March 17, 1982
In a case where a client enters into a contingent fee arrangement with an attorney and during the pendency of the matter the client changes attorneys and enters into a 1/3 contingency fee agreement with successor counsel, the question of the predecessor attorney's right to the payment of legal fees is a legal question and not an ethical one, with the exception that the total fee paid by the client is not excessive, and the ultimate division is made in proportion to the services performed and the responsibility assumed by each of the lawyers.
References: MCPR DR 2-107(A)(2) and (3).
A client's representation resulted in a large settlement. Plaintiff had once been represented by one law firm, and subsequently selected other substitute counsel from another firm. The fee arrangement with the successor firm provided for a 1/3 contingent fee. The attorney fees are being held in escrow pending the final order of the court.
MCPR DR 2-107(A) states:
"(A) A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm or law office, unless:
"(1) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
"(2) The division is made in proportion to the services performed and responsibility assumed by each.
"(3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they render the client."
There is no question that the successor firm is entitled to an attorney fee as long as the change in counsel was made with the client's consent. ABA i834. The question is, what portion of the attorney fee, if any, is due the first law firm.
The original law firm entered into a valid fee agreement with the client. CI-462 addressed the fees in such a situation as follows:
"As for the inquirer's activities, he may not inhibit or impede the client from obtaining or seeking new counsel, as a client has the right to terminate a lawyer's employment. See, Op 113, CI-121; ABA i130, i209, i1142. However, if the clients do take such steps, breach of contract may result. The inquirer would then have the right to seek redress through the courts. This becomes a legal controversy, and not an ethical one with the exception of prohibition against excessive fees contained in MCPR DR 2-106. See, Op 204."
If the client terminated the prior contract with the predecessor firm, the firm may be entitled to fees under that contract. With respect to the appropriate division of the fees, the only limitations in the disciplinary rules are that there be no excessive fees and the division be made in proportion to the service performed and responsibility assumed by each.
The payment of a 1/3 contingency fee as a result of a recovery in a claim or action for a personal injury or wrongful death case is governed by GCR 928. MCPR 2-106(A) prohibits an attorney from charging a clearly excessive fee, and GCR 928.2 states that a contingent fee is fair and reasonable when computed on the net sum recovered after deducting from the amount recovered all disbursements properly chargeable to the enforcement of the claim or prosecution of the case.
When a client agrees to a 1/3 contingent fee arrangement, there is no ethical problem in the agreement being incorporated into the consent judgment. The fact that an earlier fee agreement under the former sliding scale maximum contingent fee rule was later amended to a flat 1/3 contingency fee rate would not change the result, provided the client freely consented to the change in the fee structure after being made fully aware of the likelihood that the fee arrangement would result in a lower net recovery to the client.