Prohibited Contingent Fees

Rule 1.5(c) allows a contingent fee except where paragraph (d) or other law forbids one.¹ Paragraph (d) opens by naming the three acts that violate it: a lawyer “shall not enter into an arrangement for, charge, or collect” the fees that follow.² Two kinds of fee follow. The first is any fee in a domestic relations matter whose payment or amount depends on securing a divorce or on the amount of alimony, support, or property settlement in lieu thereof.³ The second is a contingent fee for representing a defendant in a criminal case.⁴

These two prohibitions sit outside the machinery covered in the earlier sections. The signed writing, and the closing statement a lawyer owes “upon conclusion of a contingent fee matter,”⁵ regulate fees that the rules allow. A lawyer who complies perfectly with both still violates paragraph (d) by agreeing to a fee in a prohibited matter.

The first verb in paragraph (d) fixes the moment of violation. A lawyer “enters into an arrangement” when lawyer and client agree to the fee, which happens at signing, before any work is done. Charging the fee and collecting it are further violations, so a lawyer breaks the rule on the day of signing whether or not a dollar is ever paid. The timing fits the harm. A lawyer who becomes financially interested in the outcome of a client’s matter risks compromising the free exercise of judgment on the client’s behalf during the litigation,⁶ and that interest arises when the fee is tied to the outcome, not when the fee is collected.

A contingent fee usually earns its place for two reasons. It often provides the only practical way for a claimant to afford a competent lawyer, and a successful claim produces a res, a fund out of which the fee can be paid. The Iowa Supreme Court in Wunschel Law Firm, P.C. v. Clabaugh listed those two historical bases and then identified the two settings in which public policy turns against the fee. Contingent fees in domestic relations cases are rarely justified, it said, because of the human relationships involved and the unique character of the proceedings, and public policy condemns them in criminal cases largely because criminal defense services produce no res with which to pay the fee.⁷

The “rarely justified” language appeared in an ethical consideration of the older Code of Professional Responsibility, and a Pennsylvania court noted that such considerations were aspirational rather than mandatory law.⁸ Paragraph (d) states the judgment as a command. A predecessor provision put both categories in one sentence: a lawyer shall not enter into an arrangement for, charge, or collect a contingent fee for representing a defendant in a criminal case, or either party in any action involving domestic relations.⁹

The domestic relations bar takes most of what follows, because courts have given it several rationales and tested it at several edges. The criminal defense bar rests mainly on the missing res.

Domestic Relations Matters

Rule 1.5(d)(1) bars “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.”¹⁰ That sentence contains two triggers. A fee that depends on securing a divorce pays the lawyer if the marriage ends and nothing if it does not. A fee that depends on the amount of alimony, support, or property settlement rises and falls with what one spouse obtains from the other. Either trigger suffices, and the words “payment or amount” reach past all-or-nothing fees: a fee owed in some form in every outcome, but larger when the award is larger, is contingent in amount. The bar protects neither side. It applies whether the contingent fee is promised to the husband’s lawyer or the wife’s.

The rule’s text states no reasons, but courts and commentators supply them. The prohibition rests on the fundamental public policy of preserving the marital relationship. Given the sensitive nature of these matters and the human relationships involved, a fee premised on the termination of a marriage, or on the money awarded when it ends, offends that policy.¹¹

Courts then explain how a contingent fee harms that policy: through the lawyer’s own stake. A lawyer paid only if a divorce is granted gains from encouraging the divorce and loses from a reconciliation, and the Indiana Court of Appeals in Meyers v. Handlon described the bar as preventing lawyers from promoting divorce and hindering reconciliation because of their financial interest in the divorce proceedings.¹² In State ex rel. Oklahoma Bar Ass'n v. Fagin the Oklahoma Supreme Court added a second harm. An arrangement of that kind not only prevents reconciliation but also feeds the trend of divorce trials becoming a battleground in which each spouse hires a lawyer to win as much property as possible, and it fails to promote the sanctity of the marriage relation, the welfare of children, the good order of society, and regard for virtue.¹³ The two triggers in the rule line up with the two harms. A fee that depends on securing the divorce rewards the lawyer for ending the marriage, and a fee that depends on the amount of the award rewards the lawyer for escalating the fight over what the marriage leaves behind.

