When a contingent fee agreement ends early, can the lawyer collect a fee, and what can a contingent fee contract say about fees on termination?

Plain-English summary

The committee was asked whether attorneys are entitled to fees when contingent fee agreements are terminated, prompted by lawyers inserting provisions that "guarantee" some fees when either party ends the agreement. It concluded the rules and the common law allow recovery in some circumstances, but with ethical limits on the amount and the circumstances of termination. It began from Rule 16-105: the fee must be reasonable; a contingent fee agreement must be in writing and state the method of determining the fee and the treatment of expenses; and at conclusion the lawyer must give the client a written statement of the outcome and any remittance. It quoted the ABA comment that an agreement may not be made whose terms might induce the lawyer to curtail services improperly, and noted case law voids provisions barring a client from compromising or settling a claim.

On termination by the client, the committee traced the rule from Martin v. Camp that a client may discharge an attorney at any time without cause and without penalty, based on the relationship of trust, and surveyed the split among jurisdictions over whether a contractual or quantum meruit analysis applies and whether recovery may exceed the contract price. It adopted the approach of Rosenberg v. Levin, which allows quantum meruit recovery on discharge without cause, limited to the maximum contract fee (the amount the lawyer would have earned on completion) and arising only upon the successful occurrence of the contingency. The committee concluded a contingent fee agreement may state the lawyer is entitled to fees in quantum meruit if the client discharges the lawyer without cause, should give or refer to a reasonable definition of "cause" as applied to the lawyer's conduct, and should limit the hourly fees so they do not exceed the eventual contingency. It noted that violations of the rules constitute "cause," along with conduct like abandoning a client or failing to communicate, while a large intermediate area of valid reasons may not rise to legal cause.

On termination by the lawyer, the committee emphasized that a lawyer may not abandon a client and may withdraw under Rule 16-116(B) only if withdrawal does not materially impair the client's interests or other grounds exist; discovering that a case is less profitable than expected is not good cause to withdraw, and the duty of diligence under Rule 16-103 requires pursuing the matter even when inconvenient, with the client's interests paramount under Rule 16-107(B). A lawyer may not contract to be better off for terminating than for pursuing the agreement, and may not receive a quantum meruit fee if the contingency does not occur or after withdrawing without cause; a client's refusal to settle can never be good cause to withdraw. In conclusion, a contingent fee agreement may not reward the lawyer for failing to carry the matter to conclusion; it may provide a quantum meruit claim where client conduct rising to "cause" leads the lawyer to withdraw, subject to the ethical and procedural rules; it should not punish a client for ending the relationship or the litigation; it should give guidance on what constitutes "cause"; and any quantum meruit fee must be limited to the contingency amount and determined only upon the occurrence of the contingency.

Currency note

This opinion was issued in 1995, under the New Mexico Rules of Professional Conduct effective January 1, 1987 (SCRA 1986, Rules 16-105, 16-103, 16-107, and 16-116). It predates the State Bar of New Mexico's November 3, 2008 revisions to those Rules (the New Mexico adoption of the ABA Ethics 2000 changes). 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 collect any fee if a contingent fee client fires them?

A: The committee concluded a lawyer discharged without cause may recover in quantum meruit, limited to the maximum contract fee and only upon the occurrence of the contingency, following Rosenberg v. Levin.

Q: Can a contingent fee contract "guarantee" the lawyer a fee on termination?

A: Only within limits. The committee concluded the agreement may not reward the lawyer for failing to finish the case, must cap any quantum meruit fee at the contingency amount, and may not punish the client for discharging the lawyer or settling.

Q: Does a contract that bars the client from settling work?

A: No. The committee noted case law holds that a contingent fee agreement prohibiting a client from compromising or settling a claim is void as contrary to public policy.

Q: Can a lawyer withdraw because the case turns out to be unprofitable?

A: No. The committee concluded that discovering a case is less profitable than expected is not good cause to withdraw, and a client's refusal to settle can never be good cause to withdraw.

Background and rules framework

The opinion applied the fee rule (Rule 16-105, corresponding to Model Rule 1.5), the diligence rule (Rule 16-103, Model Rule 1.3), the conflict rule on the client's paramount interest (Rule 16-107, Model Rule 1.7), and the withdrawal rule (Rule 16-116, Model Rule 1.16). It synthesized these with the common law of attorney discharge, adopting the Rosenberg v. Levin limit on quantum meruit recovery.

