The Client-Lawyer Relationship · 10-16% of the exam
5.1.2Contingent fees, advance payments, and trust (Rules 1.5(c)–(d), 1.15)
On this page
- Rules 1.5(c)–(d) and 1.15 — Contingent fees and trust
- Quick review — advance fees, true retainers, disputed funds
Why
Contingent fees open the courthouse to clients who could not pay by the hour, but they can hide what the lawyer actually takes home and can set the lawyer's stake against the client's. Money handed over in advance raises the mirror-image worry: the client has already paid for work that has not happened yet.
Plain English
Any contingent fee requires two writings: one signed before work begins and one accounting at conclusion. A contingent fee for representing a defendant in a criminal case is prohibited, as are certain domestic-relations contingencies; advance payments belong in the client trust account regardless of label. So the question to put to any payment is: was it paid for work still to come, or solely to secure the lawyer's availability?
Rule
Rules 1.5(c)–(d) and 1.15 — Contingent fees and trust
Rule 1.5(c) — Two writings required:
- Before: A contingent fee agreement must be in a writing signed by the client, disclosing: (a) the contingent fee percentage at settlement, trial, and on appeal; (b) litigation and other expenses to be deducted; (c) whether expenses are deducted before or after the percentage is calculated; (d) any expenses for which the client will be liable whether or not the client is the prevailing party.
- After: Upon conclusion, the lawyer must provide a written statement showing the outcome; if there is a recovery, the statement must show the remittance to the client and the method of its determination.
- The contingent fee itself must be reasonable; it is impermissible if the lawyer knows at the outset the case will resolve quickly for a large amount after minimal work.
Rule 1.5(d) — Prohibited contingent fees:
- Criminal matters: a contingent fee for representing a defendant in a criminal case is prohibited absolutely. (Rule 1.5(d)(2))
- Domestic-relations matters: prohibited when contingent on securing a divorce or on the amount of alimony, support, or property settlement. Exception: collecting past-due balances already owed under an existing court order is permissible.
Rule 1.15 — Advance payments and trust mechanics: see the Quick review box below (fully taught in Chapter 20).
Rule
Quick review — advance fees, true retainers, disputed funds
Quick review — advance fees, true retainers, disputed funds (taught fully in Chapter 20)
Three points, and the second is the one where the money stays out of trust:
Advance payment — Rule 1.15(c)'s "legal fees and expenses that have been paid in advance": deposit in the client trust account; withdraw only as fees are earned; refund any unearned portion if the representation ends; courts look past labels ("nonrefundable") to substance.
True retainer (paid solely to secure availability) — state practice and case law, not Rule 1.5 or Rule 1.15: earned when paid; not deposited in trust; not refundable.
Third-party claim on trust funds (Rule 1.15(e)): where a third party has a lawful claim to specific property the lawyer holds, the claim is not frivolous under applicable law, and applicable law gives the lawyer a duty to protect it against wrongful interference by the client (Comment [4]), the disputed slice stays in trust while the dispute resolves; the undisputed portion is disbursed promptly to those entitled.
Mnemonic
Mnemonic
Two writings for contingency: Sign before, Statement after. Contingency for a criminal defendant: never. Domestic contingency: never on divorce or the amount involved; permissible for collecting amounts a court already ordered.
Example 1
Ex. 1
Ray represented Gina on a DUI charge on a 25 percent contingency of any acquittal, with a signed agreement meeting all Rule 1.5(c) requirements. Gina was acquitted. Ray is subject to discipline regardless of the compliant writing: Rule 1.5(d)(2) prohibits criminal contingencies without exception, and no writing validates an absolute prohibition. Give Ray a perfect writing, a consenting client and an acquittal, and he is still subject to discipline.
Example 2
Ex. 2
Nina agreed to collect $40,000 in court-ordered unpaid child support on a 20 percent contingency. A colleague warned that domestic-relations contingencies are always forbidden. That's incorrect. Rule 1.5(d) bars contingencies on securing a divorce or on the amount of alimony, support, or a property settlement; it doesn't bar collection of amounts a court has already fixed. Line up Nina's percentage against what it depends on — an amount a court already fixed, not a divorce.
The exam will describe a domestic-relations contingency and suggest it is always forbidden. Contingencies for collecting past-due amounts already ordered by a court are permissible.
The exam will present a fee labeled "nonrefundable retainer" and suggest the label controls. Courts look past the label; money paid for future services is an advance, belongs in trust, and the unearned portion must be returned.
The exam will present a scenario with only one of the two contingent-fee writings. Both the before-agreement and the after-statement must be in writing; completing one without the other is a violation.
Tip
Questions · 2
Q 01ch05-e03
Question 1 of 2 · Rule 1.5(d)(2)
Attorney was retained to defend Client against felony charges of insurance fraud. Before any work began, the two signed an agreement stating that Attorney would be paid fifty thousand dollars if the charges were dismissed or Client was acquitted, and nothing at all otherwise. The agreement set out the percentage that would accrue at each stage, listed the expenses to be deducted, stated that expenses would come out before the fee was figured, and named the costs Client would owe whatever the outcome. Client signed it after reading it overnight. The case went to trial and Client was acquitted. Attorney now wishes to send the bill. Is it proper for Attorney to collect the fee?
Keys 1 to 4 choose.