Can an Ohio lawyer use a fee agreement that lets the lawyer pick, after settlement, whichever is larger between the hourly fee and a one-third contingent fee?
Ohio BPC Opinion 1995-007: Choosing the Larger of an Hourly or a Contingent Fee
Short answer: The opinion concluded that it is improper for a lawyer to enter a fee agreement under which the client pays an hourly rate until settlement or collection, at which point the lawyer chooses between the hourly fee and a one-third contingent fee, whichever is larger, because the fee is not based on the reasonableness factors of DR 2-106 and the contingency is illusory.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Ohio Board of Professional Conduct'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. The opinion text is reproduced at the bottom; the official source (linked) controls.
Plain-English summary
The Board addressed a fee agreement in which the client pays an hourly rate until settlement or collection of a judgment, and the lawyer then chooses between keeping the accumulated hourly fee or taking one-third of the recovery, whichever produces the larger fee. It analyzed the agreement under DR 2-106, which bars illegal or clearly excessive fees and lists the reasonableness factors, and DR 5-103(A)(2), which allows a reasonable contingent fee in a civil case.
The Board concluded the agreement is improper. It found the fee is not tied to the reasonableness factors of DR 2-106(B) and carries no genuine risk of nonrecovery; the Board described it bluntly as based on the lawyer getting the larger of two fees. It drew support by analogy from Cincinnati Bar Association v. Schultz, where the Ohio Supreme Court found a DR 2-106(A) violation in an agreement that flipped from contingent to hourly based solely on whether the lawyer was discharged, contrary to the shared risk a contingent fee represents.
The Board stressed the narrowness of its holding: it addressed only the agreement where the final fee is set solely by whichever is larger, making reasonableness non-determinative and the contingency illusory because the lawyer waits until after recovery to pick the better fee without bearing any risk. It expressly did not address the broader propriety of mixed fee agreements combining contingent and fixed components, citing differing views from other states and ABA materials, and it declined to follow Michigan's contrary opinion.
Currency note
The Ohio Board reports that this opinion was withdrawn by Opinion 2024-02 on April 5, 2024. Because it has been withdrawn, it is indexed here as research only and is not current guidance. The opinion interprets the former Ohio Code of Professional Responsibility, which was superseded by the Ohio Rules of Professional Conduct effective February 1, 2007.
This opinion issued in 1995. Treat this page as historical context, not current guidance. Verify against the current Ohio Rules of Professional Conduct and Opinion 2024-02 before relying on any specific rule mentioned here.
Common questions
Q: Can a lawyer keep the larger of an hourly or a contingent fee after the case settles?
A: No. The Board concluded an agreement letting the lawyer pick, after settlement, whichever of an hourly fee or a one-third contingent fee is larger is improper under DR 2-106 because it is not based on reasonableness and the contingency is illusory.
Q: Why did the Board say the contingency was "illusory"?
A: The Board reasoned that by waiting until after settlement or recovery to choose the more advantageous fee, the lawyer is assured of the larger of two fees without bearing any real risk of nonrecovery, which is the essence of a contingent fee.
Q: Did the opinion ban all mixed hourly-plus-contingent fee agreements?
A: No. The Board expressly limited its holding to the "whichever is larger" agreement and said it did not address the broader propriety of mixed fee agreements that combine a contingent fee and a fixed fee.
Background and rules framework
The opinion interprets the former Ohio Code of Professional Responsibility DR 2-106(A) and (B) (illegal or clearly excessive fees and the reasonableness factors) and DR 5-103(A)(2) (reasonable contingent fees in civil cases), with reference to EC 2-19 and EC 5-7.
