87-06: Contingent Fee; Domestic Relations

7/1987

Inquiring attorney proposing to use contingent fee arrangement in marital dissolution matter.

FACTS

The inquiring attorney proposes to use a contingent fee arrangement in a marital dissolution matter. The recovery of the fee would be contingent upon a decree of marital dissolution, and the amount of the fee would be contingent upon the value of any property the client receives as a result of a division of marital property.

QUESTION

Is the proposed contingent fee arrangement ethically permissible?

ETHICAL RULES INVOLVED

ER 1.5. Fees

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(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, 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. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

(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; or

(2) a contingent fee for representing a defendant in a criminal case.

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OPINION

This committee has previously considered the propriety of a contingent fee agreement in a marital dissolution action. In our Opinion No. 77-18 we stated: “A contingent fee is unethical in a dissolution action, with regard to either property division or future maintenance.” Id., at 3. The committee pointed out that the great weight of authority is that contingent fee contracts in domestic relations cases are not proper. Further, we observed that the rule was not changed by Arizona Statutes providing for “dissolution upon the ground that a marriage is irretrievably broken, rather than upon the basis of fault." Id., at 2.

In a later opinion, we identified a narrow exception to this prohibition for a post-dissolution action to set aside a previously rendered property settlement. Opinion No. 82-9. However, we also stated that our Opinion was based on the facts of the matter then before us, and we reaffirmed the public policy favoring marital reconciliation efforts that could be imperiled by contingent fee agreements premised on marital dissolution. Id., at 5.

The adoption of the Rules of Professional Conduct by the Supreme Court of Arizona, effective February 1, 1985, confirmed the committee's approach under the prior Code of Professional Responsibility. ER 1.5(d) (1) states, in pertinent part:

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

The rule proscribes a contingent fee in any domestic relations action that is contingent upon either the securing of a divorce or upon the amount of alimony, support, or property settlement approved by the court. In discussing the rule, the authors of The Law of Lawyering state:

* * * Public policy is offended, however, when the fee is made contingent upon the lawyer's obtaining a divorce for his or her client, for the lawyer would then have no incentive to help bring the parties to a settlement that might preserve the marriage.

“Rule 1.5 (d) (1) does not engage in such fine distinctions, but expressly provides that lawyers may not use contingent fee arrangements in any domestic relations matter. Since questions of alimony and support are inextricably intertwined with the question of whether the marriage itself will continue, this broadened ban seems reasonably related to the purposes of the rule."

Hazard & Hodes, The Law of Lawering 84 (1985) (emphasis in original); see also, Milord, The Right Choice, 73 ABA Journal 104 (May 1, 1987, issue).

The proposed fee arrangement would make payment of the attorney's fee contingent upon the dissolution of a marriage. It would also make the amount of the fee contingent upon the size of the property settlement. Such an arrangement is unethical under ER 1.5(d) (1).

We accordingly conclude that the proposed contingent fee arrangement is ethically impermissible.

Formal opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceeding. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rules change, a different conclusion may be appropriate.