A student might object that divorce law has loosened since these policies took hold, and that the policy reasons have loosened with it. The Pennsylvania Superior Court rejected that inference in Eckell v. Wilson. Divorce laws evolved, it said, not because society cared less about preserving the marital relationship but because society’s interest was rarely served by prolonging the agonies of a dying marriage, and that evolution does not lessen the impropriety of a lawyer’s financial stake in promoting a hostile, adversarial atmosphere between the parties.¹⁴

The same court explained why the economic case for a contingent fee is weak in a divorce. An ordinary damage claimant must persuade a lawyer to risk getting nothing at all by offering a percentage of any recovery. A spouse in a divorce is differently placed: the spouse comes to prospective counsel with a statutory right to an equitable share of the marital estate, and courts now award fees to either party in their discretion in place of the old mandatory payment by the husband.¹⁵ With no all-or-nothing risk for the percentage to compensate, the contingent fee loses the first of the two justifications noted earlier, the practical means of financing a claim.

Courts do not agree on every rationale. North Carolina’s Thompson decision identified, as a third policy consideration, the harm to the public, the profession, and the bench if contingent fees became customary in divorce cases, because distraught clients invite charges of undue influence and overreaching. In Davis v. Taylor the North Carolina Court of Appeals was not persuaded that this consideration weighs any more heavily in divorce than in wrongful death actions, where contingent fees are routinely allowed.¹⁶ A rationale that one court discounts still leaves the rule’s text in force, because the text does not wait for judicial agreement on its reasons.

The bar is categorical. The Oklahoma court read its own version of the rule to forbid any type of fee with some aspect of contingency in a domestic relations matter,¹⁷ and the Model Rule’s phrase “payment or amount” points the same way. Because the rule attaches to what the fee depends on, a signed writing, a client’s informed consent, and a modest percentage cannot cure it. Those features satisfy the requirements for fees the rules permit, and this fee is not one of them.

On an exam, the question is whether the fee depends on the result at all. A fee that does not so depend falls outside the bar.

The hourly fee does not move with the result. Nothing in it rewards the lawyer for ending the marriage, for blocking a reconciliation, or for winning a larger award. It remains subject to the reasonableness standard of Rule 1.5(a), which applies to every fee,¹⁸ but it does not run into paragraph (d)(1). A bonus payable only if the award is large attaches a trigger to the same hourly rate, and the next section takes up how the rule treats fees that carry another label but depend on the result.

Jurisdictions word this prohibition differently. The Oklahoma text quoted in Fagin forbids any fee in a domestic relations matter whose payment or amount is contingent upon “the result obtained,”¹⁹ which is broader than the Model Rule’s two triggers. An exam stem that names a jurisdiction calls for that jurisdiction’s rule. A stem that names none calls for the Model Rule as written.

Disguised Contingent Fees

A fee that depends on the result does not become permissible because it carries another label. Rule 1.5(d)(1) asks whether “the payment or amount” of the fee is contingent on securing a divorce or on the amount of alimony, support, or property settlement,²¹ and the Oklahoma court read its own version to forbid any fee with some aspect of contingency.²² Two features of that language do the work. “Payment or amount” reaches a fee owed in some form whatever happens but larger when the result is better. And the triggers are defined by the result achieved, not by the form of the fee. The incentive problem is the same in every form: a lawyer whose pay rises when the client’s award rises has the same stake in the award whether the retainer says one-third or says hourly rate plus enhancement.

Fagin shows the pattern. The lawyer’s fee rested on an hourly rate subject to enhancement if the results of the case were favorable.²³ The court found that he was the final arbiter of which result deserved an enhancement, and it saw nothing to suggest that the enhancement was a bonus the client chose to give; it looked like a charge imposed whenever the lawyer felt he deserved it.²⁴ The lawyer said he would have reduced his fee after a less favorable result, but his contract did not oblige him to do so, and the court dismissed the claim.²⁵ Both points expose the incentive problem. A fee that can rise with the award, with no matching duty to fall, gives the lawyer a stake in the size of the award, and a lawyer who alone decides what a good result is worth holds unchecked power over the client.

