Can a lawyer charge a contingent fee made up of both a percentage of the recovery and an hourly rate, with both parts payable only on a successful outcome?

Plain-English summary

A former federal worker retained counsel to appeal a denial of disability retirement benefits to the Merit Systems Protection Board, under a fee agreement making payment contingent on a successful outcome. The appeal succeeded, yielding a lifetime annuity and a lump sum. After a dispute, the client fired the attorney once the non-administrative legal work was done. The attorney claimed one-third of the lump sum and one-third of the annuity's value plus hourly compensation, and sued for the lump-sum share. The client argued the agreement was a void "mixed" fee and that only quantum meruit applied. The committee was asked whether a fee combining a percentage and an hourly amount, both contingent, is ethical, and whether amending pleadings to seek more in response to the client's challenge is ethical.

On the first question, the committee notes that here both the hourly and percentage portions are contingent on success. Like all fees, the agreement is subject to Rule 1.5(a)'s reasonableness requirement, and it lists the eight reasonableness factors; applying them is a fact-specific analysis outside the committee's purview, and a client's consent does not relieve the lawyer of the duty to charge only reasonable fees. Contingent fees carry the added requirements of an actual risk of nonpayment and a res from which the fee is paid (LEO 1606), both met here. Rule 1.5(c) governs clarity and communication of the calculation method but does not dictate whether a contingent fee is a percentage, an hourly rate, or a flat fee, so nothing in it prohibits a mixed contingent fee, provided the total remains reasonable.

On the second question, the committee notes a lawyer may sue a former client for unpaid fees (LEOs 995, 996, 1325, 1544). It lacks information about the motive for the amended pleading, but says the governing standard would be Rule 3.1's bar on asserting non-frivolous-less positions, and that the merit of the particular pleading is for a trier of fact. It also points to quantum meruit as discussed in LEO 1606 and Heinzman v. Fine, Fine, Legum and Fine, 217 Va. 985 (1977): a contingent-fee attorney discharged before completion may recover only the reasonable value of services rendered, a determination left to the fact-finder.

Currency note

This opinion was issued in 2002. Virginia's Rule 1.5 and related fee provisions may have changed since. Verify against current rules before relying on any specific requirement mentioned here.

In practice

The opinion holds that, under the rules as they stood at the time, a mixed contingent fee (percentage plus hourly, both contingent) is not prohibited per se; its propriety turns on Rule 1.5(a) reasonableness, which the committee treats as a fact question outside its purview. It also holds a lawyer may sue a former client for fees, with Rule 3.1 supplying the non-frivolous standard for any amended pleading, and notes quantum meruit limits recovery when a contingent-fee lawyer is discharged before completion.

Common questions

Q: Is a contingent fee that adds a percentage of recovery to an hourly rate ethical?

A: Yes, if the total is reasonable. The committee holds Rule 1.5(c) does not dictate a contingent fee's form, so a mixed contingent fee is permissible so long as the overall fee satisfies Rule 1.5(a) reasonableness.

Q: Does the committee decide whether this particular fee was reasonable?

A: No. The committee holds that applying Rule 1.5(a)'s reasonableness factors is a fact-specific inquiry outside its purview, and that client consent does not excuse an unreasonable fee.

Q: Can a lawyer amend a suit to demand more after the client challenges the fee?

A: A lawyer may sue a former client for unpaid fees, and the committee identifies Rule 3.1's non-frivolous standard as governing the pleading, but says the merit of the particular amendment is for a trier of fact, not the committee.

Q: What does the client recover if the lawyer is fired before finishing?

A: The committee points to quantum meruit (LEO 1606; Heinzman v. Fine): a contingent-fee attorney discharged before completion may recover only the reasonable value of services rendered, which the fact-finder decides.

Background and rules framework

The opinion interprets Rule 1.5 (Model Rule 1.5; reasonableness of fees under 1.5(a) and the contingent-fee requirements of 1.5(c)) and Rule 3.1 (Model Rule 3.1; meritorious claims and contentions). It applies the contingent-fee prerequisites (risk of nonpayment and a res) and the quantum-meruit limit drawn from LEO 1606 and Heinzman v. Fine, Fine, Legum and Fine.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 / Virginia Rule 1.5(a) and 1.5(c) (fee reasonableness; contingent-fee requirements)
• Model Rule 3.1 / Virginia Rule 3.1 (non-frivolous claims and contentions)

Cases:

• Heinzman v. Fine, Fine, Legum and Fine, 217 Va. 985 (1977), quantum-meruit recovery for a discharged contingent-fee attorney

Other opinions cited:

• Virginia LEO 1606: contingent-fee prerequisites (risk of nonpayment, a res) and quantum meruit on discharge.
• Virginia LEOs 995, 996, 1325, 1544: a lawyer may sue a former client for unpaid fees.

See also

• VA LEO 1812: Contingent-Fee Termination and Quantum Meruit
• VA LEO 1783: Disbursing Excess Collected Fees to a Lender
• VA LEO 1831: Guardian ad Litem Fee Paid by an Insurer

Source

• Landing page: https://vsb.org/Site/about/rules-regulations/leo-opinions.aspx
• Original PDF: https://www.vsb.org/common/Uploaded%20files/LEOs/1766.pdf

Original opinion text

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

Committee Opinion
September 25, 2002
LEGAL ETHICS OPINION 1766

CONTINGENT FEE AGREEMENT THAT
CHARGES PERCENTAGE OF RECOVERY
PLUS HOURLY FEE.

