NYSBA 1994-06-14

Can a lawyer calculate a contingent fee on the gross recovery before deducting litigation expenses?

Short answer: The opinion concluded that in personal injury and wrongful death cases the Appellate Division rules require the fee to be computed after deducting expenses, but in other cases where contingent fees are lawful, the fee may be computed before deducting expenses if it is reasonable and disclosed in a prompt written statement.

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 Not binding precedent.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) is the authoritative source for any reliance.

NY State Bar Ethics Opinion 669: Computing a contingent fee

Short answer: The opinion concluded that in personal injury and wrongful death cases the Appellate Division rules require a contingent fee to be computed on the net recovery after deducting litigation expenses, but in other cases where a contingent fee is lawful, the fee may be computed on the gross before deducting expenses if it is reasonable in the circumstances and disclosed in a prompt written statement.

Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the New York State Bar Association'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

A lawyer asked under what circumstances a contingent fee may be computed before, rather than after, deducting the expenses of the litigation. The committee began with the Appellate Divisions' rules, which require that a contingent fee in any personal injury or wrongful death claim be computed on the net sum recovered after deducting expenses and disbursements (citing, for example, 22 NYCRR section 806.13(c)). It noted that the 1993 amendment to DR 2-101 permits advertising contingent-fee rates only if the advertisement discloses whether percentages are computed before or after deducting costs and expenses. Because interpreting the Appellate Divisions' rules is primarily a question of law, the committee declined to opine on whether contingent fees are proper in cases beyond personal injury and wrongful death, but said it saw no inherent ethical impropriety in contingent fees in many other kinds of cases, apart from matrimonial cases (rarely justified), criminal cases (barred per se), and cases where a contingent fee is otherwise proscribed by law.

For personal injury and wrongful death matters, the committee held the Appellate Division rule controls: the fee may be computed only after deducting costs and expenses. It reasoned that the specific rule governs over the general advertising language of DR 2-101, and that charging an illegal fee would itself be unethical under DR 2-106(A). For matters outside the Appellate Divisions' computation rules, the committee said the touchstone is reasonableness: a contingent fee, like any fee, must be reasonable in light of all the circumstances (DR 2-106; EC 2-17 through 2-20), and whether it may be computed on the gross recovery depends on whether the computation and resulting fee are fair and reasonable. Finally, it noted DR 2-106(D) requires the lawyer to give the client a prompt written statement that states, among other things, whether expenses are deducted before or after the contingent fee is calculated.

Currency note

This opinion was issued in 1994, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. 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: How must a contingent fee be computed in a personal injury or wrongful death case?

A: The opinion concluded the Appellate Division rules control: the fee must be computed on the net recovery after deducting the costs and expenses of the litigation.

Q: Can the fee be computed on the gross recovery in other kinds of cases?

A: The opinion concluded it may be, in cases outside the Appellate Divisions' rules where a contingent fee is lawful, provided the computation and resulting fee are fair and reasonable in light of all the circumstances.

Q: What must the lawyer tell the client about how the fee is calculated?

A: The opinion concluded DR 2-106(D) requires a prompt written statement to the client stating, among other things, whether expenses are deducted before or after the contingent fee is calculated.

Background and rules framework

The opinion interpreted DR 2-106 (fees, including DR 2-106(A) on excessive or illegal fees, DR 2-106(C) on prohibited contingent fees, and DR 2-106(D) on the required written statement), DR 2-101 (advertising), and EC 2-17 through EC 2-20 of New York's former Code, together with the Appellate Divisions' contingent-fee rules. The Model Rule analogue is Rule 1.5 (fees, including the contingent-fee writing and computation requirements). New York replaced the Code with the Rules of Professional Conduct in 2009; the DR numbers cited here are historical.

Citations and references

Rules of Professional Conduct:

MR 1.5 (fees; contingent-fee requirements)
NY DR 2-101; DR 2-106(A), (C), (D); EC 2-17; EC 2-18; EC 2-19; EC 2-20

Regulations:

22 NYCRR section 806.13(c) (Appellate Division contingent-fee computation rule)

Source

Landing page: https://nysba.org/opinion-669/