March 29, 1994
A lawyer may charge a contingent fee in an action by a client against a former spouse after the divorce is final seeking (1) damages for assault and battery, and (2) to set aside and renegotiate the property settlement based on coercion and/or duress.
References: MRPC 1.5(c) and (d); RI-6, RI-28, RI-127, RI-181; CI-962; ABA i1317.
A lawyer asks whether a contingent fee arrangement is permissible when a client initiates a civil action against a former spouse five years after the divorce is final seeking damages for assault and battery and other torts, and to set aside and renegotiate the property settlement based on coercion and/or duress. The lawyer originally began representing the client on a hourly fee basis, but because of financial constraints, the client now wishes to complete the case on a contingency fee basis.
MRPC 1.5(c) and (d) state:
"(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or by other law. A contingent-fee agreement shall be in writing and shall state the method by which the fee is to be determined. Upon conclusion of a contingent-fee matter, the lawyer shall provide the client with a written statement of the outcome of the matter and, if there is a recovery, show the remittance to the client and the method of its determination. See MCR 8.121.
"(d) 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."
In RI-181 the issue was whether a contingent fee arrangement was permissible where a client wished to institute a civil action for assault and battery against the client's spouse, but did not contemplate divorce. In other words, the parties were still married and there was no divorce suit pending or contemplated. There is case law in Michigan which permits one spouse to maintain an action against the other for certain torts committed during the marriage. Hosko v. Hosko, 385 Mich 39 (1971). The tort of assault and battery has been specifically allowed in civil actions by one spouse against the other. See McCoy v. Cooke, 165 Mich App 662 (1988); Goldman v. Wender, 122 Mich App 744 (1983). RI-181 concluded that a civil action for assault and battery between spouses is not a "domestic relations" matter for which MRPC 1.5(d) prohibits contingent fees.
As stated in RI-28 and RI-127 the primary concern in the use of contingent fees in domestic relations matters is that if a fee is made contingent upon the lawyer obtaining a divorce for clients, the lawyer would have no incentive to help bring the parties to a settlement that might preserve the marriage. In the present case, the marriage ended with the entry of a final judgment of divorce five years ago. If an assault and battery tort action can be maintained between spouses under a contingent fee arrangement, it would certainly not be unethical for the lawyer in this case to represent the client on a contingency fee basis in a civil action for assault and battery by one former spouse against the other where the marriage has ended five years earlier. There is no danger that the lawyer would be less inclined to counsel regarding reconciliation if the matter is handled on a contingent fee bases, since the marriage has been dissolved.
The second part of the question is whether a contingent fee arrangement is permissible where a client institutes a civil action against a former spouse to set aside and renegotiate the property settlement portion of the divorce judgment based on coercion and/or duress. In RI-128 a contingent fee was allowed to collect past due alimony. The fundamental purpose of the rule prohibiting a contingent fee in a domestic relations matter is that if a lawyer were permitted to charge a contingent fee on the amount recovered for a spouse in a divorce case, the lawyer would be less inclined to counsel regarding reconciliation. That consideration was found not to apply in a post-judgment proceeding in domestic relations matters. However, the opinion limited the use of a contingency fee arrangement to those cases where it is the only practical means by which the client can pursue the claim, the contingent fee is reasonable and any court awarded fees are credited against the contingent fee.
Even more directly on point is RI-127 in which it was determined that a lawyer may charge a contingent fee in an action to set aside the property settlement portion of a divorce decree previously entered based upon the fraud of the client's spouse. It was again stated that the contingent fee must be the only practical means by which the perspective client can pursue the claim, the contingent fee must be reasonable, and any court ordered fees must be credited against the contingent fee.
Other states have allowed contingent fee arrangements in post judgment proceedings and domestic relations matters. Those states have also emphasized that contingent fee arrangements should only be used when that fee arrangement is the only practical means by which a claim can be pursued. Virginia OP 1062 (1988); Alabama Op 86-75 (1986); Arizona Op 91-20 (1991); Nassau County Op 90-18 (1990). This is consistent with the concern expressed in MCR 8.121(E) that the client be advised that other fee arrangements may be available.
Thus, when a divorce is final and it is later determined that the property settlement was based on coercion and/or duress, it is not unethical for a lawyer to undertake representation of a client to set aside the property settlement on a contingent fee basis, where a contingent fee is the only practical means by which the client can pursue the claim, the contingent fee is reasonable and any court awarded fees are credited against the contingent fee.
One additional consideration is that it appears that the case was originally begun on an hourly fee basis and because of financial constraints, the client now wishes to complete the case with a contingency fee. If the client has already made payments under the hourly fee agreement, this raises the issue of a mixed fee structure between a hourly rate and a percentage of the net recovery. As long as a fee is not illegal or "clearly excessive," under MRPC 1.5 a lawyer may charge and a client may agree to pay on the basis of a flat fee, a hourly fee, a percentage basis, or some combination or "mix" of these types of fees. CI-962; ABA i1317. A mixed fee arrangement was addressed in RI-6 which stated:
"When the lawyer's risk is lowered by a mixed fee arrangement that guarantees the lawyer a retainer, a hourly fee, or a fee alternatively calculated, then the maximum percentage calculation allowable should be reduced by some reasonable amount to reflect the lawyers lesser risk, i.e., in such fee arrangements the percentage calculation must be something less than 33 1/3 percent, or in cases where the 33 1/3 percent is not applicable, something less than the percentage that should be charged where the lawyer risked everything."
Thus, in the event there is a mixed fee agreement between hourly and contingent, the calculation of such fee on a percentage basis must be less than the maximum percentage allowed had the lawyer risked taking nothing by receiving no hourly fee.