You have presented a hypothetical situation in which a client, a former federal worker, has
retained counsel to represent him in an appeal to the Merit Systems Protection Board of the
decision to deny him disability retirement benefits when he was fired from his position. The
attorney entered into a fee agreement which stated that payment was contingent upon obtaining a
successful outcome. The appeal was successful and the award called for both a monthly lifetime
annuity and a lump sum payment. Certain disputes arose between the attorney and the client, and
the client fired the attorney before all necessary paperwork was completed in order for the
client’s payment to begin; however, all non-administrative, legal work in the case was completed.
The attorney asserts that he is entitled to one-third of the lump sum as well as one-third of the
value of the lifetime annuity plus compensation of $200 per hour for time expended by the
attorney and $150 per hour for time expended by his associate. The client maintains that he
believed that the attorney would be entitled only to the hourly compensation, as attorney’s fees
were awarded by the Merit Systems Protection Board. The attorney maintains that the majority
of the fee award was paid to the client’s first attorney, who had originated the case, and has now
filed suit against the client seeking one-third of the lump sum. He plans to amend the pleadings
to seek also the life time annuity, though not the hourly compensation called for in the fee
agreement. The client maintains that the attorney/client contract is void because it is a “mixed”
fee agreement, combining a percentage and an hourly fee, and, therefore, quantum meruit is the
only appropriate standard for the attorney’s recovery.
Under the facts you have presented, you have asked the committee to opine as to whether it is
ethical to include both a percentage of recovery and an hourly fee in an attorney’s fee agreement
if both are
contingent upon a successful outcome and whether it is ethical for the attorney to amend his
pleadings to increase his recovery solely because the former client challenges the attorney’s
calculation of the fee.
Your first question asks for a determination of the propriety of a “mixed fee” 1 involving a
contingent fee, with the specific amount to be determined by a sum of a percentage of the award
plus an hourly amount for legal work performed. The committee notes that while the term
“mixed fee,” frequently is used to describe an agreement containing an hourly amount that is
fixed combined with a percentage that is contingent, the agreement in the present hypothetical
makes both the hourly and the percentage portions of this fee contingent upon a successful the
outcome in the case.
This fee agreement, like all fee agreements, is subject to the requirement of Rule 1.5 (a) that the
fee be “reasonable.” Thus, the fee in the hypothetical is only permissible if the sum of one-third
1

This opinion uses the term “mixed fee” but that term is considered to be synonymous
with the terms “blended fee” and “split fee.”

Committee Opinion
September 25, 2002
of the recovery plus $200 and $150 per hour for the lawyers’ time does not amount to an
unreasonable fee for the work performed. Determination of whether the fee agreement in this
hypothetical is reasonable would involve consideration of the factual context in which the
agreement was entered. Rule 1.5(a) provides an extensive list of factors for that determination:
(1) the time and labor required, the novelty and difficulty of the questions
involved, and the skill requisite to perform the legal services properly;
(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; and
(8) whether the fee is fixed or contingent.
Application of those factors would involve a fact-specific analysis that is outside of the
purview of this committee. However, the committee notes that the fact that a client consents to a
fee agreement does not obviate the lawyer’s obligation to charge only reasonable fees. See Rule
1.5.
Along with the general requirement of reasonableness applicable to all legal fees, contingent
fees have additional requirements. For a contingent fee to be appropriate, there must be actual
risk of nonpayment and a res from which the fee can be paid. LEO 1606. The agreement
contemplated in the hypothetical meets those criteria in that there is a clear risk of nonpayment as
the lawyer is paid nothing if he does not prevail and there is a clear res as the case involves a
potential award of retirement benefits. Rule 1.5(c) proscribes requirements for contingent fees;
however, those requirements involve clarity and communication of calculation method and do
not dictate whether a contingent fee must be a percentage, an hourly rate or a flat fee. Thus,
nothing in rule 1.5(c) directly prohibits a “mixed” contingent fee that is determined by combining
an hourly rate with a percentage of the res, nor that is determined by combining a fixed and a
contingent fee so long as any resulting total fee remains reasonable.
Your second question is whether it is ethically permissible for the attorney to amend pleadings
to seek a larger portion of the fee outlined in the fee agreement in response to the client’s
challenge of this fee. It is well-established that a lawyer may sue a former client for unpaid fees.
See. LEOs ##995, 996, 1325, & 1544. As to motive for pursuing a particular amount, the
committee lacks sufficient information regarding the motive behind the amended pleading;

Committee Opinion
September 25, 2002
however, the appropriate standard for determining such a question would be Rule 3.1's directive
that a “lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein,
unless there is a basis for doing so that is not frivolous...” Determination of the merit of the
particular pleading in this hypothetical is not within the purview of this committee. The
committee does note as pertinent to the resolution of this fee dispute is the concept of quantum
meruit as discussed in LEO 1606. That opinion states as follows:
When the attorney is discharged prior to the completion of the representation he
may only recover the reasonable value of the services which he has rendered. He
cannot recover for damages for the breach of the contract, and, in instances where
the fee is contingent upon the outcome of the matter, the attorney may not recover
the full agreed upon fee. He is entitled only to a recovery in quantum meruit for
services actually rendered.
Whether that concept, first articulated in Heinzman v. Fine, Fine, Legum and Fine, 217 Va. 985
(1977), has been triggered in the hypothetical scenario is for a trier of fact to determine, and as
such is outside the purview of this committee.
This opinion is advisory only, based only on the facts you presented and not binding on any
court or tribunal.