You have asked the Professional Guidance Committee for advice in your inquiry of February 2, 1987. The inquiry was presented to the Professional Guidance Committee at its meetings in February and March of 1988. This letter will constitute the formal opinion of the Committee.
Your inquiry asks whether the contents of a contingent fee agreement ("CFA") you enclosed violates any ethical or disciplinary standard. Inasmuch as the current Code of Professional Responsibility will be superseded by the Rules of Professional Conduct ("Rules") on April 1, 1968, the Committee has confined this response to the Rules. The Committee has identified several areas of concern with regard to the CFA. These concerns will be addressed in the order in which they arise in the CFA.
First, the CFA quotes a fee of 40%-50% of any recovery, depending upon at what stage a recovery is made. Rule 1.5 requires that fees not be clearly excessive. A clearly excessive fee is any fee that is unreasonable. See Comment to Rule 1.5. While the Committee believes there are instances where a 40%-50% contingent fee may be reasonable, the Committee also believes that there are many cases in which such a fee would be unreasonable. Thus, any uniform or systematic practice of charging such a fee would, in each instance where a 40%-50% is not supported by the circumstances, violate Rule 1.5.
Second, the CFA purports to give the attorney the absolute right to withdraw from representation at any time upon written notice. Rule 1.16(B) permits withdrawal only if such can be accomplished without material adverse effect on the interests of the client or under certain enumerated instances. Additionally, most, if not all, courts or other tribunals have rules and regulations concerning withdrawal, particularly concerning those matters where litigation has commenced. Thus, the CFA does not accurately set forth the attorney's rights to withdraw, and any withdrawal of counsel not within the rights described in Rule 1.16 or applicable local rules would, of course, be a violation.
Third, the CFA states that the attorney may only be discharged upon "good cause" shown in writing. Rule 1.16(A) provides that a lawyer may be discharged by a client at any time whether or not for good cause shown. Thus, this portion of the CFA violates that standard.
Fourth, the balance of the CFA asserts financial rights of the attorney upon withdrawal or termination of his employment. With regard to the remunerative aspects, the CFA would again appear to violate the reasonable fee" standard described above. For example, the CFA would, if read literally, entitle the attorney to an hourly compensation of $125, even to the extent of exceeding the actual recovery ultimately realized by the client or a successor attorney. The CFA also appears to assert such an hourly rate for staff and clerical time spent. Such a practice is virtually unprecedented, and is unreasonable in our view.
Additionally, the CFA purports to repose in the attorney unfettered rights to retain parts or all of the client's file until the attorney's remunerative demands are satisfied. Such provisions are not in accord with a variety of standards set forth in the Rules. This issue was the subject of a previous opinion (87-1) of this Committee.