Citations and references
Rules of Professional Conduct:
- Former Ohio Code of Professional Responsibility DR 2-106(A), DR 2-106(B), DR 5-103(A)(2); EC 2-19, EC 5-7
Cases:
- Cincinnati Bar Association v. Schultz, 71 Ohio St. 3d 383 (1994), contingent-to-hourly flip violated DR 2-106(A)
Other opinions cited:
- ABA Formal Ops. 329 (1972), 94-389 (1994); State Bar of Michigan Op. RI-6 (1989); Rhode Island Op. 92-42; State Bar of Nevada Op. 4; Bar Ass'n of Nassau County Op. 87-27; South Carolina Op. 87-7
See also
- Ohio BPC Op. 1995-002: Fixed Flat Fee for Insurer Subrogation Work
- Ohio BPC Op. 1988-031: No Fee Where No Services Are Performed
- Ohio BPC Op. 1988-026: Fee Division Where Responsibility Is Assumed
Source
- Landing page: https://ohioadvop.org/advisory-opinion-index/
- Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-95-007.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804
OFFICE OF SECRETARY
OPINION 95-7
Issued June 2, 1995
[CPR Opinion-provides advice under the Ohio Code of Professional Responsibility which is superseded by the Ohio
Rules of Professional Conduct, eff. 2/1/2007.]
SYLLABUS: It is improper for an attorney to enter a fee agreement whereby the client agrees to
pay an hourly rate until settlement or collection of judgment at which time the attorney chooses
between keeping the hourly fee or receiving a total fee equal to one third of the settlement or
recovery depending upon whichever results in the larger fee to the attorney.
OPINION: This opinion addresses the propriety of a fee agreement in which an attorney receives
his or her choice of either an hourly fee or a percentage fee of settlement or recovery whichever is
larger.
Is it proper for an attorney to enter a fee agreement whereby the client pays an
hourly rate until settlement or collection of judgment at which time the attorney
chooses between keeping the hourly fee or receiving a total fee equal to one third
of the settlement or recovery depending upon whichever results in the larger fee
to the attorney?
The Code of Professional Responsibility regulates fees for legal services in DR 2-106.
DR 2-106 Fees For Legal Services
(A) A lawyer shall not enter into an agreement for, charge, or collect an illegal or
clearly excessive fee.
(B) A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary
prudence would be left with a definite and firm conviction that the fee is in excess of
a reasonable fee. Factors to be considered as guides in determining the
reasonableness of a fee include 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.
Op. 95-7 2
(2) The likelihood, if apparent to the client, that the acceptance of
the particular employment will preclude other employment by the
lawyer.
(3) The fee customarily charged in the locality for similar legal
services.
(4) The amount involved and the results obtained.
(5) The time limitations imposed by the client or by the
circumstances.
(6) The nature and length of the professional relationship with the
client.
(7) The experience, reputation, and ability of the lawyer or lawyers
performing the services.
(8) Whether the fee is fixed or contingent.
Under DR 5-103 (A) (2), a lawyer may "[c]ontract with a client for a reasonable contingent fee in a
civil case." For discussion and additional guidance regarding contingent fee arrangements see EC
2-19 and EC 5-7.
The proposed fee agreement provides an attorney the comfort of receiving an hourly fee with the
luxury of choosing a more lucrative contingency fee. This type of fee agreement is not proper
under the Ohio Code of Professional Responsibility. It is not based upon the factors that determine
reasonableness under the Code, nor is it based upon any degree of risk of nonrecovery. It is, on its
face, based upon greed.
In Cincinnati Bar Association v. Schultz, 71 Ohio St. 3d 383 (1994), the Supreme Court of Ohio
concluded that a law firm violated DR 2-106 (A) by requiring clients to sign contingent-fee
agreements providing for an hourly rate charge if the clients discharged the firm. The agreement
was improper because it did not account for the factors in DR 2-106 (B) that determine the
reasonable value of a discharged, contingent-fee attorney's services. The agreement was also
contrary to the "shared risk of nonrecovery that a contingent-fee agreement represents." Id. at 384.
In addition, the firm's policy of requiring clients to sign agreements in which nonrefundable
retainer fees were considered earned upon receipt, but also credited toward hourly charges violated
DR 2-106 (A) and 2-110 (A) (3). That practice enabled the firm to keep fees for which the client
did not benefit. Id. at 384.
