September 8, 1989
A lawyer may charge a contingent fee to collect past due alimony, provided it is the only practical means by which the prospective client can pursue the claim, the contingent fee is reasonable, and any court-awarded fees are credited against the contingent fee.
References: MRPC 1.5(d); CI-620, CI-712, CI-828, CI-901.
A lawyer is consulted by a prospective client seeking collection of past due alimony. The client was divorced nearly 15 years ago in Ohio and that the prospective client's former spouse has remarried and now resides in Michigan. The Ohio divorce judgment provides that the former spouse will pay the prospective client periodic alimony. The former spouse has either failed or refused to pay such alimony, and there is a substantial arrearage of alimony now due. The prospective client has multiple sclerosis and is without adequate funds with which to hire a Michigan lawyer on an hourly or fixed fee arrangement. The lawyer asks whether it is ethically permissible for a lawyer to enter into a contingent fee arrangement for the collection of past due alimony.
MRPC 1.5(d) states:
"A lawyer shall not enter into an arrangement for, charge, or collect a contingent fee in a domestic relations matter or a criminal matter."
Prior to the adoption of MRPC 1.5(d), former MCPR DR 2-106(C) provided as follows:
"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."
The Committee on several occasions found that former MCPR DR 2-106(C) was not a complete prohibition to contingent fee arrangements in divorce cases. The Committee determined:
- a contingent fee arrangement was proper in proceedings to modify a judgment of divorce wherein the basis for such undertaking was fraud or misrepresentation perpetuated by the other spouse and wherein the property rights of the client as established by the judgment of divorce was the single issue involved, CI-620;
- a contingent fee arrangement was permissible in post-judgment proceedings to enforce a client's property rights established in a judgment of divorce, CI-712, CI-828;
- a contingent fee arrangement was permissible on the appeal of the Trial Court award of attorney fees and alimony in a divorce case, CI-901.
The opinions reasoned 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. The Committee concluded that once a judgment of divorce has been entered, reconciliaton became less significant and under the above circumstances a contingent fee was not inappropriate.
Professor Charles W. Wolfram in Modern Legal Ethics (1986 West Publishing Co) at section 9.4.4 outlines the various reasons for prohibiting contingent fees in domestic relations matters and sets forth the following:
- a contingent fee puts a strong economic pressure on the lawyer to assure that reconciliation did not occur;
- contingent fee arrangements first gained recognition in situations in which they were necessary to enable litigants to obtain counsel. No compelling necessity exists for resort to contingent fees to assure representation to divorce litigants. The spouse in possession of property will typically have no difficulty retaining counsel. The spouse without property is protected in most jurisdictions through the award of attorney fees. MCR 3.206(A)(2) allows the Court to award attorney fees in post-judgment proceedings. See Michigan Family Law Section 6.69 (third edition-ICLE);
- a further objection to contingent fees exists where the amount of the promise fee depends on the amount awarded to a spouse for support of alimony or by way of a property settlement. The lawyer's fee may disrupt the pattern of wealth distribution that the court intended in making the award unless, according to some courts, the fact of contingent fees is made known to the court in advance. Citing Jordan v. Westerman, 62 Mich 170 (1896);
- finally, contingent fees are not suitable in domestic relations matters as fees are normally made at the beginning of representation and a client confronting a divorce might well be in an emotional state that does not encourage careful deliberation about the consequences of agreeing to a contingent fee.
None of these concerns are presented under this inquiry.
Other state bar associations under both the Code of Professional Responsibility and the Rules of Professional Conduct as adopted in those states have approved contingent fee arrangements in post-judgment proceedings in domestic relations matters. Several of those rulings point out that the contingent fee arrangement should only be used when that fee arrangement is the only practical means by which the claim can be pursued. Virginia Op 1062; Georgia Op 47; New Jersey Op 618; New York County Op 660.
It appears that the change in language between MCPR DR 2-106(C) and MRPC 1.5(d) is not a change in the fundamental purpose of the rule, but rather expands the scope of proceedings which are covered by the rule.
Since the fundamental purpose of the rule has not changed, we conclude that where the divorce case has been completed and the prospective client seeks enforcement of past due alimony and a contingent fee arrangement is the only practical means by which the prospective client can pursue the claim and the contingent fee arrangement is reasonable and any court awarded fees are credited against such contingent fee, then and under those circumstances a contingent fee arrangement is not prohibited under MRPC 1.5(d).