1996-01

QUESTION:

“I have been employed to represent the wife of a physician
in a county approximately one hundred miles from Anytown,
Alabama. The parties entered into an antenuptial agreement
which is subject to legal attack as to the validity of the
agreement in that there was no financial disclosure and the
wife did not have independent counsel. The agreement
references that there did occur a financial disclosure and
in fact names a lawyer who provided independent counsel to
the wife at the time of her signing. Under the terms of the
agreement the wife would be entitled to only $X per
months for 24 months. She estimates the marital estate to
be
worth between $X million and $Y million. If she is bound by
the agreement she will not receive any division of the
estate. She also alleges physical abuse and I have advised
her concerning her rights for a separate tort claim with
jury trial or for the matter to be decided by the divorce
court. She has advised me that reconciliation is a remote
possibility and only then under certain circumstances and
parameters.

It appeared to me under the facts of this case as pertains
the contract of the antenuptial agreement and the damages
claim that a fee utilizing a percentage contingency as a
guideline with an offset for any fees actually paid on
hourly charges would be appropriate. I am enclosing
herewith
my fee agreement for your review and presentation to any
commissioners. Please advise if this contract would be
approved as an exception to the prohibition against
charging
contingent fees in domestic relations matters. I have
drafted the agreement taking into consideration recent
opinions and discussions concerning these issues.”

* * *
ANSWER:

A lawyer may not enter into an arrangement for, charge or
collect a fee in a domestic relations matter, the payment
or
amount of which is contingent upon the securing of a
divorce
or upon the amount of alimony or support, or property
settlement in lieu thereof.

DISCUSSION:

PREAMBLE

The Disciplinary Commission of the Alabama State Bar, in
formal opinion RO-88-l03, concluded that a lawyer could
represent a spouse on a contingent fee basis in an action
for breach of an antenuptial contract, said action seeking
money damages. The Commission, deciding the matter pursuant
to DR 5-103(A) and EC 2-20 of the former Code of
Professional Responsibility, acknowledged the pending
adoption of Rule 1.5 (d) , Alabama Rules of Professional
Conduct, and its direct prohibition of contingent fees in
domestic relations matters. The Commission noted a prior
opinion (RO-83-22) which had listed the only approval of a
contingent fee contract in a domestic relations matter,
that
being collection of child support or alimony arrearage in a
completed divorce.

REASONING:

Rule 1.5(d)(1), prohibits a lawyer from entering into an
arrangement for, charging, or collecting any fee in a
domestic relations matter, the payment or amount of which
is
contingent upon the securing of a divorce or upon the
amount
of alimony or support, or property settlement in lieu
thereof. Under the former Code of Professional
Responsibility, DR 2-107(A) prohibited “A contingent fee
for
representing a defendant in a criminal case.” EC 2-20
provided that “Contingent fee arrangements in domestic
relation cases are rarely justified.” According to the
Annotated Model Rules of Professional Conduct, Second
Edition, Rule 1.5(d) reflects the public policy concern
that
an attorney-client fee arrangement should not discourage
reconciliation between the parties. The Annotated Model
Rules also point out that the counterpart provision in the
predecessor Model Code discouraged but did not flatly
prohibit such agreements. Several illustrative cases are
set
forth in the Annotated Model Rules:

A contingent fee agreement that gave a lawyer a
percentage of property received on behalf of a client
in excess of that negotiated in a settlement at the
time of separation was improper – Coons v. Kary, 263
Cal. App.2d 650, 69 Cal. Rptr. 712 (1968).

Lawyer forfeits rights to collect any fee, including
quantum meruit, by representing client under contract
that included contingency fee and action for
modification of divorce judgment and property
settlement – Licciardi v. Collins, 180 Ill. App. 3rd
1051, 536 N.E.2nd 840, 129 Ill. Dec. 790 (1989).

Arrangement whereby lawyer would receive contingent
fee of $60,000 from settlement proceeds improper –
Shanks v.Kilgore, 589 S.W.2d 318 (Mo. Ct. App. 1979).

Contingent fee contracts for legal services are
generally permitted in actions brought by one spouse
to
recover property from other spouse or to settle
property rights among spouses, including equitable
distribution proceeding separate from divorce action:
Agreement may not be used in action for child support
Davis v. Taylor, 81 N.C. App. 42, 344 S.E.2d 19
(1986).

While predecessor Model Code had no disciplinary rule
prohibiting lawyer from representing client in action
for breach of prenuptial agreement on contingency
basis, Model Rules make such agreement unethical. Ala.
Bar, Disciplinary Comm’n, Op. 88-103 (1989).

