Opinion ID: 2208277
Heading Depth: 1
Heading Rank: 4

Heading: The Contingent Fee Agreement

Text: Although respondent no longer denies that he collected an excessive fee in violation of Rule 2-106(a), we think it is important to state that we agree with the Review Board's finding that respondent violated this rule. Also, we think it is important to review the subject of contingent fees, and to point out that this entire incident arose from respondent's ignorance of contingent fees, ignorance which he did not bother to rectify, and which caused him to draft a badly worded fee agreement and, apparently, to poorly advise his client both before and after she agreed to the fee agreement. We would have thought it was general knowledge among the members of the bar that a contingent fee is to be collected only if an attorney successfully champions the legal rights and claims of his client, with the result that the client is compensated through a settlement with, or judgment against, those who denied his claims. This court stated as much 26 years ago in Pocius v. Halvorsen (1963), 30 Ill.2d 73, 78, when we stated that an attorney's collection of a contingent fee depend[s] upon the success or failure to enforce a supposed right. In addition, Rule 2-106(c)(1) of the Code clearly states that a contingent fee agreement is an agreement for the provision of legal services by a lawyer under which the amount of the lawyer's compensation is contingent in whole or in part upon the successful accomplishment (by settlement or litigation) of the subject matter of the agreement. (107 Ill.2d R. 2-106(c)(1).) Furthermore, Rule 2-106(c)(3) (107 Ill.2d R. 2-106(c)(3)) requires that a contingent fee agreement detail the precise method to be used in determining the fee, including whether expenses are to be deducted before or after the percentage is applied, and whether the percentage will vary depending on the stage  settlement, trial, or appeal  at which the case is concluded. Respondent's defense in this proceeding is ignorance: Because he had never entered into a contingent fee agreement before, he was ignorant of the proper form and ignorant of the Code's provisions on collecting an excessive fee. But if respondent, realizing his ignorance of contingent fees despite his four years of service on the Chicago Bar Association's Professional Fees Committee, had sought to remedy it by doing the research necessary to draft a proper contingent fee agreement, presumably he would not now be before us; it would have been clear to him that he could not charge a one-third contingent fee because he did not recover Randolph's certificates of deposit by means of a settlement or judgment. Instead of doing this research, respondent decided to use the term recovered in the fee agreement without further clarification. Even so, the term recovered suggests reobtaining the certificates of deposit from somewhere outside of Randolph's sphere of control; yet at all times Randolph owned the funds represented by the certificates, although she did not have conscious actual possession of the paper certificates. As the appellate court has explained, the term recovered requires that an attorney's recovery of property or monetary compensation for a client result from action taken by the attorney; otherwise the attorney receives an unjust windfall. Robert S. Pinzur, Ltd. v. The Hartford (1987), 158 Ill. App.3d 871, 881 (interpreting the term recovered in the Attorneys' Lien Act (Ill. Rev. Stat. 1985, ch. 13, par. 14), and finding that no recovery was made when an insurance company paid a claim as a matter of course, not as a result of the attorney's services). Respondent comments in his brief that Randolph never asked him to renegotiate his fee, and he testified that Randolph authorized him to redeem the unmatured certificate of deposit that he redeemed on January 10, 1986. But a client's acquiescence to an attorney's misconduct does not purge it of its unethical character. (See In re Himmel (1988), 125 Ill.2d 531, 542, citing In re Thompson (1963), 30 Ill.2d 560, 569 (absence of client complaints about respondent's misconduct does not render him immune from discipline). Furthermore, Randolph's failure to ask for a renegotiation likely resulted from respondent's never explaining to Randolph the correct terms of a contingent fee  the fee is paid only if there is a settlement or judgment resolving the situation in the client's favor  due to respondent's own ignorance. In addition, respondent apparently never explained to Randolph what actions he took to recover the certificates of deposit; while respondent testified that he reported to Randolph as he received information, he has never said that he explained to her how he was achieving the recovery. Regardless, the unethical nature of respondent's actions in collecting an excessive fee is not ameliorated by Randolph's failure to question him about it or to file a complaint with the Commission. In essence, the contingent fee agreement was based on a mutual mistake of fact  that someone had stolen the certificates of deposit and would either make a claim to them or wrongfully redeem them. But respondent, an attorney who learned all the facts concerning the status of the certificates of deposit and the need simply to reregister them, contrary to his initial expectations, never sought reformation of the agreement. We conclude that respondent charged Randolph an excessive fee, and thereby violated Rule 2-106(a). [A] lawyer of ordinary prudence would [have been] left with a definite and firm conviction that [a $159,648.60] fee [was] in excess of a reasonable fee (107 Ill.2d R. 2-106(b)) for the nonlegal services of identifying the certificates of deposit that Randolph owned, and having them reregistered, even if it did take 160 hours over a period of two months. Next, we address respondent's argument that the Administrator failed to state a cause of action when he charged that respondent had violated Rule 1-102(a)(4), and that the Administrator also failed to present clear and convincing evidence of this violation.