Board of Professional Conduct Warns Against Lawyers Using ‘Convertible’ Hourly-to-Contingent Fee Agreements
By Shane A. LawsonOhio Board of Profession Conduct Concludes Attorneys Cannot Ethically Enter Fee Agreements that Permit the Attorney to Convert an Hourly Rate to a Contingent Fee
In Advisory Opinion 2024-03, Ohio’s Board of Professional Conduct concluded that a lawyer cannot ethically enter into a fee agreement that gives the lawyer a unilateral ability to choose between charging an hourly rate or a contingent fee upon the conclusion of the representation.
Specifically, the Board found as follows:
It is improper for a lawyer to enter into a fee agreement where the client agrees to pay an hourly rate until settlement or collection of judgment at which time the lawyer may choose between charging the hourly fee or receiving a total fee equal to a percentage of the settlement or judgment depending upon whichever results in the larger fee to the lawyer.
The Board reasoned that such an agreement “likely interferes with the client’s authority to choose when and whether to settle a matter” in violation of Prof.Cond.R. 1.2(a), and could in some circumstances result in the charging or collection of an unreasonable or excessive fee under Prof.Cond.R. 1.5.
The Board also noted that contingency fees are normally greater than the hourly fees that would be charged for the same representation because the lawyer bears the risk of there being no recovery. The Board found that a fee arrangement that permits a lawyer to ultimately choose between an hourly fee or a contingent fee would improperly permit the lawyer to eliminate their own risk to the client’s detriment.
Ohio attorneys should therefore avoid “convertible” fee agreements that permit the attorney to pick between the higher of an hourly fee or contingent fee based on the ultimate outcome of the representation.
