Can a North Carolina lawyer collect a one-third contingent fee on the gross recovery and an additional contingent fee for recovering the medical insurer's reimbursement claim?

Plain-English summary

The opinion addressed a personal injury contingent fee agreement that would pay the lawyer one-third of the gross recovery from the defendant plus whatever contingent legal fee the law might provide for recovering and paying the reimbursement claim of an insurance carrier or medical insurance program that had paid the client's medical expenses. The question was whether collecting both fees was ethical.

The opinion expressed no opinion on whether a legal fee for collecting a medical insurance provider's claim is permitted by law. It concluded that if such a fee is permitted, collecting it in addition to the contingent fee on the gross recovery may render the total fee clearly excessive in violation of Rule 2.6(a), and that whether the total is clearly excessive depends on the facts and circumstances. It cited RPC 35 for the principle that contingent fees, like all legal fees, must be reasonable, and RPC 196 for the principle that a lawyer may not charge a clearly excessive fee even though the fee may be recovered from an opposing party.

The opinion set out the standard and process. Under Rule 2.6(b), a fee is clearly excessive when a lawyer of ordinary prudence experienced in the area would be left with a definite and firm conviction that it exceeds a reasonable fee, judged against listed factors such as the time and labor required, the amount involved and results obtained, the time limitations, the lawyer's experience and ability, and whether the fee is fixed or contingent. Because the lawyer may not know at the outset whether the additional fee will make the total excessive, the opinion concluded that the lawyer should examine the Rule 2.6(b) factors at the conclusion of the representation and, if the total is then clearly excessive, reduce the client's fee by an amount equivalent to the fee permitted by law for collecting the insurer's claim. On disclosure, the opinion concluded that the lawyer should fully explain the fee arrangement at the beginning and obtain the client's agreement.

Currency note

This opinion was issued in 1996, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer charge a contingent fee on the recovery and another fee for collecting the medical insurer's claim?

A: The opinion did not decide whether the second fee is allowed by law, but concluded that combining it with the one-third contingent fee may make the total clearly excessive under Rule 2.6(a), depending on the facts.

Q: How is "clearly excessive" measured?

A: The opinion concluded that under Rule 2.6(b) the test is whether a prudent, experienced lawyer would have a definite and firm conviction that the fee exceeds a reasonable fee, weighing factors like time and labor, the amount and results, and whether the fee is contingent.

Q: What should the lawyer do if the combined fee turns out to be excessive?

A: The opinion concluded that the lawyer should review the Rule 2.6(b) factors at the end and, if the total is clearly excessive, reduce the client's fee by an amount equivalent to the fee permitted by law for collecting the insurer's claim.

Q: Does the client have to be told up front?

A: Yes. The opinion concluded that the fee arrangement should be fully explained to the client at the beginning and the client should agree to it.

Background and rules framework

The opinion applied North Carolina's then-current Rule 2.6(a) and (b), prohibiting a clearly excessive fee and listing the reasonableness factors, which correspond to Model Rule 1.5 on fees. It relied on RPC 35 (contingent fees must be reasonable) and RPC 196 (no clearly excessive fee even if recoverable from an opposing party).

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees; reasonableness; contingent fees)
• North Carolina Rule 2.6(a) and Rule 2.6(b)

Other opinions cited:

• RPC 35: contingent fees, like all legal fees, must be reasonable
• RPC 196: a lawyer may not charge a clearly excessive fee even if recoverable from an opposing party

See also

• NC Ethics Op. RPC 235: hourly rate plus contingent fee
• NC Ethics Op. 2002-4: collecting a contingent fee and a court-awarded fee

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-231/

Original opinion text

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

Inquiry #1:

Attorney A's contingent fee agreement with Client for representation in a personal injury case will pay Attorney A a fee of one-third of the gross recovery from the defendant plus whatever contingent legal fee may be provided by law for recovering and paying the claim for reimbursement of an insurance carrier or medical insurance program that paid some or all of the client's medical expenses. Is it ethical for a lawyer to collect a contingent fee on the gross recovery and an additional contingent fee for recovering and paying the claim of the medical insurance carrier or program?

Opinion #1:

No opinion is expressed as to whether a legal fee for collecting a medical insurance provider's claim for reimbursement is permitted by law. If such a fee is permitted by law, the collection of this fee in addition to the collection of a contingent fee on the gross recovery may render the lawyer's total fee for the representation of the client "clearly excessive" in violation of Rule 2.6(a) of the Rules of Professional Conduct. Whether the total fee is "clearly excessive" depends upon the facts and circumstances of the particular representation. "Contingent fees, like all legal fees, must be reasonable." RPC 35. Further, a lawyer may not charge a clearly excessive fee even though the fee may be recovered from an opposing party. RPC 196

Rule 2.6(b) provides that "[a] fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence experienced in the area of law involved would be left with a definite and firm conviction that the fee is in excess of a reasonable fee." The rule then lists a number of factors to be taken into consideration in determining the reasonableness of a fee including the following:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

…

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

…

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent.

A lawyer may not know at the beginning of the representation whether collecting the additional fee will render the lawyer's total fee clearly excessive in violation of the rule. However, at the conclusion of the representation, the lawyer should examine the factors listed in Rule 2.6(b) to determine the reasonableness of the total fee. If the collection of the additional fee renders the total fee paid to the lawyer clearly excessive in light of these factors, the lawyer should reduce the fee paid by the client in an amount equivalent to the fee permitted by law for collecting and paying the claim of the medical insurance provider.

Inquiry #2:

At the beginning of the representation, should the lawyer disclose to the client the lawyer's intention to seek the fee from the medical insurance provider in addition to the contingent fee payable by the client on the gross amount of the recovery?

Opinion #2:

Yes, the fee arrangement should be fully explained to the client and the client should agree to the fee arrangement. See Rule 2.6 and comment.