Can a lawyer arrange to pay a medical expert or consulting service a percentage of the client's recovery, and how must New Jersey counsel handle fee-sharing with pro hac vice counsel?

Plain-English summary

The Committee addressed three related medical-malpractice inquiries, each involving a contingent-fee arrangement under which a doctor or a medical consulting service would obtain expert assistance or testimony in exchange for a percentage of the plaintiff's gross recovery (20 percent in two of the situations, six percent in the third). In each, the lawyer was a signatory or guarantor agreeing to distribute recovery funds according to the contract. The arrangements raised two principal questions.

On the first question, the Committee held that, under R. 1:21-7(g), New Jersey counsel and out-of-state counsel must enter into a joint contingent-fee agreement and comply in all respects with R. 1:21-7 where New Jersey counsel will share in the contingency fee. It pointed to R. 1:21-2(b), which directs that an order admitting an attorney pro hac vice require the attorney to abide by the rules governing New Jersey courts, including the disciplinary rules, so RPC 1.5(e) applies to the fee-sharing arrangement between New Jersey and out-of-state counsel.

On the second question, the Committee concluded that it is not proper for counsel to cooperate in an arrangement charging the plaintiff a contingent fee for obtaining medical expertise. It cited the American Medical Association's Current Opinions of the Judicial Council (1984), Section 8.04, which warns that a contingent physician's fee creates a danger that the physician becomes less a healer and more an advocate, and that a physician's fee should rest on the value of the service rather than the uncertain outcome of a claim. The Committee recognized that the physician here would not render medical services per se, but found the spirit of the medical guidelines applicable. It reasoned that, as reflected in R. 1:21-7(e) and RPC 1.5(a), the Supreme Court's policy is to protect the injured party and ensure the maximum recovery, and a contingent fee for obtaining medical expertise would leave the plaintiff without the majority of the proceeds, contrary to the spirit of those rules. Quoting Opinion 402, 102 N.J.L.J. 89 (1978), the Committee noted that where serious doubts about the bona fides of an arrangement exist, the prudent course is to present the matter to the Court under R. 1:21(f).

Currency note

This opinion was issued in 1985, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct, and the cited contingent-fee court rules have been amended over time. 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 agree to pay a medical consulting service a percentage of the client's recovery for finding an expert?

A: The opinion concluded counsel should not participate in such an arrangement, because a contingent fee for obtaining medical expertise would leave the plaintiff without the majority of the recovery, contrary to the policy of the fee rules.

Q: Does the AMA's view of contingent physician fees matter to a lawyer's ethics?

A: Yes, in the Committee's analysis. It relied on AMA Current Opinions Section 8.04 and applied the spirit of that guidance, that a physician's fee should rest on the value of services, not the outcome of a claim.

Q: How must New Jersey counsel handle fee-sharing with out-of-state counsel admitted pro hac vice?

A: Per the opinion, they must enter a joint contingent-fee agreement complying with R. 1:21-7, and RPC 1.5(e) applies because pro hac vice counsel must abide by New Jersey's disciplinary rules.

Background and rules framework

The opinion applies RPC 1.5(a) (reasonable fees) and RPC 1.5(e) (division of fees among lawyers), together with the court's contingent-fee rules R. 1:21-7 (including subsections (e) and (g)), R. 1:21-2(b) (obligations of attorneys admitted pro hac vice), and R. 1:21(f). It also draws on the AMA's Current Opinions of the Judicial Council (1984), Section 8.04, on contingent physician fees.

Citations and references

Rules of Professional Conduct:

• MR 1.5 / NJ RPC 1.5(a) (reasonableness of fees) and RPC 1.5(e) (division of fees among lawyers)

Court rules:

• R. 1:21-7(e), (g) (contingent fees)
• R. 1:21-2(b) (attorneys admitted pro hac vice must abide by New Jersey rules)
• R. 1:21(f) (presenting fee questions to the Court)

Other authorities:

• American Medical Association, Current Opinions of the Judicial Council (1984), Section 8.04 (contingent physician fees)

Other opinions cited:

• ACPE Opinion 402, 102 N.J.L.J. 89 (1978) (present doubtful arrangements to the Court)

See also

• NJ ACPE Op. 637: Division of Fees in a Partnership With Out-of-State Attorneys
• NJ ACPE Op. 618: Contingent Fee for Post-Divorce Alimony Arrearages
• NJ ACPE Op. 632: Temporary Attorneys and Placement Agencies

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp562-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

116 N.J.L.J. 193, August 8, 1985

OPINION 562

Expert Witness Secured Through Payment of Contingent Fee: Various Situations

The Committee has received three related inquiries which present the following factual situations:

1. Plaintiff brought a wrongful death action individually, as administrator, and on behalf of his minor children for the death of his 37 year old wife against a hospital and various doctors alleging medical malpractice.

