Contingent Fees and What Must Be in Writing
The contingent fee is the only fee arrangement the model rules require to be written and signed. The rule specifies what the writing must say, and it ends with a settlement statement most clients never receive. Two categories of matter are closed to contingency altogether.
The rule in short
A contingent fee agreement must be in a writing signed by the client, stating how the fee is determined, the percentages accruing at each stage, the expenses to be deducted, whether they are deducted before or after the contingency is calculated, and which expenses the client owes whatever the outcome. On conclusion the lawyer must give a written statement of the outcome and the remittance. Contingency is barred in criminal defense and in specified domestic matters.
Most fee arrangements need only be communicated to the client, preferably in writing but not necessarily so. The contingent fee is the exception. The rule requires a writing signed by the client and then specifies its contents, because a percentage of an unknown sum is an arrangement whose consequences a client cannot check until the money has already arrived.
Reasonableness comes before everything else
Every fee must be reasonable, and the contingent fee is not exempt. The rule lists the factors: the time and labor required, the novelty and difficulty of the questions, the skill needed, the preclusion of other employment, the customary fee in the locality, the amount involved and the results obtained, time limitations imposed, the nature and length of the relationship, the experience and ability of the lawyer, and whether the fee is fixed or contingent.
A contingent percentage that is standard in a locality is not automatically reasonable in a case where liability was admitted and the recovery was a matter of arithmetic. The factors are applied to the case that actually happened, not to the risk profile assumed at signing. Several states have gone further and set graduated statutory caps in particular categories, most commonly medical negligence, so the ceiling may be a matter of statute rather than judgment.
The required contents of the agreement
The writing must state the method by which the fee is to be determined, including the percentage or percentages that accrue in the event of settlement, trial or appeal. Staged percentages are common and permitted; a single figure is equally permitted, provided the writing says so. Silence about what happens if the case is tried is a defect, not a default.
It must state the litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. It must also notify the client of any expenses for which the client will be liable whether or not the client prevails. These are separate requirements, and a form that recites the percentage while leaving the expense treatment to be worked out later does not satisfy them.
On conclusion of a contingent fee matter the lawyer must provide the client with a written statement stating the outcome and, if there is a recovery, showing the remittance to the client and the method of its determination. This is the provision most often overlooked in a settled case where the client is content, and its absence leaves the lawyer without the one document that answers a later complaint about the accounting.
Where contingency is not allowed
Two categories are closed. A lawyer may not charge or collect a contingent fee for representing a defendant in a criminal case, a prohibition traceable to concern that a lawyer's stake in an acquittal distorts advice about a plea. And a lawyer may not charge a fee in a domestic relations matter the payment or amount of which is contingent on securing a divorce or on the amount of alimony or support, or of a property settlement in lieu of them.
The domestic prohibition is narrower than it is often described. It targets fees tied to the marital outcome itself. Work to recover unpaid support under an existing order, or to enforce a judgment already entered, is ordinarily collection work and falls outside, though some states read the bar more widely. Where a state has not addressed the point, the safer reading is the broader one.
| Fee arrangement | Writing required by the model rule | Principal constraint |
|---|---|---|
| Hourly fee for a continuing client | Communication preferably in writing; no signature required | Must be reasonable; changes must be communicated |
| Flat fee for a defined matter | Same; several states require a writing | Unearned portion refundable on early termination |
| Contingent fee | Signed writing with prescribed contents | Barred in criminal defense and specified domestic matters |
| Fee divided with a lawyer in another firm | Client's agreement in a writing disclosing each share | Proportional to services or joint responsibility assumed |
| Fee shared with a non-lawyer | Not applicable | Generally prohibited, with narrow exceptions |
Advanced costs and the money that passes through
A lawyer may advance court costs and expenses of litigation with repayment contingent on the outcome, and may pay them outright for an indigent client. That permission is an exception to the general bar on financial assistance to a client, and it is confined to litigation costs rather than living expenses, though a small number of states now permit modest humanitarian assistance in defined circumstances.
When a recovery arrives it does not belong to the lawyer. It is deposited to the trust account, the client is notified promptly, the undisputed share is paid out, and any portion subject to a lien or competing claim is held apart. Those obligations come from the rules on safekeeping client property, and a contingent matter is where they are most often tested, because the lawyer's own fee and the client's money arrive in the same check.
