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Ethics Opinion

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R-11

July 26, 1991

SYLLABUS

    Where a contingency fee agreement is silent or ambiguous concerning the taking of an appeal, a lawyer in a contingent fee matter is required to file notice of appeal of a client's case at the client's request, as long as the appeal is not frivolous and does not assist a fraudulent or illegal act of the client.

    Where a contingency fee agreement is silent or ambiguous concerning an additional fee for taking an appeal, a lawyer may not charge an additional fee for taking the appeal.

    The total contingent fee for all lawyers of a party in a personal injury or wrongful death case may not exceed one-third of the recovery; in other cases the total fee may not be in excess of a reasonable fee.

    References: MRPC 1.2(b), (c), 1.5(a), (c), 1.16, 3.1; R-9; RI-6; CI-559, CI-853; MCR 2.117(C), 8.121; Ambrose v. Detroit Edison Co, 65 Mich App 484 (1975); Ecclestone, Moffet & Humphrey, PC v. Ogne, Jinks, Albert & Stuart, PC, 177 Mich App 74 (1989); Morris v. City of Detroit, 189 Mich App 271 (1991); Maryland Attorney Grievance Comm'n v. Korotki, 569 A2d 1224 (1990).

TEXT

A trial lawyer's client wants the lawyer to appeal the decision of the trial court in the client's matter. The fee agreement between the lawyer and client specified a contingent fee, but is silent regarding the taking of an appeal. The lawyer asks whether he/she is obligated to file the appeal, and if so, whether a fee in addition to the contingent fee may be charged.

MRPC 1.5(c) states:

    "A fee may be contingent on the outcome of the matter for which the service is rendered, except in [domestic relations or criminal matters or when prohibited] by other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement of the outcome of the matter, and if there is a recovery, show the remittance to the client and the method of its determination. See MCR 8.121."

Although written fee agreements are a wise business practice and strongly favored by the Committee, ethics rules require written fee agreements only in contingent fee arrangements. MCR 8.121(E) requires a lawyer to advise a client, before entering into any contingent fee arrangement, that lawyers may be employed under other fee arrangements in which the lawyer is compensated for the reasonable value of the services performed, such as on an hourly or per diem basis. MCR 8.121(F) requires that the client be provided a copy of the contingent fee agreement.

A lawyer may propose a fee agreement that combines percentage and hourly or flat fees, RI-6. It is also proper for a lawyer to limit the objectives of the representation. CI-559. MRPC 1.2(b) allows a lawyer to limit the objectives of the representation if the client consents after consultation. The Comment stresses that it is important for the lawyer and client to have a clear understanding of what is to be accomplished in the representation:

    ". . . a client also has a right to consult with the lawyer about the means to be used in pursuing those objectives. At the same time, a lawyer is not required to pursue objectives or employ means simply because a client may wish that the lawyer do so. A clear distinction between objectives and means sometimes cannot be drawn, and in many cases the client-lawyer relationship partakes of a joint undertaking. In questions of means, the lawyer should assume responsibility for technical and legal tactical issues, but should defer to the client regarding such questions as the expense to be incurred and concern for third persons who might be adversely affected."

In formulating the "joint undertaking" it is the lawyer's responsibility to counsel the client regarding the legal recourses available and the likelihood of success with each. The client depends on the lawyer's guidance when pursuing different remedies. If there are any limitations on the choices available, either because the lawyer is unwilling or unable to pursue certain options, or because some options are more promising than others, the lawyer must bring those factors to the attention of the client in order for the client to make an informed decision.

It is clear, therefore, that extra precautions must be taken to advise the client in contingent fee arrangements, and that extra burdens are placed upon the lawyer in such arrangements.

If the fee agreement does not specify that the lawyer has undertaken the trial only, or fails to specify in terms the client understands what tasks the lawyer is willing to perform for the fee,is the lawyer required to pursue the client's appeal? Two jurisdictions have held that if the lawyer does not want to be obligated to represent the client on appeal, the contract should expressly provide that limitation, Maryland Attorney Grievance Comm'n v. Korotki, 569 A2d 1224 (1990); Association of the Bar of the City of New York, Op 1986-6 (7/14/86).

MCR 2.117(C) states:

    "(1) Unless otherwise stated or ordered by the court, an attorney's appearance applies only in the court in which it is made, or to which the action is transferred, until a final judgment is entered disposing of all claims by or against the party whom the attorney represents and the time for appeal of right has passed. The appearance applies in an appeal taken before entry of final judgment by the trial court.

    "(2) An attorney who has entered an appearance may withdraw from the action or be substituted for only on order of the court."

The decision of whether to appeal is usually the client's decision. Exceptions would be where such a course of action would be illegal or fraudulent [MRPC 1.2(c)], or where the claim is frivolous [MRPC 3.1, R-9]. Also, under MRPC 1.2(b), the trial lawyer may decline to take the appeal if the client consents.

Pursuant to MCR 2.117(C), the trial appearance of the lawyer continues until the time for appeal of right from the final judgment has passed. If the client seeks to pursue an appeal and has not obtained successor counsel, the trial lawyer as counsel of record may not refrain from acting in the matter, and would be required to preserve the client's right to appeal by filing notice of appeal.

It also appears that unless the appeals court accepts the notice of appeal as a limited appearance of the lawyer, the lawyer has, by filing notice of appeal, entered an appearance before the court of appeals in the matter, MCR 2.117(C)(1). MCR 2.117(C)(2), which is consistent with MRPC 1.16(c), requires a court order for the lawyer's withdrawal. Therefore, where the fee agreement is silent or ambiguous regarding the taking of an appeal, a lawyer in a contingent fee matter is required to file notice of appeal for the client. If the lawyer is unwilling to handle the appeal, the lawyer may then seek court permission to withdraw.

