CI-938

September 10, 1983

SYLLABUS

While General Court Rule 928 applies only to Michigan court actions, Michigan lawyers may not charge or participate in contingent fees exceeding the amounts set forth in that Rule unless they can be justified under DR 2-106(B).

References: DR 2-106(B); CI-548, superseded.

TEXT

A lawyer has been retained to represent a Michigan resident who has a cause of action against a British Virgin Island's corporation with offices in Miami and assets in the United States.

Florida counsel indicated they required a one-third fee if the case was settled without filing suit, a 40% fee if the suit is filed or demand for arbitration made, and a 45% fee if judgment is granted and further proceedings are required to collect. Further, the amount of the fee is calculated on gross recovery without deduction of costs and expenses.

The proposed fees are larger than are allowed in General Court Rule 928 which limits fees in negligent actions to one-third of net recovery. The second sentence of GCR 928.1 reads as follows:

". . . The receipt, retention, or sharing of compensation which is in excess of such a fee shall be deemed to be the charging of a "clearly excessive fee" in violation of Canon 2, DR 2-106(A) of the Code of Professional Responsibility and Canons."

DR 2-106(A) states:

"A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee."

It would appear that GCR 928 does not apply to an action not brought in the courts of Michigan: "These rules govern the practice in the circuit courts, recorder's court, Court of Appeals, and the Supreme Court, in actions at law or in equity. These rules also govern the practice in criminal actions before such courts to the extent indicated in Rule 785." General Court Rule 11.1.

IN CI-548, this Committee considered an Illinois law suit where local Michigan counsel had been asked to participate in a fee agreement exceeding those limits set forth in GCR 928. In the opinion the Committee opined:

"Compensation in excess of the percentages allowed by MGCR 928. Are deemed to be the charging of a clearly excessive fee, in violation of DR 2-106(A) of the Code of Professional Responsibility."

While under the strict letter of the General Court Rules, the standards of GCR 928 would not apply to other than Michigan actions, the fee as set forth in this inquiry may well be excessive under the terms of DR 2-106(B).

It in fact it is determine that the fee is not clearly excessive under that rule, you are cautioned to adhere to the provisions of DR 2-107(A).

CONCLUSION

Apparently, Florida laws permits contingency fees higher than would be allowed in Michigan. To say that a Michigan lawyer may not employ the services of Florida counsel under a fee arrangement inconsistent with GCR 928 in all circumstances would likely place severe limitations on the client's ability to obtain representation in the foreign jurisdiction.

Attempt should be made to employ the services of Florida counsel under a fee arrangement consistent with GCR 928 and not accept the first proposal. If, after reasonable efforts are undertaken to employ the services of Florida counsel under a fee agreement consistent with GCR 928 and is unable to do so, it would be unethical to enter into a contingency fee arrangement permitted in the foreign jurisdiction provided there is compliance with DR 2-107(A) concerning the division of fees.