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Contingency Fee Agreement Checklist

By Gina Hendryx, General Counsel

The new year invariably brings with it the resolutions to do better, do more, do less or a combination of the three. Many practitioners resolve to review and update forms, contracts and procedures to start off the new year. For those who employ the contingency fee in their practices, your inspection should confirm that your fee agreements contain the following. If not, some redrafting might be in order.

Is my contingency fee agreement in writing? Oklahoma Rule of Professional Conduct (ORPC) 1.5(c) states that a fee agreement which is contingent upon the outcome of the matter shall be in writing. While other types of fee agreements should be in writing, the ethical rules are clear that the contingency fee must be in writing. The Oklahoma Supreme Court has held failure to reduce a contingency fee agreement to writing is a factor in determining discipline. See State ex rel. Oklahoma Bar Association v. Mayes, 1999 OK 9, 977 P.2d 1073.

Too many times the OBA General Counsel’s office reviews complaints from clients stating that he did not agree to or did not understand the attorney fee percentage. Putting the agreement in writing and providing your client with a copy of same would reduce the risk of this type of  grievance considerably.

Having your contingency fee agreement in writing not only complies with the rules, but also protects you from the client with the poor memory.

Does my contingency fee agreement have a place for a client’s signature? Prior to 2008, the ORPC only required the agreement be in writing. The 2008 amendments require the agreement be signed by the client. In years past, lawyers would “confirm” the agreement in writing by sending a letter to the client outlining the fee agreement. Unfortunately, disgruntled clients still complained that they did not receive a copy of the letter, that they did not agree to the percentages, etc. By having the client sign the contract, you alleviate most of these arguments. Take the time to go over the contract in your office with your client. Get a signature on the agreement and provide a copy of the signed agreement to the client. If the client wants to “think about it,” docket a follow up e-mail or phone call. Do not begin a representation without a written, signed contract.

Does my contingency fee agreement state the method to determine the fee? Your fee agreement should state the method by which the fee is to be assessed. This should include the percentages that accrue to the lawyer at the various stages of litigation. What percent will be charged if the case is settled? Goes to trial? Is appealed? The contract should be clear and state triggering events for increases in percentages. For example: What fee is imposed if the case is settled during trial? Remember that ambiguities in contracts are usually resolved against the lawyer who drafted it. Anticipate that certain types of cases may be resolved through a structured settlement and have a fee agreement that addresses same. Also, the agreement should state whether or not the attorney agrees to take on the appeal and, if so, what percentage applies.

Does my contingency fee agreement state the method by which expenses will be deducted from the recovery? The fee agreement should clearly inform the client whether expenses will be deducted before or after the attorney fee is calculated. Stated another way, are costs of litigation deducted from the “gross” or “net” recovery? If this issue is not addressed in the contract, the client can successfully argue that reimbursement of costs should be deducted before the attorney fee is taken.

Does my contingency fee agreement inform the client of the expense reimbursement policy in the event of no recovery? It is proper to inform a prospective client that in the event of no recovery, the client is not responsible for attorney fees or costs advanced. However, if you intend to seek reimbursement from the client for those advanced costs, you must notify the client of same and have it in your fee agreement. If the client is not the prevailing party, the client will be responsible for the advanced costs of litigation. If you intend to charge the client for advance costs, it is recommended that you keep the client informed of the costs being incurred. A monthly recap and a candid discussion about the costs of litigation should be utilized when employing this type of agreement.       

Do I provide a settlement statement at the conclusion of contingency fee matters? Your answer should be “yes,” and the statement should include a financial break down of the amount received, attorney’s fee charged, expenses deducted, with net to the client. If lien holders are paid from the proceeds, these payments should also be reflected on the statement. If no recovery is obtained, a statement should be provided to the client indicating any costs to be reimbursed.

Contingency fees must be reasonable and must be earned just as any other fee charged by a lawyer. These types of fees are still prohibited in domestic relations matters and in criminal defense representations. This prohibition does not preclude the use of a contingency fee contract in connection with the recovery of post-judgment balances due under support, alimony or other financial orders.

FINAL RECOMMENDATION

Take this new year opportunity to review your client contracts. Make sure your contingency fee agreements encompass the above requirements. Most importantly, put the terms in clear English and explain to the client what is expected at every stage of litigation.

Originally published in the Oklahoma Bar Journal --  Jan. 16, 2010 -- Vol. 81, No. 2