In a contingent-fee case, can the lawyer switch to hourly billing if the client abandons the claim or accepts a settlement the lawyer thinks is too low?

Plain-English summary

Opinion E-82-5 considered several situations under a personal-injury contingent-fee contract. In Situation 1, a client decided to abandon the claim before any settlement offer, and the lawyer wished to bill at his usual hourly rate under an implied contract instead of the contingent fee. The committee noted the client has the unilateral right to compromise or abandon the claim (Knoll v. Klatt, 168 N.W.2d 555 (Wis. 1969); SCR 20.34(2)(d)). Whether the lawyer could recover compensation on a breach-of-implied-contract theory, and how much, were questions of law beyond the opinion's scope. The committee said it had difficulty with the ethics of asserting such a claim except under the most extreme circumstances where the client withdraws without cause, and recommended that contingent-fee contracts include a provision covering reasonable withdrawal terms, limited to cases where the client terminates without cause and no recovery or offer has been made.

In Situation 2, where the contract contained such a withdrawal clause (hourly rate plus expenses if the client discontinues against advice), the committee concluded the suggested provision is not unethical so long as the resulting fee is not clearly excessive, applying the fee-reasonableness factors in SCR 20.12 and 20.06(6) and citing ABA Informal Opinion 1389 (1977) on combined fixed-and-contingent arrangements. In Situation 3, where the client wanted to accept a $2,000 offer that the lawyer disagreed with, the committee concluded the lawyer is entitled only to the contingent fee ($500), because the risk of a lower recovery is inherent in the contingent arrangement and the client has the right to decide whether to accept a settlement. In a further situation the committee raised on its own (an offer the lawyer deems inadequate but the client wants to accept, under the Situation 2 clause), the committee concluded that allowing the lawyer to charge hourly in that circumstance would let the lawyer have it both ways, is overreaching, and is therefore unethical.

Currency note

This opinion was issued in 1982, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it applies the former Code provisions cited in the opinion. Lawyer fees, including contingent fees, are now governed by SCR 20:1.5 / Model Rule 1.5, and the client's authority to settle by SCR 20:1.2(a) / Model Rule 1.2(a). 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: If the client accepts a settlement the lawyer thinks is too low, what fee does the lawyer get?

A: The committee concluded the lawyer is entitled only to the contingent fee, because the risk of a smaller recovery is inherent in a contingent arrangement and the client decides whether to accept a settlement.

Q: Can a contingent-fee contract include a clause to bill hourly if the client quits the case?

A: The committee concluded such a withdrawal clause is not unethical, limited to a client terminating without cause when no offer or recovery has been made, so long as the resulting fee is not clearly excessive.

Q: Can that clause be used to charge hourly whenever the lawyer thinks an offer is too low?

A: No. The committee concluded that using the clause to charge hourly because the lawyer deems an offer inadequate, while the client wants to accept, is overreaching and unethical.

Background and rules framework

The opinion applied the former Wisconsin Supreme Court Rules on fees and clearly excessive fees (SCR 20.12, 20.06(6)) and on the client's exclusive authority to decide whether to accept a settlement (SCR 20.34(2)(d), (e)), informed by Wisconsin case law and an ABA informal opinion. The current counterparts are the fee rule (SCR 20:1.5 / Model Rule 1.5) and the allocation-of-authority rule (SCR 20:1.2(a) / Model Rule 1.2(a)).

Citations and references

Rules of Professional Conduct:

• Wis. SCR 20.12 (illegal or clearly excessive fee) (former Code)
• Wis. SCR 20.06(6) (factors in determining a reasonable fee) (former Code)
• Wis. SCR 20.34(2)(d), (e) (client's authority to decide settlement) (former Code)
• Model Rules 1.5, 1.2(a) (fees; client's authority to settle)

Cases:

• Knoll v. Klatt, 168 N.W.2d 555 (Wis. 1969), client's unilateral right to compromise or abandon a claim

Other opinions cited:

• ABA Informal Opinion 1389 (1977): combined fixed-and-contingent fee arrangements

See also

• WI Ethics Op. E-83-15: Blanket Fee for Insurance Defense Cases
• WI Ethics Op. E-90-4: Interest Charges on Delinquent Accounts
• WI Ethics Op. E-09-03: Communicating Fees and Expenses to Clients

Source

• Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
• Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-82-5.pdf