§ 7.14 A Lawyer's Contingent Fee

• Jurisdiction: United States
• Publication year: 2021

§ 7.14 A Lawyer's Contingent Fee

The characterization of a lawyer-spouse's right to collect a contingent legal fee for cases pending at divorce is not simple. Since such cases, by definition, have been initiated but not completed at the time of divorce, the spouse obviously will render some services in each case before divorce and some after divorce. Such a situation presents a problem similar to the long-term employment contract situation.¹¹⁰⁰ If the inception of title approach¹¹⁰¹ is used to characterize the fees, the fees would be characterized according to the status of the professional spouse when the fee contract was signed, assuming the spouse practices as a sole proprietor. If post-divorce services are rendered by the lawyer-spouse in the matter, the spouse's separate estate should be reimbursed for the value of these services. In contrast, the pro rata approach¹¹⁰² would consider the marital portion of the fees to be a function of the relative amount of services rendered in the case while the professional spouse was married, regardless of the spouse's marital status at time the fee contract was signed.

A lawyer's contingent fee is collected at the conclusion of a successful suit. In the world of marital property, the question arises whether the fee is totally "earned" or "acquired" only at that moment.

If a suit is filed during marriage but is pending at divorce and the lawyer-spouse has a contingent fee arrangement with the client, it is unclear whether the lawyer will receive any fee from the suit. One possible response is to deem the possibility of recovery too speculative to include in the marital estate. Some courts have reached this conclusion.¹¹⁰³ However, this approach is inconsistent with the majority approach to pension rights, which includes pension rights in the marital estate even though it is uncertain whether the employee will ever receive pension benefits.¹¹⁰⁴ In addition, it seems unfair to exclude the marital estate from any possible contingency fee, if some services were rendered in the action by a spouse during marriage, and the case initiated during marriage eventually generates a fee after divorce. This situation could be viewed as one where the spouse at divorce has an unvested right to a contingent fee.

Most courts have concluded that there can be a marital claim to a portion of any contingency fee eventually generated after divorce from cases begun during marriage.¹¹⁰⁵ Determining a mechanism for valuing the marital claim has been more of a challenge. A Minnesota court has stated that the trial court could, if it chose to do so, attempt to arrive at a present value of the unvested right to the contingent fee at the time of divorce.¹¹⁰⁶ Most courts, however, have determined that the value of the marital claim should be determined if and when a fee is received after divorce; almost all agree that the marital property portion of the fee generated is to be computed by comparing the amount of time devoted to the matter during marriage until the cutoff date in that jurisdiction for accumulating marital property to the total amount of time devoted to the matter.¹¹⁰⁷ So, in a Kentucky case, this was the approach the court endorsed. The court concluded that it could see no difference between a contingent fee and a pension right.¹¹⁰⁸

A California court has suggested this may not be an appropriate way to allocate a gross fee if expenses incurred are much greater at some points compared to others.¹¹⁰⁹

Some courts have suggested that the divorce court should retain jurisdiction over the contingent fees and then equitably divide the actual portion if and when the fee is ever received.¹¹¹⁰ A majority of courts...