Citations and references

Rules of Professional Conduct:

• Rule 16-105(A), (C) (fees: reasonableness; written contingent fee terms and closing statement); Rule 16-103 (diligence); Rule 16-107(B) (client's interests paramount); Rule 16-116(B) (withdrawal)

Cases:

• Martin v. Camp, 114 N.E. 46 (N.Y. 1916): client may discharge an attorney at any time without cause
• Rosenberg v. Levin, 409 So.2d 1016 (Fla. 1982): quantum meruit on discharge without cause, capped at the contract fee, arising on the contingency
• In re Chowning, 100 N.M. 375, 671 P.2d 36 (1983): a lawyer may not abandon a client
• Dombey, Tyler, Richards & Greiser v. Detroit, T. & I.R.R., 351 F.2d 121 (6th Cir. 1965): provision barring settlement is void

See also

• NM Ethics Op. 1995-1: Disagreements Between Lawyers and Clients Over Courses of Action

Source

• Landing page: https://www.sbnm.org/Leadership/Committees/Ethics-Advisory-Committee/Ethics-Advisory-Opinions
• Original PDF: https://www.sbnm.org/Portals/NMBAR/AboutUs/committees/Ethics/1993-95-96/1995-2.pdf

Original opinion text

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

Advisory Opinion 1995-2
ATTORNEY'S FEES IN TERMINATION OF CONTINGENT FEE AGREEMENTS
The Advisory Opinions Committee has received inquiries from attorneys regarding whether they are entitled to fees when
contingent fee agreements are terminated. Lawyers have inserted provisions in contingent fee agreements that
"guarantee" some fees when one or the other party terminates the agreement. It is the opinion of the Committee that the
Rules of Professional Responsibility and the common law allow for the recovery of fees in some circumstances. However,
there are ethical limitations on the amount of the fees and the circumstances of the termination of the representation.
Contingent Fee Agreements
At the outset, New Mexico attorneys know that a contingent fee agreement must comply with New Mexico Rule of
Professional Conduct 16-105. First, the fee must be reasonable. Rule 16-105 (A). Second, a contingent fee agreement
shall be in writing and shall state the method by which the fee is to be determined, including the percentage or
percentages that shall accrue to the lawyer in the event of settlement, trial, or appeal, litigation and other expenses to be
deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is
calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating
the outcome of the matter, and, if there is a recovery, showing the remittance to the client and the method of its
determination.
Rule 16-105 (C). The ABA Comment to this rule further reminds attorneys that:
An agreement may not be made whose terms might induce the lawyer improperly to curtail services for
the client or perform them in a way contrary to the client's interests. When there is doubt whether a
contingent fee is consistent with the client's best interest, the lawyer should offer the client alternative
bases for the fee and explain their implications.
Id. cmt., Terms of Payment.
Further, case law has established that certain provisions attempting to restrict a client's rights are contrary to public policy.
For example, a contingent fee agreement that prohibits a client from compromising or settling a claim is void. Dombey,
Tyler, Richards & Greiser v. Detroit, T.& I.R.R., 351 F.2d 121 (6th Cir. 1965)
Clients have the right to discharge their attorneys at any time, with or without cause. Attorneys may withdraw from
representation of a client, subject to both ethical and procedural rules. Both types of termination of the attorney-client
relationship have an impact on a lawyer's contingent fee agreement.
Termination by the Client
The seminal case of Martin v. Camp, 114 N.E. 46 (N.Y. 1916), emphasized that the nature of the attorney-client
relationship necessitates the rule that a client can discharge his or her attorney at any time without cause and without
penalty. This rule was predicated on "the peculiar relation of trust and confidence" between a lawyer and the client. Id. at
47. This fiduciary relationship, not traditional contract principles, defined the standards to be applied to disagreements
over fees, and the Martin court held that the discharged attorney could collect no fee. The Martin court implied a provision
in the retainer agreement that recognizes the right of the client to fire the attorney. The ABA Comment to Rule 16-116
essentially embraces the basic holding in Martin regarding the client's right to discharge the lawyer.
A contingent fee agreement amounts to a joint venture to which the client brings his or her claim and the attorney brings
time and effort. DeGraff v. McKesson & Robbins, Inc., 292 N.E.2d 310 (N.Y. 1972). The attorney charges a risk premium
for accepting the client's case on the contingency. Part of the risk that the attorney assumes is that the client will exercise
the right to fire the attorney. L. Brickman, Setting the Fee When the Client Discharges a Contingent Fee Attorney, 41
Emory L.J. 367 (1992).
Courts in Ohio, California, Indiana, Minnesota, Missouri, Texas, and Illinois disagreed with the Martin court and held that
contractual analysis was appropriate when clients fired attorneys.
These courts held that, if the discharge were without "cause," the client would be liable for the value of the attorney's
services in quantum meruit. Annotation, Limitation to Quantum Meruit Recover, Where Attorney Employed under
Contingent Fee Contract is Discharged without Cause, 92 A.L.R.3d 690 (1979). Those courts holding that a contractual