Implied agreement between lawyer and client for
reasonable fees in connection with client’s divorce
not
voided by subsequent invalidation of contract because
of contingency fee -Morfeld v. Andrews, 579 P.2d 426
(Wyo. 1978).

The historical perspective on Rule 1.5 is enunciated in the
Law of Lawyering by Hazard and Hodes:

“The rule against contingent fees in domestic relations
matters is of more recent origin, and may have a sounder
public policy rationale. Basing a lawyer’s fee on the
amount
of alimony or support recovered seems no more objectionable
than basing it on the amount of a jury verdict. Public
policy is offended, however, when the fee is made
contingent
upon the lawyer’s obtaining a divorce for his or her
client,
for the lawyer would then have no incentive to help bring
the parties to a settlement that might preserve the
marriage.

Rule 1.5(d)(1) does not engage in such fine distinctions,
but provides that lawyers may not use contingent fee
arrangements in any domestic relations matter. Since
questions of alimony and support are inextricably
intertwined with the question of whether the marriage
itself
will continue, this broadened ban seems reasonably related
to the purposes of the rule.” Section 1.5: 501

According to Wolfram’s Modern Legal Ethics, Practitioner’s
Ed. (1986) most American jurisdictions hold that it is
improper for a lawyer to charge a fee in a divorce case
that
is either contingent on a favorable judgment or settlement
or proportional to the recovery of a certain amount of
alimony or property settlement. Section 9.4.4. This is
consistent with the first Restatement of Contracts that a
promise by a spouse to pay a lawyer a contingent fee to
obtain a divorce or annulment is illegal and thus void as a
matter of contract law. Restatement, Contracts §542(2)
(1932). The Second Restatement of Contracts states that:

“A promise that undermines [the marriage] relationship
by tending unreasonably to encourage divorce or
separation is unenforceable.” Restatement (Second),
Contracts §190, Comment c (1979).

One basis upon which the prohibition may be justified is
that a contingent fee contract would place strong economic
pressure on the lawyer to assure that reconciliation did
not
occur. However, this approach should not be so absolute as
to prohibit contingent fees in all domestic relations
litigation, as indicated below.

The second basis for the prohibition concerns the ability
of
a client to employ counsel. Contingency fee arrangements
enable financially strapped litigants to obtain counsel.
The
argument can be made that such need does not exist in a
divorce matter. The spouse in possession of the majority of
the marital assets should have no difficulty retaining
counsel. The spouse with little or no assets would be
protected in most jurisdictions by the court’s ordering the
spouse with the greater assets to pay the other spouse’s
attorney’s fee.

Another point of concern is that a lawyer’s taking a
percentage of any property or monies awarded to a client by
the court would unnecessarily and unfairly skew the
division
of property as envisioned by the court independent of such
contractual attorney’s fee. This could possibly place the
lawyer at odds with his client, as well as the client’s
children, in that the lawyer’s fee would diminish the
court’s award of support, alimony, or property.

Where a separate tort, contractual or fraud claim exists
independent of the divorce matter representation of the
client could be undertaken on a contingency fee basis.
However, where these claims are so intertwined with the
divorce matter that they are inseparable and so related to
one another not only with regard to the legal rights of
your
client, but also as to the computation and assessment of
your fee, then the contingent fee provisions of the
contract
would be prohibited.

Rule 1.5 is very absolute in its terms. If the fee in any
way is contingent upon the granting of the divorce then
such would be prohibited by Rule 1.5. It appears from your
contract that if the antenuptial agreement is upheld, then
you will be compensated on an hourly basis per the terms of
the contractual arrangement with the client. If, on the
other hand, you are successful in having the antenuptial
contract set aside or invalidated, your fee would then be
contingent upon the assets which the client could receive
from the divorce in the event one is granted. This would
violate the letter and purpose of Rule 1.5. While the rules
allow a “fee plus” arrangement as stated in your contract
whereby you would be compensated above and beyond your
hourly fee basis based upon those factors enumerated in the
contract, such cannot be contingent upon the securing of a
divorce or upon the amount of alimony or support, or
property settlement in lieu thereof.

The contract which you have submitted for review concurrent
with your ethical inquiry appears to establish contingency
fee for your representation of the client in the divorce
proceeding. The antenuptial agreement is so interwoven with
the divorce matter that the two cannot be distinguished or
separated sufficient to allow a conclusion that the
contingent fee as proposed does not violate Rule 1.5.

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