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LACBA 2009-06-15

May a California lawyer and client agree to a contingency fee calculated as a percentage of the combined damages plus court-awarded statutory attorney's fees in a fee-shifting case?

Short answer: Yes. A retainer that defines gross recovery to include statutory fees and then takes a percentage of the whole is not fee splitting with a non-lawyer under former Rule 1-320(A), because the statutory fee belongs to the client absent agreement (Flannery v. Prentice).
Currency note: this opinion is from 2009
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.
View original ethics opinion (PDF)

LACBA Ethics Opinion 523: Contingency Fee Including a Statutory Attorney's Fee Award

Short answer: A California lawyer and client may agree that the contingency fee will be a percentage of the gross recovery that includes any court-awarded statutory attorney's fees. The arrangement does not violate former Rule 1-320(A)'s prohibition on fee splitting with a non-lawyer because, under Flannery v. Prentice (2001) 26 Cal.4th 572, the statutory fee belongs to the client absent a written agreement assigning it to the lawyer.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Los Angeles County Bar Association's view of California's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.

About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. We do not reproduce the opinion text on this page; follow the linked source for the official text, which controls.

View original opinion

Plain-English summary

The opinion addresses a contingent-fee retainer in a FEHA employment-discrimination case. The agreement defines "gross recovery" to include any court-awarded statutory attorney's fees under Government Code section 12965(b) and provides the lawyer with one-third of that gross figure, with the remaining two-thirds going to the client.

The committee considers whether the structure violates former Rule 1-320(A), which prohibits sharing legal fees with a non-lawyer. The committee concludes it does not. Under Flannery v. Prentice (2001) 26 Cal.4th 572, court-awarded statutory attorney's fees in a FEHA action belong to the client absent a written agreement transferring ownership to the lawyer. Because the statutory fee is the client's property when received, the lawyer's contingency percentage is taken from a fund the client owns, not split with a non-lawyer.

The committee also addresses the reasonableness limit in former Rule 4-200 and Bus. & Prof. Code section 6147(a)(2). The fee must remain non-unconscionable on the gross-recovery base. The opinion treats Pony v. County of Los Angeles (9th Cir. 2006) and Evans v. Jeff D. (1986) 475 U.S. 717 as confirming that fee-shifting statutes do not create a separate lawyer's right immune from agreement with the client.

The opinion expressly does not address (in footnote) whether the gross-recovery structure must be disclosed to the court in a fee application, leaving that question to the trial court and applicable rules.

In practice

The opinion holds that, under California's rules as they stood in 2009, a contingency fee calculated as a percentage of gross recovery (including statutory attorney's fees) is permissible and is not fee splitting with a non-lawyer. The arrangement requires a written retainer complying with Bus. & Prof. Code section 6147(a)(2) and must not be unconscionable under former Rule 4-200.

This opinion predates California's November 1, 2018 rule revisions and is framed under former Rule 1-320(A) and Rule 4-200. Current California Rule 5.4(a) and Rule 1.5 carry forward the equivalent concepts.

Common questions

Q: My FEHA contingency retainer takes one-third of damages plus statutory fees. Is that fee splitting?

A: Per the opinion, no. Because Flannery v. Prentice treats the statutory fee as belonging to the client absent agreement, the lawyer's percentage is taken from a recovery the client owns; it is not a split with a non-lawyer under former Rule 1-320(A).

Q: Does this depend on the type of fee-shifting statute?

A: The opinion analyzes FEHA's section 12965(b) but relies on the general Flannery rule and the federal analog 42 U.S.C. section 1988 (Evans v. Jeff D.; Pony v. County of Los Angeles). The reasoning applies to other fee-shifting statutes where the statutory fee belongs to the prevailing party absent agreement.

Q: Are there fee-amount limits even if the structure is allowed?

A: Per the opinion, the fee must be non-unconscionable under former Rule 4-200, and the agreement must comply with Bus. & Prof. Code section 6147(a)(2). The opinion does not bless any specific percentage but treats one-third as within the customary range.

Q: Does the retainer have to disclose the gross-recovery definition to the court when applying for fees?

A: The opinion expressly does not decide this question. The footnote notes that whether the retainer terms must be disclosed in a fee application is left to the trial court and applicable rules.

Background and rules framework

The opinion interprets former California Rule 1-320(A) (no fee splitting with non-lawyers) and Rule 4-200 (fees and unconscionability). The statutory backdrop is Bus. & Prof. Code section 6147(a)(2) (contingent-fee writing requirements) and the fee-shifting provisions of Cal. Gov't Code section 12965(b) (FEHA) and 42 U.S.C. section 1988. The substantive rule that the statutory fee belongs to the client comes from Flannery v. Prentice (2001), with Pony v. County of Los Angeles (9th Cir. 2006) supplying the federal analog.

Citations and references

Rules of Professional Conduct:

  • Former California Rule 1-320(A) (no fee splitting with non-lawyers)
  • Former California Rule 4-200 (reasonable fees)

Statutes:

  • Bus. & Prof. Code section 6147(a)(2) (contingent-fee writing)
  • Cal. Gov't Code section 12965(b) (FEHA fee-shifting)
  • 42 U.S.C. section 1988 (federal civil rights fee-shifting)

Cases:

  • Flannery v. Prentice, 26 Cal.4th 572 (Cal. 2001), statutory fees belong to client absent agreement
  • Evans v. Jeff D., 475 U.S. 717 (U.S. 1986), section 1988 waiver in settlement
  • Pony v. County of Los Angeles, 433 F.3d 1138 (9th Cir. 2006)
  • McIntosh v. Mills, 121 Cal.App.4th 333 (2004)
  • Ramirez v. Sturdevant, 21 Cal.App.4th 904 (1994)
  • Severson & Werson v. Bollinger, 235 Cal.App.3d 1569 (1991)
  • Denton v. Smith, 101 Cal.App.2d 841 (1951)
  • In re Yagman, 3 Cal. State Bar Ct. Rptr. 788 (Rev. Dept. 1997)

Other opinions cited:

  • LACBA Formal Opinion 447
  • LACBA Formal Opinion 515 (2005): statutory attorney-fee splits between attorney and client
  • California State Bar Formal Opinion 1994-136
  • Oklahoma Bar Legal Ethics Committee Opinion 329 (2009)

See also

  • No sibling opinions yet indexed.

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