When the representation ends before the case does
A contingent matter that ends early raises a question the agreement rarely answers well. A lawyer discharged without cause, or who withdraws for good reason, may in many states recover the reasonable value of services rendered, commonly once the contingency has occurred and there is a recovery to pay from. A lawyer who abandons a client without proper grounds may recover nothing.
The permissible grounds and the required protective steps come from the rule on declining or terminating a representation, and a lawyer leaving a contingent case must still return the file and account for costs advanced. Where successor counsel takes over and both firms will be paid from one recovery, the arrangement becomes a division of a fee between firms, which brings its own consent and disclosure requirements under the rule governing fee division and cannot be settled between the lawyers alone.
Where the dispute is with the client rather than with successor counsel, many jurisdictions expect a lawyer to use an available fee arbitration program before suing. Disclosing client information in a fee suit is itself constrained by the limits on permissive disclosure, which allow only what is reasonably necessary to establish the claim.
Points to carry away
- A contingent fee must be in a writing signed by the client, unlike most other fee arrangements.
- The writing must state the percentages applying at settlement, at trial and on appeal.
- It must say whether expenses are deducted before or after the contingent percentage is calculated, a choice that changes the client's recovery.
- The lawyer must give the client a written statement showing the outcome and how the remittance was computed.
- Contingency is prohibited in criminal defense and in domestic relations matters contingent on securing a divorce or on the amount of support or property settlement.
- The fee must still be reasonable, and a percentage lawful in one state may be capped by statute in another.
Questions readers ask
Why does the order of deducting expenses matter so much?
Because the two methods produce different numbers from the same recovery. If costs are subtracted from the gross before the percentage is applied, the lawyer's fee is calculated on a smaller base and the client keeps more. If the percentage is applied to the gross and costs are then taken from the client's share, the fee is larger and the client's net is smaller. On a recovery with substantial expert and deposition costs the difference is significant, which is why the rule requires the agreement to state which method applies rather than leaving it to custom.
May a lawyer take a contingent fee in a family law case?
The model rule prohibits a fee contingent on securing a divorce, or contingent on the amount of alimony, support, or a property settlement in lieu of them. It does not prohibit every fee in a domestic matter. A fee for collecting arrears on an existing support order, or for enforcing a judgment already entered, is generally outside the prohibition because the marital outcome is settled and the work is collection. States vary in how they draw this line, and some read the bar more broadly than the model text does.
Does the writing requirement apply when the case is referred out?
It applies to the client's agreement with the lawyers who will be paid from the recovery. Where a fee is divided between lawyers in different firms, the client must agree to the arrangement in a writing that discloses the share each lawyer will receive, in addition to the contingent fee writing itself. The two requirements are separate and both must be met. A referral handled with a handshake between firms, and never disclosed to the client in writing, fails the division rule even if the contingency agreement is impeccable.
Sources
- ABA Model Rules of Professional Conduct — Rule 1.5, FeesThe reasonableness factors, the contingent fee writing requirements and the prohibited categories.
- ABA Model Rules — Comment on Rule 1.5Explains the scope of the prohibitions and the expectation that fee disputes use available arbitration.
- ABA Model Rules — Rule 1.15, Safekeeping PropertyGoverns the trust account through which a contingent recovery must pass before distribution.
- ABA Model Rules — Rule 1.8, Conflict of Interest: Current Clients, Specific RulesPermits advancing litigation expenses with repayment contingent on the outcome, and limits proprietary interests.
- ABA Model Rules — Rule 1.16, Declining or Terminating RepresentationRequires refund of any unearned advance and governs a lawyer's exit from a contingent matter.
- State Bar of California — Rules of Professional Conduct, Current RulesAn adopted text illustrating state-level additions to the contingent fee disclosure requirements.
- The Florida Bar — Rules Regulating The Florida BarA state regime with prescribed contingent fee percentages and a client statement of rights.
Justice Partners Journal is a publication, not a law firm. This article states general rules and cites its sources; it is not advice about any particular case, and the law differs by state and changes over time.
