State Bar of Arizona Ethics Opinions

89-02: Fees
4/1989

An attorney may represent an indigent client on a contingency fee basis in a post-decree action to recover property not divided during the marriage dissolution proceeding only where the action involves property claim separate from alimony and child support issues; this type of fee arrangement should be considered a last resort to allow representation to a party otherwise unable to afford competent legal counsel.



FACTS

The inquiring attorney asks the committee to consider the ethical propriety of an attorney's representing a client on a contingency fee basis in an action to claim a share of an alleged undisclosed community asset which was not considered by the court in the dissolution action. The “asset” is a judgment obtained by the spouse's business, which the client claims is community property. The decree of dissolution of the marriage has been final for over four years. The finality of the divorce is not at issue, nor are there any issues regarding alimony or support involved in the case. The client's funds are extremely limited and she will be unable to secure competent representation on any but a contingency fee basis.

 

QUESTION

May an attorney ethically represent a client on a contingency fee basis in a post-decree action to recover property that was not divided during the marriage dissolution proceeding?

 

ETHICAL RULE INVOLVED

ER 1.5. Fees

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(d) A lawyer shall not enter into an arrangement for, charge, or collect:

(1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof, or

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OPINION

This committee has dealt with similar questions in earlier opinions:

Opinion No. 77-18 (August 17, 1977) - Ethically impermissible for an attorney to handle a dissolution proceeding under the “no-fault” divorce statute on a contingency fee basis as to either property division or spousal maintenance.

Opinion No. 82-9 (May 28, 1982) - Under the facts of the case, the attorney was allowed to represent the client on a contingency fee basis in an action either to set aside the original property settlement agreement and negotiate a new property settlement agreement several months after the divorce became final, or to hold the ex-husband liable in damages for fraud, duress and bad faith in persuading the client to sign the agreement.

Opinion No. 87-6 (July 27, 1987) - Ethical Rule 1.5(d) (1) held to prohibit a contingency fee agreement based upon the size of the property settlement.

By its terms, ER 1.5(d) (1) prohibits contingency fee arrangements only when the fee is contingent upon:

  1. The securing of a divorce; or
  2. Upon the amount of alimony or support, or property settlement in lieu thereof.

In this case, the divorce occurred over four years ago, thus the fee is not contingent upon the securing a divorce. The dispute does not involve a claim for alimony or child support. The dispute centers on a property issue regarding community property law and not on a property settlement in lieu of alimony or support. Strictly on this basis, it could be argued that the ethical prohibition contained in ER 1.5(d) (1) does not apply and that the contingency fee arrangement is permissible. However, such a narrow, technical analysis fails to give any useful guidance to the bar.

The decision in this case requires a balancing of the policy considerations upon which the prohibitions contained in ER 1.5(d)(1) rest and the counterbalancing need to make competent legal representation available to persons with limited funds.

Opinion No. 77-18 was decided under the former Code of Professional Responsibility and rested primarily on Ethical Consideration 2-20, which read in part as follows:

“Because of the human relationships involved and the unique character of the proceedings, contingent fee arrangements in domestic relations cases are rarely justified."

In addition to the public policy concern that contingent fee arrangements in divorce cases would encourage divorce, the opinion cited the availability of an award of attorney fees pursuant to A.R.S. § 25-324, and the fact that payment of a contingent fee out of a fixed amount of property would leave even less for parties to divide.

In Opinion No. 87-6, the committee reiterated the prohibition against contingent fees in divorce cases based upon ER 1.5(d)(1) emphasizing the public policy concern that allowing contingent fee arrangements would eliminate the lawyers' incentive to help bring the parties to a settlement that might preserve the marriage.

The situation presented by the inquiring attorney is very similar to that presented in Opinion No. 82-9. In that case, as here, the divorce was already final. The public policy concerns contained in Opinions Nos. 77-18 and 87-6 did not apply. In Opinion No. 82-9, as here, the contemplated legal action was limited to property issues. In both cases, the major impediment to securing competent legal representation is a lack of funds available to pay an hourly rate and the unwillingness of counsel to take on an extensive legal battle without a more secure arrangement than the possibility that the court might exercise its discretion and award fees at the conclusion of the case.

One of the bases for the committee's decision in Opinion No. 77-18 was the absence of a "res" in a divorce action from which the contingency fee would be paid. The judgment to which the client seeks to lay claim in this case is property which did not exist at the time the divorce was entered. Thus, the concern expressed in Opinion No. 77-18 that dividing property between the husband, wife and the lawyers would leave less for the parties, is not present.

The most relevant consideration under these facts is the concern that a party with a colorable claim will be precluded from the judicial process if, as a matter of legal ethics, an attorney is precluded from accepting representation on a contingent fee basis. In Opinion No. 82-9, the committee, in balancing these same factors, determined that the need to provide competent legal representation and access to the judicial process outweighed the remaining policy concerns prohibiting contingency arrangements in divorce cases.

Likewise, under the facts of this case, we hold that the attorney may ethically handle the property matter on a contingent fee basis.

This decision, as in Opinion No. 82-9, is limited to a post-decree action involving only a property claim separate from alimony and child support issues. Further, even within the narrow range of cases envisioned by this opinion, the contingency fee arrangement should be considered a last resort to allow a party who is otherwise unable to afford competent legal counsel to be represented.

In so deciding, the committee wishes to emphasize that the general policies contained in ER 1.5(d )(1) and Opinions Nos. 77-18 and 87-6 prohibiting contingent fee arrangements prior to a divorce, or based upon the amount of alimony or support, or property settlement in lieu of alimony or support, in a pre-decree context are to be strictly enforced. Similarly, a contingency fee arrangement in a post-decree action for modification of alimony or child support, or property settlement in lieu of alimony or child support, is also prohibited by ER 1.5(d)(1).

Formal opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceeding. This opinion is based on the Ethical Rules in effect on the date the opinion was published. If the rules change, a different conclusion may be appropriate.

© State Bar of Arizona 1989



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