Although the facts presented in Schultz are distinguishable from the question raised in this opinion,
the case provides support by analogy. Under the Schultz fee agreement, the fee changed from
contingent to hourly based solely upon one
Op. 95-7 3
Factor--whether or not the attorney was discharged. Under the facts herein, the fee changes from
hourly to contingent based solely upon one factor--a determination of which fee results in the larger
amount for the attorney. Neither determination is founded in "reasonableness" as required by DR
2-106 of the Code of Professional Responsibility.
The fact that the attorney's fee is determined solely by the type of fee that will result in the larger
amount to the attorney is an indication to this Board that the fee is not based upon a consideration
of reasonableness. For a different view see State Bar of Michigan, Op. RI-6 (1989) (advising that
attorney may enter a fee agreement where a client agrees to pay the greater of a percentage of the
recovery in a case or an hourly fee if certain requirements are met: the fee is reasonable under
either standard; the agreement is in writing; the lawyer informs the client of the hourly rate as the
case progresses; the percentage calculation is reduced to reflect that the risk is less; and the hourly
fee is lower than the standard rate). This Board is not persuaded by Michigan's view. The bottom
line to the client is that the attorney may simply wait until settlement and recovery and choose the
larger fee.
It should be noted that this opinion focuses upon the narrow issue of the propriety of an attorney
charging alternatively an hourly fee or a contingent fee where the final fee is determined solely
upon whichever is the largest fee. Under such circumstances, reasonableness is not a determinative
factor and the contingency is illusory. By waiting until after settlement or recovery to choose the
most advantageous fee, the attorney is assured of getting the larger of two fees without incurring
any risk of nonrecovery.
This opinion does not address the broad issue of the propriety of a mixed fee agreement whereby
an attorney charges both a contingency fee and a fixed fee. For general discussion regarding
modified contingent fee agreements see ABA/BNA Lawyers' Manual on Professional Conduct,
41:305, 925, 926 10/19/94. For view's of ethics committees see, e.g., Rhode Island Sup.Ct, Ethics
Advisory Panel, Op. 92-42 (1992) (advising that "if the attorney's fee arrangements conform with
the guidelines established in Rule 1.5 and the comments, then a fixed fee agreement and
contingency fee agreement for the same matter is not inconsistent with the Rules of Professional
Conduct"); State Bar of Nevada, Op. 4 (1987) (advising that certain fee arrangements with both
fixed and contingent provisions are proper if the fee is reasonable); Bar Ass'n of Nassau County,
Op. 87-27 (1987) (advising that lawyer may not
Op. 95-7 4
agree to a guaranteed minimum fee coupled with a sliding fee or a standard contingent fee because
it might exceed the amount in the rules of court schedules for permissible contingent fees); South
Carolina Bar Ass'n, Op. 87-7 (undated) (advising that a lawyer may use a modified contingent fee
arrangement where an hourly fee is charged but is contingent upon a successful result and the fee
does not exceed total recovery); ABA, Formal Op. 329 (1972) (advising that “[n]o reasonable
method of fixing fees which takes into account the factors enumerated in DR 2-106 (B) is
proscribed by the Code of Professional Responsibility); and ABA Formal Op. 94-389 (1994)
(advising upon various aspects of contingency fees).
In conclusion, as to the narrow facts presented, the Board advises that it is improper for an attorney
to enter a fee agreement whereby the client agrees to pay an hourly rate until settlement or
collection of judgment at which time the attorney chooses between keeping the hourly fee or
receiving a total fee equal to one third of the settlement or recovery depending upon whichever
results in the larger fee to the attorney.
Advisory Opinions of the Board of Commissioners on Grievances and Discipline are
informal, nonbinding opinions in response to prospective or hypothetical questions regarding
the application of the Supreme Court Rules for the Government of the Bar of Ohio, the
Supreme Court Rules for the Government of the Judiciary, the Code of Professional
Responsibility, the Code of Judicial Conduct, and the Attorney's Oath of Office.