This opinion modifies RI-193
January 28, 2013
A lawyer retained to represent a client to obtain funds escheated to the State of Michigan may charge a reasonable attorney's fee based on an hourly rate, a flat fee or a contingent fee for the legal services to be performed, each of which is subject to scrutiny for reasonableness under MRPC 1.5(a).
References: MPRC 1.5; RI-193, RI-269; MCR 8.121.
In Informal Ethics Opinion, RI-193 (March 2, 1994), this Committee concluded that since there is no "contingency" or "risk of loss" when a lawyer is retained to assist a client entitled to escheated funds, the lawyer may only charge a reasonable hourly or flat fee for the legal services, which may be paid from the escheated funds. Although RI-193 noted that there was no per se rule prohibiting a contingent fee arrangement with regard to a lawyer representing a client to obtain escheated funds, the Committee rejected the concept of a contingent fee arrangement because the amount of work to be performed by the lawyer to recover the escheated funds is minimal. In reaching that conclusion, the Committee analyzed the provisions of MRPC 1.5(a) and the procedure made available through the Department of Treasury of the State of Michigan that allows any person to ascertain the existence of escheated funds to which the person may be entitled without the assistance of a lawyer.1
Notwithstanding that MRPC 1.5(c) permits a contingent fee arrangement except as prohibited by paragraph (d)2 or by other law,3 RI-193 creates a per se rule prohibiting a contingent fee arrangement with regard to the provision of legal services to obtain escheated funds for a client. While this Committee agrees that MRPC 1.5(a)4 must be applied to determine the reasonableness of the lawyer's fee in escheated funds matters, it has reconsidered the proposition that the MRPC 1.5(a) factors necessarily prohibit a contingent fee arrangement.
Accepting the proposition that it is ethically permissible for a lawyer to enter into a contingent fee in an escheated fund matter, in order to do so, the lawyer must establish a percentage such that "a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee" is not in excess of a reasonable fee.5 Paragraphs (1) and (4) of MRPC 1.5(a) appear most helpful to this determination.
It is undisputed that the time and labor required to determine if there are escheated funds to which a client may be entitled is minimal in light of the readily accessible Department of Treasury online database. Because the administrative process for asserting a claim involves the preparation of a one page claim form, also available online, providing the claimant's contact information and certification of the truthfulness of the information provided in the claim form, establishing a client's entitlement to escheated funds would involve minimal time and labor. Similarly, the skill needed to perform the legal services properly with regard to an escheated funds representation would be minimal. Thus, consideration of MRPC 1.5(a)(1) suggests a reasonable percentage to establish a reasonable contingent fee.
MRPC 1.5(a)(4) requires consideration of the amount involved and the results obtained in establishing a reasonable fee. Upon confirmation through the Department of Treasury website that the client has a valid escheated funds claim, a favorable result is guaranteed as the State of Michigan holds the funds until the rightful owner claims them.6 Thus, there may be no risk associated with undertaking the representation on a contingent fee basis. If the client has no information regarding the amount of the escheated funds, this information may not be readily available until confirmation of ownership.7 The justification for establishing a contingent fee which may "exceed a retrospective 'quantum meruit ' calculation of the actual value of the services rendered" is negated because there is no greater risk on the part of the lawyer in undertaking the escheated funds representation on a contingent fee agreement as compared to a hourly rate or flat fee.8 So, analysis of MRPC 1.5(a)(4) also supports a reasonable percentage to establish a reasonable contingent fee.
A lawyer seeking to establish a reasonable contingent fee needs to be mindful of the time involved, the simplicity of the matter, and degree of risk of not obtaining a positive result. In summary, a lawyer retained to represent a client to obtain funds escheated to the State of Michigan may charge a reasonable attorney's fee based on an hourly rate, a flat fee or a contingent fee for the legal services to be performed, each of which is subject to scrutiny for reasonableness under MRPC 1.5(a).
The remaining portions of RI-193 are unmodified.
A person can search for unclaimed property by visiting www.michigan.gov/unclaimedproperty or by calling the Unclaimed Property Department at (517) 636-5320. The Michigan Department of Treasury's website has a name search database which indicates that the Treasurer is the custodian of unclaimed property for a particular individual. The form for claiming unclaimed property is also available online.
MRPC 1.5(d) provides: "A lawyer shall not enter into an arrangement for, charge, or collect a contingent fee in a domestic relations matter or in a criminal matter."
MCR 8.121 (referenced in MRPC 1.5(d)) limits a contingent fee in personal injury and wrongful death matters. The Committee is unaware of any other law that prohibits a contingent fee when representing a client to obtain escheated funds.
MRPC 1.5(a) provides:
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. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
See "Frequently Asked Questions" at www.michigan.gov/unclaimedproperty.
Id., note 5.
See Informal Ethics Opinion, RI-269 (June 14, 1996), which addressed the permissibility of a contingent fee in excess of one-third when the lawyer defended a governmental forfeiture and seizure action. The Committee opined: "It is difficult to address, within the limited facts of the question before us, what constitutes a ''reasonable' contingent fee in crime related forfeiture cases. Many variations on the theme of contingency might be considered. A fixed amount of remuneration might be paid upon successful defense of the forfeiture action, or a percentage of the value of the client's property. All of the subject property, or just the part successfully protected might be included in the percentage computation; we do not have before us any specific formula or terms. However, whether the contingent fee is a sum certain for successful defense of part or all of the client's property, or a percentage of part or all of the value of the subject property, the potential of the total fee should be proportionate to the risk and consistent with the criteria of 'reasonableness' set forth in MRPC 1.5(a)."