Opinion #81. Contingent Fee in Case in Which Fee Award Is Permitted by Statute

Issued by the Professional Ethics Commission

Date Issued: November 4, 1987

Questions Presented

a) Does Bar Rule 8(c) prohibit the taking of a contingent fee in an action brought under a statute providing for the award of attorneys’ fees to the prevailing party?

b) If a court‑awarded fee is sought, is the attorney seeking the fee obligated to disclose to the Court the existence of the contingent fee agreement?

c) If Rule 8(c) does not prohibit the taking of a contingent fee in such cases, are the Bar Rules violated if the contingent fee agreement provides that the attorney will receive a percentage of the gross recovery and gross recovery is defined to include the attorneys’ fees as well as the judgment?

Opinion

Rule 8(c)(3) prohibits the use of a contingent fee agreement in any matter wherein the “method of determination of attorneys’ fees is otherwise expressly provided by statute or administrative regulations.” It is the opinion of the Commission that this provision precludes the use of a contingent fee agreement in a case involving a statutory fee provision regarding the award of fees to a prevailing party only if the statutory provision contains language indicating that the Court’s determination regarding the amount of the fees was intended to be binding upon all parties. The Commission believes that, absent an expression of legislative intent to the contrary, the statutory language regarding fee‑shifting should be taken as expressing no more than a legislative judgment that the non‑prevailing party should bear all or a portion of the prevailing party’s legal fees, and not a prohibition upon payment by the prevailing party of a larger fee to his or her own counsel. In such cases, the language of Rule 8(c)(3) would be taken as regulating only the contractual relationship between the claimant and his attorney with respect to the allowance of fees.[1]

The consequence of the foregoing analysis is that the claimant’s attorney will be obliged in every case in which relief is sought under a “fee‑shifting” statute to determine whether it was intended to be preclusive as far as establishing the amount of the claimant’s attorneys’ fee. If such preclusive language is not present, the claimant and his attorney are free to establish their own contingent fee contract. Since receipt of a statutory fee award is a right of the claimant rather than of his attorney, the claimant would normally be entitled to apply sums recovered for attorneys’ fees from the non‑prevailing party against the contingent fee contracted for.

With respect to question (b), the Commission is of the opinion that, in all cases, the existence of a contingent fee agreement must be disclosed to the Court or other authority determining the statutory award of fees. In making its determination regarding fees, the Court is entitled to be informed as to what the parties themselves considered to be reasonable. Moreover, as a practical matter, the plaintiff’s attorney may want to demonstrate the risk factor involved to support a demand for a multiplier.

As to question (c), the Commission notes that Bar Rule 3.3(a) prohibits an agreement for or the collection of an excessive fee. The Commission cannot say that a fee agreement which included the fee itself in the base against which the contingency percentage is to be charged would be excessive per se. To do so would ignore the infinitely varying factors which affect the reasonableness of a fee. Of equal importance, determinations as to the reasonableness of a fee are by rule committed to the Fee Arbitration Commission. See Bar Rules 9, 3.3(c), 8(f). It would be singularly inappropriate for this Commission to adopt any per se rules as to the reasonableness of fees, for to do so would impinge upon the jurisdiction of a Commission of coordinate jurisdiction. However, because an agreement for an excessive fee can constitute grounds for discipline, we strongly recommend that in contracting for a contingent fee structured as set forth in the inquiry, a lawyer should be satisfied that, judged by the standards set forth in Bar Rule 3.3 (a)(1)‑(9), any fee provided for in such an agreement would be reasonable.[2]


Footnotes

[1] For a statute which absolutely limits the fee which can be charged, see 39 M.R.S.A. §110(1) (Supp. 1986‑87).

[2] We note that the contingent fee agreement form contained in Rule 8(f) may not meet the needs of the statutory fee‑shifting case. Counsel should be careful to make appropriate adaptations to this or other standard forms so that compliance with the formal requirements of Rule 8(d) are satisfied and the terms are sufficiently clear to both lawyer and client.


Enduring Ethics Opinion

Enduring Ethics Opinion #81 [December 2014]