The tort occurred in New Jersey. Plaintiff was initially represented by New Jersey counsel but then sought the advice of out-of-state counsel. The attorney-client relationship between plaintiff and the original New Jersey counsel was terminated and a new New Jersey law firm was substituted as counsel for plaintiff. Out-of-state counsel and the substituted New Jersey firm are to jointly represent plaintiff in the action and will divide fees based upon an apportionment of work.

Plaintiff signed a contingency fee agreement with out-of-state counsel and New Jersey counsel apportioning fees. Out-of-state counsel will be admitted pro hac vice to work on the case.

Plaintiff has executed a contingency agreement with an out-of-state medical doctor. The doctor will make his expertise available to plaintiff's attorney and will obtain expert witnesses and expert's reports for use in the litigation. The doctor will not testify in court although he has submitted his own expert report stating that malpractice occurred. Any experts who testify will be compensated at an hourly rate.

Certain costs are to be advanced by plaintiff under the agreement. In addition, the doctor is to receive 20 percent of the plaintiff's gross recovery. No costs are to be deducted from the fee.

The agreement between the doctor and the plaintiff requires the "understanding and acknowledgment" of plaintiff's attorney and requires the plaintiff's attorney to agree to distribute the funds of any recovery in the case pursuant to the agreement. Out-of-state counsel has agreed to same and has executed a clause in the agreement to that effect. The agreement is to be governed by Virginia law under its express terms.

A second inquirer has presented the Committee with the following facts:

2. The inquirer represents a client in a medical malpractice action and asks whether it is permissible to arrange for medical expert testimony on behalf of his client through an organization which charges for its services 20 percent of the plaintiff's gross recovery (settlement award) which percentage shall be paid to the organization at the time that the first disbursements are made. In addition to the contingency fee, additional costs are billed to the client as well. The contract is between the client and the medical consulting service, but the attorney is an additional signatory to the contract pursuant to a clause wherein he agrees to distribute the funds of any recovery obtained pursuant to the terms of the contract. With the exception of certain limited fees that are charged to the client the consulting service pays the expert which they have obtained and the expert obtained does not participate in the contract nor does he have any knowledge of it.

The third inquirers have presented the following factual situation:

3. Plaintiffs' attorney contacted a medical consulting service which service entered into a contract directly with the plaintiffs, not their attorney, to locate a qualified expert to testify in the plaintiffs' medical malpractice case for a fee of six percent of the total amount recovered. Payment of this was guaranteed by plaintiffs' attorney. The expert who was obtained by the medical service was compensated directly by the plaintiffs and not by the service which expert's fee was separate and distinct from the fee to be paid to the consulting service.

These various situations give rise to two principal questions:

A. Pursuant to R. 1:21-7(g), is New Jersey counsel required to enter into a separate or joint retainer with plaintiff since New Jersey counsel will share in the contingency fee?

As to this inquiry, it is our opinion that New Jersey counsel and out-of-state counsel must enter into a joint contingent fee agreement and comply in all respects with the provisions of R. 1:21-7. Attention is directed to R. 1:21-2(b) which, among other things, directs that the order granting admission pro hac vice shall require the attorney to: "(2) abide by the rules governing the courts of the State of New Jersey including all disciplinary rules." Therefore, RPC 1.5(e) will apply to the fee sharing arrangements between New Jersey counsel and out-of-state counsel.

B. Is it ethical and proper for New Jersey counsel or out-of-state counsel to cooperate with a medical consulting service with respect to an agreement wherein a contingency fee is charged to plaintiff by the service?

With respect to the second inquiry, the questions raised have previously been before the Committee on Ethics and Professional Responsibility of the ABA and before similar committees in nine other jurisdictions which opinions we have had an opportunity to review.

Here we refer the inquirers to the Current Opinions of the Judicial Council of the American Medical Association 1984, Section 8.04 Contingent Physicians Fees, which states:

If a physician's fee for medical service is contingent upon the successful outcome of a claim, there is the ever-present danger that the physician may become less of a healer and more of an advocate. Accordingly, a physician's fee for medical services should be based on the value of the service provided by the physician to the patient and not on the uncertain outcome of a contingency that does not in any way relate to the value of the medical service.

In view of the ethical guidelines of the medical profession which we recognize and with which we concur we are of the opinion that counsel should not participate in an arrangement with a doctor which contravenes these guidelines. We recognize that in the cases at hand the physician will not be rendering medical services per se. Nevertheless, the spirit of the medical guidelines, mainly that the physician's fee should be based on the value of the services provided and not on the uncertain outcome of litigation, applies to the situations presented to us.

As is clear from R. 1:21-7(e) and RPC 1.5(a), it is the policy of our Supreme Court to protect the injured party and to ensure that the injured party realize the maximum amount of his recovery. The situation posited of a contingent fee for obtaining medical expertise to assist in prosecuting the litigation would result in the plaintiff not getting the majority of the proceeds of his litigation, and is contrary to the spirit of these rules.

As we said in Opinion 402, 102 N.J.L.J. 89 (1978), "if the inquirer has serious doubts concerning the bona fides of the arrangement, [as the present inquiries indicate] the prudent course would be to present the entire matter to the Court pursuant to R. 1:21(f)."