After collecting a one-third contingent fee in a personal injury case, can the same firm charge the client a separate fee to provide financial counseling on the recovery?
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This page answers the general question as of 1991. Ezel answers yours: whether it's allowed on your facts, under the current Michigan Rules of Professional Conduct, with citations.
Plain-English summary
A plaintiff's personal injury firm charged and collected a contingent fee of one-third of the client's net recovery, consistent with MRPC 1.5 and MCR 8.121. After the matter concluded and the file closed, the client asked the firm, which employed a lawyer competent to do so, to provide financial counseling on managing the recovered money. The firm proposed to charge a separate fee for the counseling, in addition to the contingent fee, and asked whether that was proper.
The Committee concluded the contingent fee itself complied with the rules: MCR 8.121(B) caps personal injury and wrongful death contingent fees at one-third of the amount recovered, and because the firm's fee did not exceed that, it was not illegal or clearly excessive under MRPC 1.5(a). On reaching a recovery, the firm had to give the client a written statement of outcome and a closing statement explaining the remittance, under MRPC 1.5(c) and 1.15(b), at which point the contingent matter was concluded and the file closed.
The Committee concluded that if a former contingent-fee client then employs the firm on a new and different matter, such as financial counseling, tax advice, or estate planning, the firm may ethically charge and collect a separate fee for those services so long as it complies with MRPC 1.5 and other applicable rules. That separate fee is neither part of nor an addition to the earlier contingent fee, so it does not violate MRPC 1.5(a) or MCR 8.121(B). The Committee noted the contemplated conduct was likely to implicate other rules, including MRPC 1.6, 1.7(b), 1.8(a), 2.1, 5.3, 7.1, and 7.3.
Currency note
This opinion was issued in 1991 and interprets the Michigan Rules of Professional Conduct as they then stood. MRPC 1.5 and 1.15 and MCR 8.121 have since been amended, and later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules and the current court rule before relying on any specific fee cap, rule, or requirement mentioned here.
Common questions
Q: Can a firm bill a contingent-fee client a separate fee for financial counseling on the recovery?
A: Yes. The opinion concluded the counseling is a new and different matter, so a separate reasonable fee for it is not part of or an addition to the contingent fee.
Q: Does the separate fee violate the one-third contingent-fee cap?
A: No. The opinion concluded that because the fee for the new matter is not part of the contingent fee, charging it does not violate MCR 8.121(B) or MRPC 1.5(a).
Q: What else does the firm have to watch when offering these added services?
A: The opinion noted the conduct was likely to implicate other rules, including confidentiality (MRPC 1.6), conflicts (1.7(b)), business transactions with clients (1.8(a)), nonlegal advice (2.1), supervision of nonlawyers (5.3), and communications and solicitation (7.1, 7.3).
Background and rules framework
The opinion interpreted MRPC 1.5 / Model Rule 1.5 (fees, including the bar on clearly excessive fees and the contingent-fee provisions) and MRPC 1.15(b) / Model Rule 1.15 (the closing statement on disbursing a recovery), read together with Michigan Court Rule 8.121(B), which caps personal injury and wrongful death contingent fees at one-third of the recovery. It treated the financial counseling as a distinct engagement outside the contingent matter.
Citations and references
Rules of Professional Conduct:
- MR 1.5 / MRPC 1.5(a), (c) (no clearly excessive fee; contingent fees; closing statement)
- MR 1.15 / MRPC 1.15(b) (accounting and remittance to the client)
Court rules:
- MCR 8.121(B) (maximum one-third contingent fee in personal injury and wrongful death actions)
See also
Source
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
RI-73
March 1, 1991
SYLLABUS
A lawyer who collects a one-third contingency fee in a personal injury or wrongful death action may subsequently collect an additional fee from the same client for financial counseling services related to the personal injury or wrongful death case proceeds.
References: MRPC 1.5, 1.15(b); MCR 8.121(B).
TEXT
A plaintiff's personal injury lawyer charged and collected a contingent fee equal to one-third of the client's net recovery consistent with MRPC 1.5 and MCR 8.121. Following the conclusion of the contingent fee matter and closure of the client's file, the client requested that the lawyer's firm provide financial counseling with respect to managing the recently recovered money.
The firm employs a lawyer who is competent to provide the requested financial counseling. The firm proposes to charge and collect a separate fee, in addition to its contingent fee, for the financial counseling.
MRPC 1.5 governs lawyer fees and states in part:
"(a) A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee . . . .
". . .
"(c) A fee may be contingent on the outcome of the matter for which the service is rendered . . . ."
MCR 8.121 limits the amount of contingent fees allowable in personal injury and wrongful death actions and states in part:
"(B) Maximum fee. The maximum allowable fee for the claims and actions referred to in subrule (A) is one-third of the amount recovered."
The firm's contingent fee contract presumably provides that the firm's compensation for processing the personal injury or wrongful death claim is contingent upon the recovery of money for the client. Upon reaching a successful conclusion of the contingent fee matter (e.g., obtaining a recovery) the firm must provide the client with a written statement of the outcome and a remittance accompanied by a closing statement explaining the method of determining the remittance amount, MRPC 1.5(c); MRPC 1.15(b).
At this point the contingent fee matter is concluded, the client's file is closed and the law firm's work is at an end. Since the contingent fee does not exceed one-third of the net recovery, it falls within the parameters of MCR 8.121. It follows that such a contingent fee is not "illegal or clearly excessive" and therefore does not violate MRPC 1.5(a).
If thereafter a former contingent fee client employs the firm regarding a new and different matter, e.g., financial counseling, tax advice, or estate planning, the firm may ethically charge and collect an additional and separate fee for its professional services, so long as it complies with MRPC 1.5 and other applicable ethics rules. The firm's fee for the new and different matter is not a part of nor is it an addition to the contingent fee previously collected by the firm in the now closed personal injury or wrongful death matter. Accordingly, the firm does not violate MRPC 1.5(a) or MCR 8.121(B) in charging a separate fee for its services in the subsequent matter.
The conduct contemplated by the inquirer is likely to implicate other ethics rules, including MRPC 1.6 confidences and secrets, 1.7(b) conflicts, 1.8(a) business transactions with clients, 2.1 providing advice other than legal advice, 5.3 supervision of nonlawyer agents, 7.1 communications about lawyer services, and 7.3 solicitation.
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