June 19, 1983
DR 2-106(C) is not violated when a lawyer charges a contingent fee for an appeal challenging the sufficiency of the trial court's award of lawyer's fees and alimony in a domestic relations case. Careful attention should be paid to DR 2-106(A) and (B) in setting reasonable fees in such a case.
References: DR 2-106(C); C-72; CI-620, CI-712, CI-828.
The Inquiry is whether a violation of DR 2-106(C) would occur if a lawyer were to charge a contingent fee for an appeal challenging the sufficiency of the trial court's award of attorney's fees and alimony. DR 2-106(C) states:
"(C) A lawyer shall not enter into an arrangement for, charge, or collect a contingent fee in a divorce case or for representing a defendant in a criminal case."
In the case of a domestic relation matter, the reason for this prohibition is set forth in EC 2-20. Although the Ethical Considerations to the Code of Professional Responsibility have not been adopted in Michigan, they are helpful in understanding and interpreting the Canons. EC 2-20 states:
". . . Because of the human relationships involved and the unique character of the proceedings, contingent fee arrangements in domestic relations cases are rarely justified."
C-72 held that a contract made between a wife and her solicitor in advance of a decree for divorce and allowance of alimony, giving the solicitors a portion of such alimony is void as against public policy, following Jordan v. Westerman, 62 Mich 170 (1886).
The rationale of Jordan v. Westerman, supra, and cases following it, such as McCurdy v. Dillon, 135 Mich 678 (1904) and Wells v. Brown, 226 Mich 657 (1924), is that, in the interests of society, reconciliation should be encouraged, whereas a contingent fee contract arms the lawyer with a strong inducement to thwart or prevent reconciliation.
Recently several questions have been put to the Committee regarding the use of contingent fee arrangements in post-judgment matters arising out of domestic relations cases.
In CI-620, it was determined that a lawyer may ethically enter into a contingent fee agreement with a divorced client for the modification of the judgment of divorce wherein the basis of such undertaking is fraud or misrepresentation perpetuated by the former husband and wherein the property right of the client, established by the judgment of divorce, is the single issue involved. That opinion sates in part:
"The divorce has been effected and no attempt to have that part of the judgment vacated is contemplated on the facts submitted."
In CI-712, it was stated that a lawyer may ethically enter into a contingent fee agreement with a divorced client in pursuit of post-judgment proceedings, to enforce the client's property rights established in the judgment of divorce.
In CI-828, the following question was posed:
"Is it proper for a lawyer who has handled a divorce proceeding which is now concluded, and for which an arrangement for fees has been satisfactorily agreed to for those past proceedings; to enter into a new contract with the client, for fees which would consist of a contingency fee for a percentage of property which the lawyer is thus able to enforce and collect, under the preceding divorce judgment?" (Emphasis in original.)
In determining the response to this question, the public policy behind DR 2-106(C) was considered as follows:
"DR 2-106(C) is based on public policy which encourages reconciliation of spouses. It is felt that if a lawyer is permitted to charge a contingent fee on the amount recovered for a spouse out of the marital property, the lawyer would have less incentive to promote reconciliation. Once the judgment of divorce has been entered, this rationale for the Rule becomes less significant."
CI-828 went on to conclude that a contingent fee agreement applied to post-judgment enforcement of property rights established in the judgment of divorce does not violate DR 2-106(C). This was so even though the lawyer represented the client in the original divorce action and the attorney fees for the earlier representation had not been paid. The opinion went on to point out that DR 2-106(A) and (B) should be carefully consulted by the lawyer in setting reasonable fees for both the pre and post-judgment proceedings.
Pursuing an appeal challenging the sufficiency of the trial court's award of attorney's fees and alimony on a contingent fee basis does not violate DR 2-106(C). The divorce in this case has been effected and no attempt to have that part of the judgment vacated is contemplated. Since reconciliation is not an issue, the public policy that encourages reconciliation of spouses is not violated by the use of a contingent fee arrangement at the appellate level.
Careful attention should be paid to DR 2-106(A) and (B) is setting reasonable fees.