In Kentucky, may a lawyer charge a contingent fee for defending a civil case?

Plain-English summary

The question came from a lawyer approached by an insurance company to defend its insureds under an unconventional fee arrangement. The Committee answered "Yes," it is permissible for a defense lawyer to charge a contingent fee in a civil case.

The opinion reasoned that the bar's traditions have long recognized contingent fees where the lawyer's work generates a res and the client might not be able to pay hourly. Rule 1.5 prohibits contingent fees only in criminal and divorce cases, and neither the rules nor the earlier Code contains any prohibition on contingent fees for lawyers defending civil cases, citing Wolfram's Modern Legal Ethics and Hazard and Hodes's The Law of Lawyering. Quoting Wolfram, the opinion observed that if a fully advised client prefers to have the lawyer share the risk of loss in return for a higher fee, "it is hard to see why the rich should not have what the poor are forced by circumstances to accept."

The opinion stressed that a lawyer who charges a contingent fee or bonus for result should expect to bear the burden of proving the method of computing the charge, and the amount of the fee, are reasonable and rational and settled in writing at the outset, under Rule 1.5. It cited Wunschel Firm v. Clabaugh, 291 N.W.2d 331 (Iowa 1980), where a court refused to enforce a defense contingent fee computed as a percentage of the difference between the damages claimed and the amount ultimately awarded, because that method was irrational and likely to produce fees unrelated to risk and effort.

Currency note

This opinion was issued in 1993, before the substantial 2009 revisions to Kentucky's Rules of Professional Conduct (SCR 3.130); the Kentucky Bar Association notes the rules are amended periodically. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a defense lawyer charge a contingent fee in a civil case?

A: Yes. The opinion concluded that nothing in the rules or the former Code prohibits a contingent fee for defending a civil case; Rule 1.5 bars contingent fees only in criminal and divorce matters.

Q: Are there limits on how the contingent defense fee is calculated?

A: Yes. The opinion held the lawyer bears the burden of proving the method of computation and the amount are reasonable and rational and set in writing at the outset under Rule 1.5.

Q: Why did the opinion cite the Wunschel case?

A: As an example of an unenforceable arrangement. The opinion described a defense contingent fee tied to the gap between damages claimed and the amount awarded, which the court found irrational and unrelated to risk and effort.

Background and rules framework

The opinion interprets KRPC 1.5 (fees; Model Rule 1.5), which prohibits contingent fees in criminal and domestic-relations matters and requires fees to be reasonable. It reads the rule as permitting contingent fees for civil defense work, with the lawyer responsible for justifying the method and amount.

Citations and references

Rules of Professional Conduct:

• MR 1.5 / KRPC 1.5 (fees; contingent-fee limits and reasonableness)

Cases:

• Wunschel Firm v. Clabaugh, 291 N.W.2d 331 (Iowa 1980): irrational defense contingent fee unenforceable

Other opinions cited:

• ABA Formal Op. 93-373 (1993)

Other authorities:

• Wolfram, Modern Legal Ethics § 9.4 (1986); Hazard & Hodes, The Law of Lawyering § 1.5:401 (1991)

See also

• KBA Ethics Op. E-364: Divorce Contingent Fees
• AL Ethics Op. 1996-01: Contingent Fees in Divorce
• AL Ethics Op. 1998-01: Contingent Fees for Child Support

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-359.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-359
Issued: July 1993

The Rules of Professional Conduct are amended periodically. Lawyers should
consult the current version of the rules and comments, SCR 3.130 (available at
http://www.kybar.org), before relying on this opinion.

Question:

Is it ever permissible for a defense lawyer to charge a contingent fee in a
civil case?

Answer:

Yes.

References: Wolfram, Modern Legal Ethics 9.4 (1986); Hazard & Hodes, The Law of
Lawyering 1.5:401 (1991); Wunschel Firm v. Clabaugh, 291 N.W.2d 331
(Iowa 1980); ABA Formal Op. 93-373 (1993).
OPINION
The question is presented by a lawyer who has been approached by an insurance
company to defend its insureds, but pursuant to an unconventional fee arrangement.
The traditions of the bar have long recognized the propriety of a lawyer charging
contingent fees in cases in which the lawyer's work will generate a res, and in which the
client might not be able to pay on an hourly basis. The rules do prohibit contingent fees in
criminal and divorce cases. See Rule 1.5.
Neither the Rules nor the earlier Code contain any prohibition of all contingent
fees for lawyers defending civil cases. See Wolfram, Modern Legal Ethics 9.4 (1986);
Hazard & Hodes, The Law of Lawyering 1.5:401 (1991).
Professor Wolfram puts it this way: "If a client, fully advised about the matter by
a lawyer, prefers to have the lawyer share some risk of loss in return for a higher fee
payment, which will be the usual trade-off, it is hard to see why the rich should not have
what the poor are forced by circumstances to accept." Yet, elsewhere in his treatise there
appear hints that even Professor Wolfram would concede that just because ballroom
dancing is legal, that that is no reason for someone to take it up.
With that last thought in mind, we stress that the lawyer who would charge a
contingent fee or bonus for result should also expect to bear the burden of proving that
the method of computing the charge, and the amount of the fee, are reasonable and
rational under the circumstances and are settled in writing at the outset of the
representation. Rule 1.5.
For example, in Wunschel Firm v. Clabaugh, 291 N.W.2d 331 (Iowa 1980), the
Court concluded that it should not enforce a contingent fee agreement relied upon by a
law firm representing a defendant in a defamation case, since the fee claimed was based
on a percentage (33 1/3%) of the difference between the unliquidated damages claimed in
the complaint and the amount ultimately awarded or provided by any settlement

agreement. Given the fact that the amounts claimed by plaintiffs routinely bear little
relation to ultimate recoveries, the method of computation was deemed irrational, and
likely to result in fee charges more or less unrelated to risk and effort.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the
Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530
(or its predecessor rule). The Rule provides that formal opinions are advisory only.