Committee Reports

Formal Opinion 1986-3

Committee Report

Formal Opinion 1986-3

April 30, 1986

ACTION: Formal Opinion


The inquirer represents a client as the plaintiff in a pending negligence action under what he states is a “”standard contingency fee arrangement.”” This client has recently been arrested and indicted and has asked the inquirer to represent him in his criminal defense. The client has proposed that the inquirer accept as his fee in the criminal action a fixed charge against the eventual recovery, if any, in the negligence action.

On these facts the inquirer poses two issues. First, he asks whether the proposed fee arrangement for the criminal action is acceptable. Second, if the proposed arrangement is not acceptable, he asks whether another attorney, with whom he is not affiliated and who is not involved in the negligence action, may undertake representation of the inquirer’s client in the criminal action under the same arrangement with payment to be deferred until the successful resolution of the negligence action.

Although the Committee is concerned about the potential conflicts of interest that may arise out of the proposed fee arrangement, it considers the proposed arrangement acceptable so long as the inquirer makes full disclosure of the potential conflicts to his client and thereafter obtains his client’s consent to proceed with the representation. Accordingly, we answer both inquiries in the affirmative, that is, that either the inquirer or another attorney may undertake the proposed representation.

The Contingency of the Inquirer’s Fee

On the surface, the inquirer’s questions raise the issue of whether by entering into the proposed fee arrangement the inquirer would be accepting a contingency fee for his work in a criminal action. The Code of Professional Responsibility permits contingent fee arrangements in certain civil cases and administrative agency proceedings because “”they often, and in a variety of circumstances, provide the only practical means by which one having a claim against another can economically afford, finance, and obtain the services of a competent lawyer to prosecute a claim,”” EC 2-20. Also, the successful prosecution of the civil or administrative claim produces a fund out of which the attorney’s fee can be paid. Id.

However, the Code strictly prohibits an attorney from entering into a contingent fee arrangement in a criminal action, DR 2-106(C), “”largely on the ground that legal services in criminal cases do not produce a fund out of which the fee can be paid.”” EC 2-20; see also DR 5-103(A). The proscription against contingent fee arrangements in criminal matters is universally recognized. See N.Y. State 412 (1975); Restatement (First) of Contracts � 542(2); U.S. ex rel. Simon v. Murphy, 349 F.Supp. 818 (E.D. Pa. 1972); Matter of Fasig, 444 N.E.2d 849 (Ind. Sup. Ct. 1983); Genins v. Geiger, 240 S.E.2d 745 (Ga. Ct. App. 1977); Schoonover v. State, 543 P.2d 881 (Kansas Sup. Ct. 1975).

The Committee does not view the proposed fee arrangement as a contingency fee in a criminal action. A contingent fee arrangement is one in which the fee is contingent upon the successful accomplishment of the subject matter of the agreement. Under the fee arrangement proposed here, the inquirer’s fee for his defense of the criminal action would not be contingent upon the successful accomplishment of any event in that action. Rather, it would be contingent upon the client’s successful recovery of a verdict in the civil negligence action. Moreover, the potential recovery in the negligence action provides a fund from which the fixed fee in the criminal action can be paid.

In the Committee’s view, it makes no difference whether the proposed “”fixed fee”” in the criminal action is calculated by multiplying the inquirer’s hourly rate by the number of hours worked on the criminal action, or as a fixed percentage of the anticipated recovery in the negligence action. In either case, the amount of the fee is not contingent upon the occurrence of any event in the criminal action. Accord, Illinois Op. 84-8.

Accordingly, for the reasons we have discussed, the stated policy behind the prohibition of contingent fees in criminal cases is inapplicable.

Conflicts of Interest

The more troubling question raised by this inquiry is whether the proposed fee arrangement may impair the inquirer’s professional judgment in either the civil or criminal action, or both. Under the Code, an attorney’s professional judgment should be exercised solely for the benefit of his client, free of compromising influences and loyalties. EC 5-1. An attorney should not accept proffered employment if there is a reasonable probability that his personal interests will adversely affect the advice to be given or services to be rendered to the client. EC 5-2. However, even if an attorney’s professional judgment might reasonably be affected by his own financial or personal interests, DR 5-101(A) permits employment if the client consents after full disclosure.

Under the fee arrangement proposed here, the source of the inquirer’s fees in both the civil and criminal actions is the same — the potential recovery of a verdict in the civil action. Thus, the inquirer’s personal stake in recovering as large a verdict, or settlement, in the civil action as possible will be magnified since whatever verdict or settlement he recovers must also support his fees in the criminal action. Conceivably, the inquirer’s magnified personal stake could — if the fixed fee in the criminal action is large enough, and his client’s chances of recovery in the civil action are questionable — cause him to accept a settlement in the civil action primarily because the settlement is sufficient to pay his fixed fee in the criminal action, plus a satisfactory fee in the civil action, in lieu of following the riskier alternative of taking the civil action to trial where a potential recovery could be greater. Conversely, if prior to the conclusion of the criminal action, the civil case is lost or settled for an amount that does not cover the agreed-upon fixed fee for the criminal action, the inquirer may be less motivated to continue representing his client in the criminal action.

While we recognize that such pressures may be brought to bear upon the inquirer’s judgment, they are in our view different only in degree, and not in kind, from already-existing pressures. In any civil contingent fee arrangement, there always may be a motivation to counsel a settlement as the safer course of action so as to secure a fee; nevertheless, the Code permits such arrangements in civil actions. Similarly, in any criminal or civil action there is always the chance that midway through the action the client cannot or will not continue to pay the lawyer’s legal fees. That is a risk any attorney takes in accepting employment.

DR 5-101(A) ultimately governs this inquiry. Although the proposed fee arrangement may conceivably impair the inquirer’s independent professional judgment, primarily in the civil action, but also in the criminal action, he may represent his client in the criminal action so long as he has fully disclosed to his client the pressures he may face in both actions and has obtained his client’s consent to proceed. Having reached this determination, we must necessarily also answer the inquirer’s second question in the affirmative, since an attorney who is not affiliated with the inquirer and is not involved in the negligence action would face even fewer pressures on the exercise of his independent professional judgment in the criminal action.

Finally, while the inquirer may represent his client in the criminal action provided the client’s informed consent has been obtained, we strongly recommend that the inquirer memorialize the proposed fee arrangement in writing. While such a course is always desirable to prevent later misunderstandings, EC 2-19, it may be especially prudent here where the proposed arrangement involves special circumstances. We also caution the inquirer that although he may advance certain litigation expenses in the criminal action, including court costs and expenses of investigation, and those incurred in obtaining and presenting evidence, the client is ultimately liable for such expenses. DR 5-103. The inquirer may not advance funds to defray such costs on the understanding that reimbursement will be contingent on the outcome of the civil action. N.Y. State 464 (1977).

The inquiries are answered in the affirmative.