. We must therefore query whether it is time to do away with the prohibition of contingency fees in divorce cases, or whether it is time to recognize that results obtained fees are, in fact, contingency fees.

Laura W. Morgan is a Senior Attorney in Family Law at the National Legal Research Group, in Charlottesville, Virginia, a firm that writes memoranda and briefs for attorneys nationwide. Ms. Morgan is the author of "Child Support Guidelines: Interpretation and Application," and is currently Chair of the Child Support Committee of the American Bar Association Family Law Section. She can be reached at: goddess@supportguidelines.com, or phone 1-800-727-6574 or 1-804-977-5690

© 1998 National Legal Research Group
and LawTek Media Group, LLC
all rights reserved

FAM-LAW-LIT: A SURVEY OF CURRENT PERIODICAL
LITERATURE ADDRESSING FAMILY LAW ISSUES

Family Law Advisor® HOME PAGE