The lawyer also argued from the Comment. In his reading, the bar reaches only a specific “result [singular] obtained,” such as securing a divorce. The court called that construction strained at best. Beyond fees contingent on a granted divorce, it said, the Comment explains that the rule also prohibits a fee contingent on “the amount of alimony or support or property settlement” obtained for the client, and the additional fees the lawyer charged violated that prohibition.²⁶

A lawyer in this position might also point to Rule 1.5(a), which lists “the amount involved and the results obtained” among the factors for judging reasonableness.²⁷ The argument fails on the structure of the rule. Reasonableness is a separate test that a fee must pass; it does not authorize a fee that paragraph (d)(1) forbids, and Rule 1.5(c) itself makes contingent fees subject to paragraph (d).²⁸ Fagin accordingly held that a fee based on an hourly rate subject to enhancement for favorable results is one whose amount is contingent on the result obtained, and that it violates Rule 1.5(d).²⁹

Not every court has read contingency this broadly, and the contrast marks the edge of the doctrine. In Eckell, the Pennsylvania Superior Court held that an agreement fixing a final fee by the value of the services rendered is a proper method of setting a fee and is not a contingent fee in its commonly used meaning. The fee was not truly contingent, it explained, because the lawyers were paid whatever the outcome; a contingent fee carries a risk of nonpayment if the case fails, and that risk was absent.³⁰ The Oklahoma court in Fagin considered Eckell as a decision treating a fee based on the results of a divorce action as noncontingent because it was neither fixed nor set by a formula, and it found that rationale unpersuasive. The bar reaches any fee contingent on the amount of support, alimony, or property settlement, it said, whether or not a percentage is set or a formula applies.³¹ The practical test that survives both decisions is whether the fee moves with the result. A fee set by the value of the services and owed whatever the court awards does not move. A fee that grows when the award grows does.

Timing can also decide whether an agreement is contingent. In Weinstein v. Barnett the court reasoned that a divorce lawyer whose fee depended on the result had a self-interest that, if the husband had raised any issue, would have conflicted with loyalty to the client, which is the conflict the disciplinary rule was designed to prevent. Expressing no opinion on a truly voluntary bonus agreement made after the entire proceeding was complete, the court concluded that the agreement was contingent when it was executed and therefore invalid under the old disciplinary rule.³² Two lessons follow. Contingency is judged when the agreement is signed, while the outcome is still open. And a gift the client truly volunteers after everything ends remains an open question: Weinstein expressly left it undecided, and Fagin stressed that nothing showed the enhancement was a bonus the client chose to give.³³

Courts also have other tools when a fee arrangement looks like a contingency in disguise. In Dahl v. Dahl the Utah Supreme Court invalidated a divorce lawyer’s fee arrangement on two stated grounds: the lawyer had acquired a prohibited interest in the subject matter of his representation, and his claimed fees were unreasonable. It also referred him to the state’s Office of Professional Conduct.³⁴ Those holdings rest on rules other than the domestic relations bar, which shows that a fee arrangement can fail on several fronts at once and that a lawyer who escapes one prohibition may fall under another.

Timing and Scope Limits

The text of Rule 1.5(d)(1) asks what the fee depends on. It does not say at what stage of the case the lawyer must have been hired, and it does not confine “support” to payments between spouses.³⁶ Courts have therefore had to decide where the bar stops, and they ask whether the reasons behind it are present on the facts. Two edges show the method: the lawyer hired after the divorce is granted, and the percentage fee on child support. The exceptions some jurisdictions recognize show where the reasons run out.

Meyers v. Handlon put the timing question. Mrs. Meyers’s lawyers billed about $29,546 in hourly charges and then added a $15,000 bonus under a contingency fee contract.³⁷ The court recited the usual rationale for the bar, that it prevents lawyers from promoting divorce and hindering reconciliation because of their financial interest in the divorce proceedings, and it acknowledged that the facts before it challenged that rationale because of the circumstances in which the lawyers had been employed.³⁸ The challenge is easy to state in general terms. A lawyer who joins a case after the divorce has been granted can no longer promote the divorce or hinder a reconciliation, so the first rationale loses its grip.

The rule’s text answers the challenge. A fee contingent on the amount of a property settlement is within the trigger, and the Comment, as the Oklahoma court read it, expressly prohibits fees contingent on the amount of alimony or support or property settlement.³⁹ Nothing in the text draws a line at the decree. The second harm also survives the decree. A fee that grows with the property recovered gives the lawyer a stake in the contest over property, and a divorce fought over property is the battleground Fagin described.⁴⁰ The bar therefore follows what the fee depends on, not when the lawyer was hired.

The two spouses differ in what the fee depends on, and the timing of the retention does no work in either case. A lawyer’s late entry may look like a reason the policies no longer apply, but the question on an exam stem is whether the payment or amount of the fee turns on the result.

