Avoiding the Pitfalls of Contingency Fee Arrangements

LSUC Rules of Professional Conduct

Contingency Fees and Contingency Fee Agreements

3.6-2 Subject to rule 3.6-1, except in family law or criminal or quasi-criminal matters, a lawyer may enter into a written agreement in accordance with the Solicitors Act and the regulations thereunder, that provides that the lawyer’s fee is contingent, in whole or in part, on the successful disposition or completion of the matter for which the lawyer's services are to be provided.

Commentary

[1] In determining the appropriate percentage or other basis of the contingency fee, the lawyer and the client should consider a number of factors, including the likelihood of success, the nature and complexity of the claim, the expense and risk of pursuing it, the amount of the expected recovery and who is to receive an award of costs. The lawyer and client may agree that in addition to the fee payable under the written agreement, any amount arising as a result of an award of costs or costs obtained as a part of a settlement is to be paid to the lawyer. Such agreement under the Solicitors Act must receive judicial approval. In such circumstances, a smaller percentage of the award than would otherwise be agreed upon for the contingency fee, after considering all relevant factors, will generally be appropriate. The test is whether the fee in all of the circumstances is fair and reasonable.

What happens if my contingency agreement does not comply with the Rules of Professional Conduct?

A. I will immediately be disbarred

B. I won’t get paid anythingC. My fees will be subject to

reduction if they are assessed

A. B. C.

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Question 1:

Can a contingency fee agreement provide that the client will be obligated to pay the greater of the hourly fees that would normally apply or a percentage of the amount recovered?

A. AbsolutelyB. Definitely notC. Only if the agreement includes

a clear example of how it will work

D. Yes, if the percentage is below 30%

A. B. C. D.

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Question 2:

Can counsel refuse to accept a lesser fee than that specified in the agreement, if this refusal will prevent the parties from reaching a settlement?

A. Yes, counsel is entitled to the percentage in the contingency agreement

B. No, that would be a breach of counsel’s duty to act in the best interests of their client

A. B.

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Question 3:

Can a contingency fee agreement provide that the lawyer will keep both a percentage of any recovery as well as any award of costs that may be made?

A. Of course, the percentage is for the risk the lawyer takes, and the costs are for actual recovery

B. Of course not, that’s double recovery for the lawyer and who needs three cottages anyway?

C. Yes, but the Court has to approve the arrangement

A. B. C.

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Question 4:

Assuming the client consents, should a lawyer disclose to the other side that a contingency agreement exists?

A. No! The other side will know that the lawyer wants out

B. Yes! Use it as a sword and let the other side know that this is going to be costly so pay up sooner rather than later

C. It doesn’t matter that there is a contingency agreement, so why go there? A. B. C.

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Question 5: