March 1, 1991
A lawyer who collects a one-third contingency fee in a personal injury or wrongful death action may subsequently collect an additional fee from the same client for financial counseling services related to the personal injury or wrongful death case proceeds.
References: MRPC 1.5, 1.15(b); MCR 8.121(B).
A plaintiff's personal injury lawyer charged and collected a contingent fee equal to one-third of the client's net recovery consistent with MRPC 1.5 and MCR 8.121. Following the conclusion of the contingent fee matter and closure of the client's file, the client requested that the lawyer's firm provide financial counseling with respect to managing the recently recovered money.
The firm employs a lawyer who is competent to provide the requested financial counseling. The firm proposes to charge and collect a separate fee, in addition to its contingent fee, for the financial counseling.
MRPC 1.5 governs lawyer fees and states in part:
"(a) A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee . . . .
". . .
"(c) A fee may be contingent on the outcome of the matter for which the service is rendered . . . ."
MCR 8.121 limits the amount of contingent fees allowable in personal injury and wrongful death actions and states in part:
"(B) Maximum fee. The maximum allowable fee for the claims and actions referred to in subrule (A) is one-third of the amount recovered."
The firm's contingent fee contract presumably provides that the firm's compensation for processing the personal injury or wrongful death claim is contingent upon the recovery of money for the client. Upon reaching a successful conclusion of the contingent fee matter (e.g., obtaining a recovery) the firm must provide the client with a written statement of the outcome and a remittance accompanied by a closing statement explaining the method of determining the remittance amount, MRPC 1.5(c); MRPC 1.15(b).
At this point the contingent fee matter is concluded, the client's file is closed and the law firm's work is at an end. Since the contingent fee does not exceed one-third of the net recovery, it falls within the parameters of MCR 8.121. It follows that such a contingent fee is not "illegal or clearly excessive" and therefore does not violate MRPC 1.5(a).
If thereafter a former contingent fee client employs the firm regarding a new and different matter, e.g., financial counseling, tax advice, or estate planning, the firm may ethically charge and collect an additional and separate fee for its professional services, so long as it complies with MRPC 1.5 and other applicable ethics rules. The firm's fee for the new and different matter is not a part of nor is it an addition to the contingent fee previously collected by the firm in the now closed personal injury or wrongful death matter. Accordingly, the firm does not violate MRPC 1.5(a) or MCR 8.121(B) in charging a separate fee for its services in the subsequent matter.
The conduct contemplated by the inquirer is likely to implicate other ethics rules, including MRPC 1.6 confidences and secrets, 1.7(b) conflicts, 1.8(a) business transactions with clients, 2.1 providing advice other than legal advice, 5.3 supervision of nonlawyer agents, 7.1 communications about lawyer services, and 7.3 solicitation.