Can a client hire an investigator on a contingent fee, paid from the recovery, at the lawyer's suggestion?

Plain-English summary

The Committee considered a scenario in which an accident victim retains a lawyer on a contingent fee and, lacking funds to pay for investigation hourly, enters into a contingent-fee contract directly with an investigating firm, which would investigate the incident, supply reports, and potentially testify, in return for a reasonable percentage of the ultimate recovery. The question was whether the investigator's contingent-fee agreement with the client violates any canon of ethics, the inquirer noting that retaining an expert witness on a contingent fee is already understood to be unethical.

The opinion concluded that it would be ethically improper for an attorney to instigate or participate in such an arrangement. It reasoned that the arrangement creates an undue opportunity for overreaching a client with respect to the costs of litigation and has an inherent potential for abuse as a subterfuge to avoid the clear prohibition on a lawyer's own employment of an investigator or expert witness on a contingent fee. The opinion added that it was persuaded by prior ABA formal and informal opinions prohibiting similar fee arrangements on the basis that they constitute dividing legal fees with a non-lawyer, and concluded such arrangements are not ethically permissible.

Currency note

This opinion was issued in 1976, before the Alaska Bar Association's adoption of the Alaska Rules of Professional Conduct (it applies the former Code of Professional Responsibility) and before the 2009 revisions to those rules. The rules on fee sharing, contingent fees, and witness compensation have since been recodified. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific point mentioned here.

Common questions

Q: Can a client hire an investigator on a contingent fee at the lawyer's suggestion?

A: The opinion concluded it is ethically improper for an attorney to instigate or participate in such an arrangement.

Q: Why is a contingent-fee investigator arrangement improper?

A: The opinion reasoned it risks overreaching the client on litigation costs, may be a subterfuge to evade the bar on a lawyer hiring an investigator or expert on a contingent fee, and amounts to dividing legal fees with a non-lawyer.

Background and rules framework

The opinion treated a contingent-fee arrangement between the client and an investigator as raising the prohibition on dividing legal fees with a non-lawyer (the subject now treated by Model Rule 5.4) and the concern, related to witness compensation, that underlies the bar on contingent-fee experts (now reflected in Model Rule 3.4). It relied on prior ABA formal and informal opinions.

Citations and references

Rules of Professional Conduct (former Code; cf. Model Rules):

• DR 3-102 (dividing legal fees with a non-lawyer) (cf. Model Rule 5.4)
• Prohibition on contingent-fee compensation of investigators or expert witnesses (cf. Model Rule 3.4)

Other opinions cited:

• Prior ABA formal and informal opinions prohibiting similar contingent-fee arrangements as fee division with a non-lawyer

See also

• Alaska Ethics Op. 93-2: Compensating Witnesses
• Alaska Ethics Op. 96-1: Billing for Contract Attorney Services
• Alaska Ethics Op. 92-4: Contingent Fee for a Subrogation Case

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/76-9.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Ethics Opinion No. 76-9
Unethical for Attorney to Instigate or Participate in the Employment of an
Investigator on a Contingent Fee.
The Committee has been asked the following question:
Assume that an individual is involved in an automobile accident. Further
assume that the individual believes that the other party was at fault in causing
the accident and wishes to pursue recovery of damages through litigation.
Assume further that the party then contacts counsel and after having the
hourly fee versus contingent fee situation thoroughly explained, the party
elects to enter into a contingent fee professional employment contract with the
attorney, for an appropriate percentage of the recovery which is reasonable and
just. Now, then assume further that the party who has now taken the posture
of being a prospective plaintiff in litigation is without sufficient funds or
inclination to pay for an hourly fashion or flat fee basis for investigative
services. Assume further then that either at the suggestion of counsel or
independently, the party then enters into a contingent fee contract with an
investigating firm; said contract providing that the investigating firm will do
investigation of the incident itself and supply reports to counsel (and
theoretically testify as to their investigation or the work product thereof) in
return for a percentage of the ultimate recovery, said percentage being
reasonable and just.
The question I wish to present to the Ethics Committee is whether or not
the investigator's contingent fee agreement directly with the client is violative of
any canon of ethics. I am of course aware that it is unethical to retain the
services of an expert witness on a contingent fee basis and can readily
understand the reasoning behind such a view. My query thus is aimed at the
concept of contracting on a contingent fee basis for services to be performed
where it is possible although not planned that the other parties to the contract,
to-wit, the investigator, will ultimately be paid a fixed percentage from the
proceeds of the litigation or settlement.
In the Committee's opinion, it would be ethically improper for an attorney
to instigate or participate in an arrangement such as the one described. In the
Committee's opinion, this creates an undue opportunity for overreaching a
client with respect to the costs of litigation, and has an inherent potential for
abuse as a subterfuge to avoid the clear prohibition of the lawyer himself
employing an investigator or other expert witness on a contingent fee. In
addition, the Committee is persuaded by previous formal and informal opinions
of the American Bar Association prohibiting similar fee arrangements on the
basis that they constitute dividing legal fees with a non-lawyer.
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Thus, it is the Committee's opinion that arrangements such as that
described are not ethically permissible.
Dated: October 15, 1976.
Adopted by the Board of Governors on October 15, 1976.
G:\Ds\COMM\Ethics\Ethics Opinions for CDROM\1976\76-9.doc

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