Can a lawyer charge a reduced hourly rate plus a contingent bonus, and split the bonus with out-of-state counsel?

Plain-English summary

A client proposed a fee combining a reduced hourly rate (80 percent of the lawyer's usual rate, billed monthly), a $150,000 bonus if the litigation succeeded in recovering stock and other property, and 50 percent of any punitive damages award. The lawyer asked whether he could agree to it, and whether he could share one-third of the bonus with the client's out-of-state counsel.

On the first question, the Committee concluded the combination fixed/contingent fee does not violate the Nevada Rules so long as the fee does not turn out to be unreasonably high at the conclusion of the representation. The opinion noted the Model Rules, as adopted in Nevada, contain no prohibition against combination fixed/contingent fee contracts, but every fee must be reasonable under SCR 155(1). It set out the eight reasonableness factors in SCR 155(1), and added considerations suggested by the inquiry, including the client's sophistication, the fact that the client proposed the arrangement, and that the lawyer here risked only 20 percent of his usual fee (far less than an all-or-nothing contingent fee). The reasonableness of the $150,000 bonus and the 50 percent punitive share would have to be measured against the amount at stake and the difficulty and risk involved, which the inquiry did not supply. Because the Committee is not a fact-finding body and reasonableness cannot be fixed in advance, the ultimate determination was left to the courts and disciplinary authorities on a developed record. The opinion also required that the arrangement be explained to the client in enough detail for intelligent evaluation (SCR 154, 155(2), 157) and that the contingent agreement be in writing (SCR 155(3)).

On the second question, the Committee concluded dividing the bonus with out-of-state counsel is permissible if SCR 155(5) is met, that is, the division is proportionate to services or the lawyers assume joint responsibility by written agreement, the client is advised in writing and does not object, and the total fee is reasonable. It cautioned that SCR 189 must not be violated: out-of-state counsel are treated almost as nonlawyers for unauthorized-practice purposes, pro hac vice admission may be required, and care must be taken that out-of-state counsel does not cross into the unauthorized practice of law in Nevada.

Currency note

This opinion was issued in 1987, before Nevada's 2006 adoption of the current Nevada Rules of Professional Conduct (the renumbered Rules 1.0 et seq. that replaced the former Supreme Court Rules) and the related Ethics 2000-based revisions. The duties discussed are now in Rule 1.5 (fees, including fee division and contingent-fee writings), Rule 1.8 (proprietary interest in a matter), and Rule 5.5 (unauthorized and multijurisdictional practice). 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: Is a fee that mixes an hourly rate with a contingent bonus allowed?

A: Per the opinion, yes; the Nevada Rules contain no bar on combination fixed/contingent fees, provided the total fee is reasonable, explained to the client, and (for the contingent portion) in writing.

Q: Would the committee approve the specific $150,000 bonus and 50% punitive share?

A: It declined to rule. The opinion concluded the Committee is not a fact-finding body and that reasonableness must be measured against the amount at stake and the risk, on a developed record, by the courts and disciplinary authorities.

Q: Can the lawyer split the bonus with the client's out-of-state lawyer?

A: Per the opinion, yes, if SCR 155(5) is met (proportionate division or joint responsibility, written client notice without objection, reasonable total fee) and SCR 189 is not violated by unauthorized practice.

Background and rules framework

The opinion interprets the Nevada fee rules then in force, principally SCR 155 (now Rule 1.5, reasonable fees, fee division, and contingent-fee writings), with SCR 154 and SCR 157 on client communication and conflicts, SCR 158 (now Rule 1.8) on a lawyer's interest in the matter, and SCR 189 (now Rule 5.5) on unauthorized and out-of-state practice.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / former Nev. SCR 155 (reasonable fees; fee division under SCR 155(5); contingent-fee writing)
• Model Rule 1.8 / former Nev. SCR 158 (proprietary interest in the matter; over-investment in the case)
• Model Rule 5.5 / former Nev. SCR 189 (unauthorized practice; out-of-state lawyers)

Other opinions cited:

• ABA Informal Ops. 1091, 1317; South Carolina Op. 84-11; D.C. Op. 42; and other sister-state opinions on fee reasonableness and combination fees

See also

• NV Ethics Op. 5: fee waiver conditioned on a church donation
• NV Ethics Op. 3: forfeiting clients' unclaimed trust funds

Source

• Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
• Original PDF: https://nvbar.org/wp-content/uploads/opinion_04.pdf