Consequences of Violations

A lawyer who mishandles a contingent fee faces three separate consequences, and each comes from a different place. The disciplinary system asks whether the lawyer broke the rules. A court in the fee dispute asks whether the agreed contingent term can be enforced, and then whether the lawyer keeps any fee at all. The first two usually follow from the violation itself. The third turns on state law and on the kind of violation the lawyer committed.

Three provisions drive the analysis. Rule 1.5(c) requires a written agreement,¹ and it also requires a written closing statement when the matter ends.² Rule 1.5(c) permits a contingent fee only 'except in a manner a contingent fee is prohibited by paragraph (d) or other law.'³ Rule 1.5(d) begins by forbidding a lawyer to 'enter into an arrangement for, charge, or collect' the fees it names.⁴

Discipline Under the Rules

Discipline attaches to the lawyer's conduct, so it neither waits for a fee dispute nor depends on how one ends. Rule 1.5(d) uses three verbs, and the first matters most here: a lawyer who agrees to a prohibited arrangement has violated the rule at signing, even if the lawyer never bills or collects a dollar.⁵ The writing requirement works the same way, since it is significant both for disciplinary purposes and for the enforceability of the agreement.⁶

The case law shows how the exposure arises, and it shows that a lawyer cannot escape the rule by choosing a different label for the fee. One court applied Rule 1.5(d)(1) to a lawyer in a domestic relations matter whose fee was an hourly rate 'subject to enhancement if the results of the case are favorable.' The court held that this was a fee 'the amount of which is contingent upon the result obtained' and that the arrangement therefore violated the rule. It did not need to decide what counts as a contingent fee under Rule 1.5(c), because Rule 1.5(d)(1) bars any fee in such a matter that has some aspect of a contingency.⁷

A bad fee arrangement can also end in a disciplinary referral. In Dahl, the court held that the lawyer had acquired a prohibited interest in the subject matter of his representation and that his claimed fees were unreasonable. It invalidated his fee arrangement with the client and referred him to the Office of Professional Conduct.⁸

Starkey shows that good faith does not take disciplinary exposure off the table. The New Jersey court found no hint of fraud or bad faith and no sign that anyone misunderstood the deal. It still pointed to two consequences that should give lawyers 'adequate incentive' to follow the rules: the loss of a potentially substantial contingency fee and the possibility of a professional disciplinary action.⁹

Loss of the Agreed Fee

The first civil consequence is that the lawyer cannot enforce the percentage the parties agreed on. A lawyer who never reduced a contingent fee agreement to writing will most likely be limited to recovery in quantum meruit and may be precluded from recovering any fee at all.¹¹ Starkey illustrates the point. The contingent fee agreement was not reduced to writing within a reasonable time, and the court invalidated it. The court called that invalidation a sufficient vindication of the rule even though it found no fraud, no bad faith, and no misunderstanding by anyone.¹² A lawyer therefore cannot save the percentage by proving that the client understood the deal, because the defect lies in the form of the agreement.

A lawyer who prices work in a way that merely resembles a contingency faces the same result. A New Jersey court held that no rule bars charging an hourly rate plus an additional charge for the same service based on other factors. It nonetheless found that the additional charge resembled a contingent fee, and it invalidated the agreement because the lawyer had not put it in writing or detailed an exact formula for calculating the extra charge.¹³

A prohibited arrangement fails for a more basic reason, because Rule 1.5(c) allows a contingent fee only where paragraph (d) does not prohibit it.¹⁴ Better paperwork therefore cannot repair it. A North Carolina court applying Thompson v. Thompson held a contingent-fee contract void as against public policy.¹⁵

Whether Any Fee Survives

Once the agreed term fails, the next question is what the lawyer keeps, and the answer depends on what went wrong. In Starkey, the invalidation was followed by a separate trial of the quantum meruit issue. The lawyer received $115,712.50, a figure calculated by multiplying an hourly rate by the hours worked.¹⁷ The court reasoned that it would be incongruous to let a lawyer who made no agreement collect a fee while denying one to a lawyer whose agreement proved unenforceable. It also relied on the Restatement (Third) of the Law Governing Lawyers, which says that denying compensation would be unfair to the lawyer and a windfall to the client. The Restatement adds that the parties may well have agreed on pay in a contract unenforceable because, for example, it is a contingent-fee contract that is not in writing as a court rule requires.¹⁸

The North Carolina court reached the opposite result on recovery. After holding the contract void as against public policy, it held that under Thompson v. Thompson the lawyers could not recover the reasonable value of services rendered under the contract. It vacated the fee orders and remanded to exclude fees for the period the void contract covered. It also directed the trial court to document the hours that were reasonable and necessary after that period.¹⁹ The two results track what went wrong. In Starkey the lawyer's agreement was invalidated for want of a timely writing. In North Carolina the contract itself was void as against public policy.

Consider two lawyers whose agreements both fail. Lawyer One reached an oral understanding on a contingent fee, never reduced it to writing in time, and then won a large recovery for the client. Lawyer Two signed a written retainer taking a percentage of whatever the client obtained in a domestic relations matter. In a jurisdiction following Starkey, Lawyer One loses the percentage but recovers the reasonable value of the work. In a jurisdiction following the North Carolina approach, Lawyer Two's contract is void and the reasonable value of services rendered under it is not recoverable.

Both outcomes rest on state decisions: Starkey applies New Jersey's rules and the Restatement, and the other case applies North Carolina public policy and North Carolina precedent. An exam answer should therefore not present either result as a command of the Model Rule. Without a controlling state rule, the safe statement is that a lawyer lacking the required writing will most likely be limited to quantum meruit and may be precluded from any fee,²⁰ while a void arrangement can leave the lawyer with no recovery under the contract at all.