The second edge concerns the kind of award the fee depends on. In Davis v. Taylor a parent had agreed to pay counsel a percentage of the child support recovered, and the North Carolina Court of Appeals held the contract void as against public policy.⁴¹ A contract paying counsel a percentage of child support, the court explained, alters and disrupts the judicial structuring of the support award. The trial court must weigh many factors to set the schedule of payments that is necessary and reasonable. If the parent has the means to hire counsel, paying the fee does not touch the child’s stream of income. If the parent lacks the means, the legislature provided for the court to award reasonable fees, a statute meant to let an interested party bring an action to protect the child by meeting the opposing party on fair terms.⁴² The court applied North Carolina public policy rather than the Model Rule, but the rule’s word “support” is not limited to payments between spouses, so a percentage of child support falls within paragraph (d)(1) as well.⁴³ The court also held that the lawyers could not recover the reasonable value of their services under the void contract, a result the section on consequences takes up.⁴⁴

A new fact pattern is therefore tested by asking which of the reasons are present: a lawyer’s stake in prolonging the conflict, a statutory path to fee awards that makes a percentage unnecessary, an award the court has structured for a dependent, or a client in a vulnerable emotional state. No single reason has to be present in every case, and Davis itself discounted the last one.

Davis also marks the place where those reasons run out. The court observed that contingent fees are generally permitted in actions by one spouse to recover separate property from the other or to settle property rights between them.⁴⁵ That observation reflects one state’s policy and does not appear in the Model Rule text, which contains no separate exception for such suits.⁴⁶

Because the answer varies, an exam stem that names a jurisdiction calls for that jurisdiction’s rule, including any exception it recognizes. A stem that names none calls for the Model Rule, which bars a fee whose payment or amount depends on securing a divorce or on alimony, support, or property settlement in lieu thereof, whether the lawyer was retained before or after the decree and whether the award is spousal or child support.

Criminal Defense Matters

The second exclusion in Rule 1.5(d) is “a contingent fee for representing a defendant in a criminal case.”⁴⁸ The lead-in verbs apply here too, so a lawyer violates the exclusion by entering into the arrangement at signing, before anything is billed or collected.⁴⁹ The matter itself falls outside the permission in Rule 1.5(c),⁵⁰ which is why no signed writing, modest percentage, or closing statement can rescue the fee. The reason starts from the justification that supports contingent fees everywhere else in this chapter, and that justification is missing here.

The Iowa court’s statement of the policy is direct: public policy condemns contingent fees in criminal cases largely because legal services in criminal cases do not produce a res with which to pay the fee.⁵¹ A res is a fund of money or property. In a civil claim the lawyer’s work creates it, because a successful prosecution produces the pool from which the percentage is taken. A successful criminal defense creates no such pool. An acquittal, a dismissal, or a reduced sentence leaves the client with nothing new to divide, so a fee promised on that result would have to come out of the client’s own existing or future resources. With the traditional justification gone, the only thing the arrangement still supplies is the lawyer’s stake in the verdict.

That stake is the hazard the ethics rules guard against whenever a lawyer becomes financially interested in a client’s matter, since an interest in the outcome can affect the free exercise of the lawyer’s judgment on the client’s behalf.⁵² The same passage recognizes that a lawyer may assert legally permissible liens to protect the right to collect a fee, even though doing so gives the lawyer an interest in the outcome. The distinction is that a lien secures a fee the client owes whatever the verdict, while a contingent fee exists only if the client wins. The plea decision illustrates the danger. A defense lawyer’s most consequential advice is often whether to accept a plea offer or go to trial, and a lawyer paid only on acquittal collects nothing from a plea that would serve the client well and everything from a trial, however slim the chance of winning.

An exam stem on this rule tests two facts together, the kind of matter and what the lawyer’s pay depends on, so both questions have to be put to the fee.

The exclusion has a narrow target, because its text covers a defendant in a criminal case and says nothing about defense engagements in general. A reverse contingency fee, which is measured by the money the client as a defendant saves in resolving a dispute, is a recognized form of contingent fee.⁵³ A fee of that kind is not a contingent fee for representing a defendant in a criminal case, so paragraph (d)(2) does not by its terms reach it.

Clearing paragraph (d)(2) means only that this exclusion does not apply. Contingent fees, like any other fees, remain subject to the reasonableness standard of Rule 1.5(a),⁵⁴ and other law may restrict them. In Wunschel the Iowa court, reviewing a contingent fee contract for civil defense under its own authority to judge such contracts against public policy, found it unnecessary to decide whether other kinds of contingent fee contracts for defense of civil cases would be approved.⁵⁵ The validity of a civil defense fee therefore turns on reasonableness and the controlling jurisdiction’s law, and the criminal defense bar neither covers nor settles it.