analysis was correct have split on whether the amount in quantum meruit may exceed the "contract price," the amount to
which the lawyer would have been entitled upon completion of the contingent fee agreement. There is also disagreement
as to when the fired lawyer's right to sue in quantum meruit arises: upon discharge or upon the occurrence of the
contingency.
In Rosenberg v. Levin, 409 So.2d 1016 (Fla. 1982), the Court allowed quantum meruit recovery when the discharge was
"without cause." The Rosenberg court did not define "without cause." The Rosenberg court reviewed the jurisdictions that
had allowed recovery under opposing analyses and concluded that the best interests of the clients and the legal
profession were served by allowing a quantum meruit approach, limited in amount to the "maximum contract fee," the
amount to which the lawyer would have been entitled upon completion of the contingent fee agreement. Id. at 1021. The
Rosenberg court further held that the cause of action arises "only upon the successful occurrence of the contingency." Id.
at 1022.
The Committee agrees that the holding in Rosenberg best protects the interests of both clients and the profession. A
contingent fee agreement may state that the lawyer is entitled to fees in quantum meruit if the client discharges the lawyer
without cause. The agreement should give, or refer to, a reasonable definition, of "cause," as it applies to the lawyer's
conduct, and should limit the amount of hourly fees so that they do not exceed the eventual contingency.
There are extremes of behavior for which it is clear that "cause" exists. The courts have held that violations of the Rules of
Professional Conduct constitute "cause" for which a client may discharge a lawyer. But "there is a large intermediate area
in which lawyers are probably discharged for valid reasons which do not rise to the level of legal cause." Brickman, at 394.
Abandoning a client or failing to communicate are examples of conduct that the courts have held allow a client to fire a
lawyer for "cause." For further examples of what actions constitute "cause," see Annotation, Right to Compensation as
Affected by Incapacity, Death, Voluntary Withdrawal, or Disbarment of Attorney before Complete Performance, 45 A.L.R.
1135 (1926) and Annotation, Circumstances under which Attorney retains Right to Compensation Notwithstanding
Voluntary Withdrawal from Case, 88 A.L.R.3d 239 (1978).
Termination by the Lawyer
A lawyer may not simply abandon a client. See In re Chowning, 100 N.M. 375, 671 P.2d 36 (1983). Rule 16-116(B) makes
it clear that a lawyer may withdraw only if that withdrawal does not materially impair the client's interests or if other
grounds obtain.
The Committee recognizes that lawyers entering into a contingent fee agreement may later determine that their initial
assessment of their possible fee was inaccurate. "The fact that the attorney discovers the case is not as profitable as first
imagined is not good cause [for the lawyer] to withdraw." Suffolk Roadways, Inc. v. Minuse, 287 N.Y.S.2d 965 (Sup. Ct.
1968). As the ABA Comment to Rule 16-103 points out, the Rules requires the lawyer to pursue the client's matter with
due diligence, even if it is inconvenient for the lawyer. The client's interests, not the lawyer's, are paramount. Rule 16107(B).
A lawyer may not enter into a contract with a client that makes the lawyer better off for terminating the agreement than
pursuing the original ends of the agreement. For example, a lawyer may not receive a quantum meruit fee if the
contingency does not occur. See Rule 16-105 cmt. Any provision that allows a lawyer to claim fees in quantum meruit
after withdrawing from or abandoning a client's case, without cause, violates this rule.
The lawyer that represents a client under a contingent fee agreement should be vigilant in seeing the contingent matter
pursued to the fullest extent possible, consistent with the client's interests. "The refusal to settle by a client can never be
sufficient grounds to constitute 'good cause' for an attorney to withdraw." Ambrose v. Detroit Edison Co., 237 N.W.2d 520
(Mich. Ct. App. 1975); Suffolk.
Further Considerations
The client depends on the lawyer for advice and counsel. The lawyer's duty of loyalty to the client requires that the lawyer
exercise the greatest care in drafting a fee agreement with the client. As the ABA Comment to Rule 16-107 reminds us,
the lawyer's need for income may not allow the lawyer to place the lawyer's interests before the client's interests.

CONCLUSION
The contingent fee agreement may not contain provisions that reward the lawyer for failing or refusing to carry the matter
to conclusion. The agreement may state that the lawyer has a quantum meruit claim if some behavior of the client, arising
to the level of "cause," leads the lawyer to withdraw, subject to the relevant ethical and procedural rules.
The agreement should not effectively punish a client who decides to end either the relationship or the litigation, both of
which are rights of the client. The agreement should give the client some guidance as to what constitutes "cause" for
purposes of the quantum meruit claim. The provisions of a contingent fee agreement should not compensate the lawyer
more handsomely for terminating the agreement than for concluding the original contingent goal; the quantum meruit fee
must be limited to the amount to which the lawyer would be entitled under the contingency. The contingent fee agreement
may give the lawyer a right to a quantum meruit fee, determined only upon the occurrence of the contingency.