In Kentucky, may a lawyer pay an expert witness, or a litigation-support service, on a contingent-fee or success-bonus basis?

Plain-English summary

Returning to a recurring question, the Committee addressed contingent fees and success bonuses for witness services and litigation support. It restated KBA E-276 (1983), under which a lawyer may not arrange medical expert testimony through an organization that charges a contingent fee. Surveying other state opinions, the Committee identified two problems: a contingent fee paid out of the lawyer's contingent fee (or otherwise involving fee-splitting under KRPC 5.4(a)), and contingent fees for expert testimony, since experts may be paid only on an hourly or flat-fee basis under KRPC 3.4(b).

The Committee drew on ABA Formal Op. 87-354, which raised concern about promising a contingent fee or bonus to a service that also supplies expert witnesses, even when the witness's portion appears to be flat or hourly, because the ongoing relationship between the service and the expert can raise the same questions as paying the expert a contingent fee directly. The Committee declined to review or approve individual litigation-support contracts.

The Committee therefore answered Question 1 no where the support services include expert testimony or involve fee-splitting with a nonlawyer. Otherwise (Question 2), it concluded there is no per se rule against contingent fees or bonuses for litigation-support services, and pointed lawyers to ABA Formal Op. 87-354 for further guidance.

Currency note

This opinion was issued in 1996 and predates the Kentucky Supreme Court's substantial 2009 revisions to the Rules of Professional Conduct (SCR 3.130). The Kentucky Bar Association notes that the rules are amended periodically and that lawyers should consult the current version before relying on this opinion. Treat this page as historical context, not current guidance.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: Could a Kentucky lawyer present testimony from an expert paid a contingent fee?

A: Per the opinion, no. The Committee concluded experts may be paid only on an hourly or flat-fee basis under KRPC 3.4(b), so a lawyer may not present testimony from an expert compensated on a contingent or bonus basis.

Q: Could a lawyer pay a litigation-support service on a contingent or bonus basis?

A: The opinion concluded yes, if the arrangement involved neither expert testimony nor fee-splitting with a nonlawyer; otherwise it was prohibited.

Q: Why did a success bonus to a service that also supplies experts raise concern?

A: Per the opinion (following ABA Formal Op. 87-354), the ongoing relationship between the service and its experts can raise the same problems as paying the expert a contingent fee directly, even if the expert's share looks flat or hourly.

Background and rules framework

The opinion interprets KRPC 3.4(b) (a lawyer may not offer an inducement to a witness prohibited by law; the Model Rule 3.4 counterpart, under which experts are paid only flat or hourly) and KRPC 5.4(a) (no sharing of legal fees with a nonlawyer; Model Rule 5.4), drawing on ABA Formal Op. 87-354.

Citations and references

Rules of Professional Conduct:

• MR 3.4 / KRPC 3.4(b) (no improper inducement to a witness; expert compensation)
• MR 5.4 / KRPC 5.4(a) (no fee-splitting with a nonlawyer)

Other opinions cited:

• KBA E-276 (1983): no contingent fee for medical expert testimony through a service
• ABA Formal Op. 87-354 (1987): contingent fees and bonuses to litigation-support services that supply experts

See also

• KBA Ethics Op. E-411: Contingent Fee in an Appeal of a Dissolution Decree
• KBA Ethics Op. E-420: Borrowing Litigation Costs and a Security Interest in a Contingent Fee

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-394.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-394
Issued: November 1996

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 1:

May a lawyer knowingly present testimony of an expert witness when the expert
witness is to be compensated on a contingent fee basis, or for a set fee with a
“bonus” due if the suit is successful and a recovery is obtained in excess of a
certain amount?

Answer:

No.

Question 2:

May a lawyer contract for other litigation support services on a contingent fee
basis, or for a set fee with a “bonus” due if the suit is successful and a recovery is
obtained in excess of a certain amount, so long as those services do not include
the presentation of expert testimony or the splitting of legal fees with a nonlawyer?

Answer:

Yes.

References:

KBA E-276 (1983); ABA Formal Op. 87-354 (1987); ABA/BNA
Law.Man.Prof.Con. 41:920-41:921.
OPINION

The Committee continues to receive questions about contingent fees for witness services
and litigation support. We previously addressed this issue in KBA E-276 (1983), when we
opined that a lawyer may not “ethically arrange for medical expert testimony through an
organization that charges a contingent fee for its services.” According to a survey of state bar
opinions, contingent fee agreements with consultants, consulting services, or litigation support
services are improper if (1) the fee for the consultant comes out of the lawyer’s contingent fee, or
otherwise involves fee-splitting [Rule 5.4(a)] or if (2) they involve the payment of contingent
fees for expert testimony. Expert witnesses may only be paid on an hourly or flat fee basis [Rule
3.4(b)]. The ABA recently revisited this area in Formal Op. 87-345 (1987), and expressed
concern about a number of ethical problems, especially the effect of promising a contingent fee
or bonus to a service which also provides expert witnesses, even when the portion of the total fee
allocated for the witness by the service appears to be flat or hourly. The expert supplied and the
service or consultant will have an ongoing relationship, and, depending on the circumstances, the
entire arrangement, considered as a whole, [could] raise many of the same questions as direct
payment of a contingent fee to an expert witness. Id.

The contents of contracts for litigation support services will obviously vary. The
Committee is unable to review and approve of individual contracts, or otherwise provide legal
and advisory services to companies wishing to provide such services.
In light of the above referenced authorities the Committee is of the view that Question 1
should be answered No in cases in which the support services include the provision of expert
witness testimony or in arrangements that involve the splitting of legal fees with a non-lawyer.
Otherwise there is no per se rule against contingent fees or bonuses. The lawyer involved may
wish to consult ABA Formal Op. 87-354 for additional guidance.

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.