Can a Texas lawyer charge a contingent fee to collect past-due child support, and use a power of attorney and escrow account for the recovered money?

Plain-English summary

The question was whether a Texas attorney could take child-support arrearage cases on a contingent fee, charging a percentage of the arrearage recovered, and whether using a power of attorney from the client and depositing the full arrearage into the attorney's escrow account before disbursement would violate any rule. The proposed fee agreement had the client pay attorney's fees out of money to be paid to the client in the future.

The Committee concluded a contingent fee did not violate the spirit of Rule 1.04. Comment 9 to Rule 1.04 discusses that contingent or percentage fees can promote divorce and may be inconsistent with a lawyer's obligation to encourage reconciliation, but child-support arrearage cases involve parties who are already divorced. Because sworn testimony at the final divorce hearing established, at least as to one party, that there was no reasonable hope of reconciliation, that obligation was alleviated.

The Committee added the conditions. The lawyer must quote a reasonable percentage; a fee is unconscionable if a competent attorney could not form a reasonable belief that it is reasonable. The lawyer must fully disclose the client's options, including that the Texas Attorney General's office handles child-support arrearage cases free of charge, and must meet the Rule 1.04 fee guidelines. On the mechanics, using a power of attorney and depositing the collected arrearage into the attorney's escrow account does not appear to violate any rule so long as the lawyer makes a proper accounting, promptly pays the client, places only the arrearage in escrow, and complies with Rule 1.14. The Committee expressly did not address questions of law, the role of the court, or the propriety of demand letters.

Currency note

This opinion was issued in 1994, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. 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 Treat this page as historical context, not current guidance.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 charge a contingent fee to collect past-due child support?

A: The Committee concluded yes. The concern about contingent fees in divorce (Comment 9 to Rule 1.04) does not apply because the parties are already divorced, so a reasonable contingent percentage is permissible.

Q: What conditions did the opinion attach?

A: The lawyer must quote a reasonable percentage meeting Rule 1.04's fee guidelines and must fully disclose the client's options, including that the Attorney General's office collects child-support arrearage free of charge.

Q: Can the lawyer use a power of attorney and an escrow account for the recovered money?

A: The Committee concluded that does not appear to violate any rule so long as the lawyer accounts properly, pays the client promptly, escrows only the arrearage, and complies with Rule 1.14.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 1.04 (fees, including the prohibition on unconscionable fees; ABA Model Rule 1.5) and its Comment 9 on contingent fees in domestic-relations matters, and Rule 1.14 (safekeeping property; Model Rule 1.15) governing the handling of money collected for a client. The analysis turns on the distinction between an ongoing divorce, where contingent fees raise a reconciliation concern, and a post-divorce arrearage collection, where that concern is alleviated.

Citations and references

Rules of Professional Conduct:

• MR 1.5 (fees), MR 1.15 (safekeeping property)
• Texas Disciplinary Rules 1.04 (and Comment 9) and 1.14

See also

• TX Ethics Op. 510: A Client's Contingent-Fee Arrangement With a Nonlawyer Investigator
• TX Ethics Op. 518: "Greater Of" Hourly or Contingent Fees and Unconscionability

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-485/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_485.pdf

Original opinion text

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

QUESTION PRESENTED

A Texas attorney contemplates entering into an employment contract regarding child support arrearage lawsuits with the client based on a (contingency fee) percentage of the amount of arrearage recovered for the client.
Is accepting these cases on a contingency fee in violation of the Texas Disciplinary Rules of Professional Conduct Rule 1.04?
Does the use of Power of Attorney from the client and the depositing of full arrearage into the attorney's escrow account prior to disbursement violate any Rule of Professional Conduct?

STATEMENT OF FACTS

A Texas attorney contemplates entering into an employment contract regarding child support arrearage lawsuits with the client based on a (contingency fee) percentage of the amount of arrearage recovered for the client.

DISCUSSION

The proposed fee agreement provides for a client to pay for attorney's fees based on money that will be paid to the client in the future.

Handling a child support arrearage case does not violate the spirit of Rule 1.04, Comment No. 9 of the State Bar Rules of Texas because that Comment discusses that contingent and percentage fees promote divorce and may be inconsistent with a lawyer's obligation to encourage reconciliation. Child support arrearage cases are between parties who are already divorced. Since sworn testimony at the final divorce hearing has previously been given that, at least as to one party, there is no reasonable hope of reconciliation, the attorney's obligation to encourage reconciliation is alleviated.

An attorney is obligated to quote a reasonable percentage in such a case. A fee is unconscionable if a competent attorney could not form a reasonable belief that the fee is reasonable.

The attorney is obligated to fully disclose all options to the client. The client should be informed of options such as the Texas Attorney General's office handling child support arrearage cases free of charge to the client. Other options should be discussed and the pros and cons of such options may be discussed.

The attorney is further obligated to meet the fee guidelines as established by the State Bar Rules of Texas in Rule 1.04.

The use of a power of attorney and depositing of the arrearage moneys collected into the attorney's escrow account does not appear to violate any Rule of Professional Conduct so long as a proper accounting is made, the client is promptly paid, and the moneys placed in escrow are arrearage only. All dealings should comply, with Rule 1.14.

Accepting a child support arrearage case on a contingency basis would not violate Rule 1.04 of the State Bar Rules of Texas provided a reasonable percentage is quoted to the client according to the fee guidelines established by the State Bar Rules of Texas and provided the attorney discloses all of the options available to the client in collecting child support arrearage. All dealings should comply with Rule 1.14 while handling clients' money. Lastly, this opinion is neither addressing the questions of law nor the role of the Court nor the propriety of demand letters.

CONCLUSION

Accepting a child support arrearage case on a contingency basis would not violate Rule 1.04 of the State Bar Rules of Texas provided a reasonable percentage is quoted to the client according to the fee guidelines established by the State Bar Rules of Texas and provided the attorney discloses all of the options available to the client in collecting child support arrearage. All dealings should comply with Rule 1.14 while handling clients' money. Lastly, this opinion is neither addressing the questions of law nor the role of the Court nor the propriety of demand letters.

Tex. Comm. On Professional Ethics, Op. 485 (1994)