May the lawyer charge a fee beyond the originally agreed contingent fee for taking the appeal? MCR 8.121(B) states:

    "The maximum allowable fee for the claims and actions referred to in subrule (A) is one-third of the amount recovered." Emphasis added.

MCR 8.121(C) clarifies that the limitation applies to all lawyers' fees in the matter; if more than one lawyer has worked on the case, the lawyers must split the one-third recovery. Ambrose v. Detroit Edison Co, 65 Mich App 484 (1975); Ecclestone, Moffet & Humphrey, PC v. Ogne Jinks, Albert & Stuart, PC, 177 Mich App 74 (1989). See also CI-853, which held:

    "The amount of contingent fees chargeable to the client in personal injury actions is limited by Court Rule GCR 928 [MCR 8.12] to a percentage of the entire recovery collected on behalf of the client."

Is the appeal part of the same "claim and action" as the trial so as to be limited to the original fee agreement? We are aware of no authority or reasoning which would conclude that the trial of a matter is a "claim" or "action" different and distinguishable from an appeal, removing the fee from the limitation imposed by MCR 8.121(B). As noted in MCR 8.121(A), a fee in excess of one-third is deemed a clearly excessive fee in violation of MRPC 1.5(a). Therefore, in personal injury and wrongful death cases, if the fee agreement provided for a one-third fee, the trial lawyer could not charge an additional fee for pursuing the appeal.

If the fee agreement provides for a fee percentage less than one-third, may the lawyer charge an additional fee up to one-third of the recovery for the appeal? The contingent fee contract may so provide, as long as the total fee does not exceed one-third of the recovery. If the contingent fee contract is silent or ambiguous, the lawyer may not charge an additional fee for the appeal.

If the claim or action is not personal injury or wrongful death, and therefore not limited to the one-third recovery, a lawyer is guided by MRPC 1.5(a) in setting fees. MRPC 1.5(a) states:

    "A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee. A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee . . . ."

In Morris v. City of Detroit, 189 Mich App 271 (1991), plaintiff charged defendant employer with discrimination based upon disability. Lawyer A represented plaintiff through discovery, but was discharged prior to trial. Lawyer B represented plaintiff at trial under a fee based on one-third of the recovery; if plaintiff did not prevail but desired an appeal, Lawyer B would take the appeal for an additional 5% of the recovery and if expenses were paid. Defendant appealed the judgment for plaintiff. Lawyer B filed the appeal for plaintiff and wrote the briefs, but was discharged prior to oral argument. Lawyer C represented plaintiff at oral argument and through various remands and appeals, for a fee based on one-third of the amount recovered.

The circuit court observed that the attorney fee was not necessarily limited to one-third of recovery by MCR 8.121. The court held that because Lawyer B was discharged before the occurrence of the contingency, Lawyer B's fee was determined on quantum meruit. Lawyer B's superior skills at trial and filing appellate briefs were significant factors in the plaintiff's victory, as viewed by the court, and thus Lawyer B was awarded the entire one-third fee. Lawyer A stipulated with Lawyer B to be paid from Lawyer B's share of the fee. The court left Lawyer C to be compensated by plaintiff from the remaining two-third share.

Plaintiff appealed the ruling on fees, arguing that the total fee of all lawyers should be limited to one-third of the recovery. The Court of Appeals agreed with the circuit court that the contingency fee agreement no longer operated to determine Lawyer B's fee since Lawyer B was discharged without cause. Applying criteria similar to that in MRPC 1.5(a) for determining a reasonable fee, the court held that the circuit court's determination of attorney fees would be upheld unless there was an abuse of discretion in determining "reasonableness" of the fees.

The court held that Lawyer B was not entitled to the full one-third fee, because Lawyer B did not perform all the work contracted for. But the court agreed that Lawyer B performed the majority of the work significant in the plaintiff's recovery, and awarded Lawyer B 99.44 percent of the one-third contingency fee. The court of appeals left standing the circuit court's ruling that MCR 8.121 does not act to limit the total attorney fee to one-third in a case of employment discrimination, but the court did not address the question of reasonableness of the total attorney fees in the case.

In Maryland Attorney Grievance Comm'n v. Korotki, 569 A2d 1224 (Md 1990), a lawyer's contingent fee agreement called for a fee of one-third of recovery upon settlement or 40 percent of all monies collected after suit is instituted. The lawyer refused to represent the client on appeal until the client signed another agreement which increased the fee to 60 percent. The court held the fee was clearly excessive, noting that nothing in the fee agreement limited the representation to trial in the circuit court, and that the fee agreement language "40 percent of all monies collected" necessarily meant the lawyer must be successful in retaining the judgment on appeal in order to be paid. The court also noted that any fee in which the lawyer acquires a greater interest in the outcome of the litigation than the client, i.e., whenever the lawyer's fee exceeds 50 percent, violates ethics rules. See MRPC 1.8(j).

Therefore, where a contingency fee agreement for representation in a matter other than a personal injury or wrongful death case is silent or ambiguous concerning an additional fee for taking an appeal, a lawyer may not charge an additional fee for taking the appeal.

The total contingent fee for all lawyers of a party in a personal injury or wrongful death case may not exceed one-third of the recovery; in other cases the total fee may not be in excess of a reasonable fee.

 
     

 

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