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FAMILY LAW: Is contingency fee proposal worthy or not?

Gregg Herman

Gregg Herman

University of Wisconsin law professor John Nicholas Schweitzer wants to amend ethics rules by, among other changes, eliminating the prohibition of charging a contingent fee in most family law cases.

According to his proposal — Rule Petition 10-09 — amending SCR 20:1.5 makes sense because, “The origin of the restriction seems to have been society’s interest in preserving the sanctity of marriage, a position that is no longer compelling.”

It’s worth examining consequences that a rules change might bring.

The concept has a great deal of merit. Most divorce lawyers charge strictly by the hour. This creates a potential conflict between the interests of the client and the lawyer.

For the most part, clients benefit by having the divorce finished as quickly and efficiently as possible. Dragging a case out usually prolongs the emotional and financial pain. Yet paying a lawyer hourly means the longer the case is dragged out, the more lucrative the case is to the lawyer. A contingent-fee agreement would put the lawyer’s financial interest on the same page as that of the client.

For the vast majority of cases, clients are not harmed by this potential conflict because most lawyers serve the clients’ best interests. Still, the potential conflict, which is present in all hourly fee cases, can create mistrust on the part of the client.

The potential conflict is present to one degree or another in any legal representation in which the lawyer charges by the hour. But, with the possible exception of bankruptcy, it is arguably more of a danger in family law than in other areas.

First, like in bankruptcy, the parties in a divorce often have significant financial difficulties. After all, there are extra bills to pay and no extra income with which to pay them. In fact, given the lack of incentive to make money during the divorce, there sometimes is even less money to go around.

Second, emotions run high. Often, these emotional aspects do not correlate with the legal issues, making the representation even more expensive.

Still, contingent fees also can present a potential conflict in a divorce. A number of years ago, thanks to the efforts of the State Bar Family Law Section, the rule was amended to allow contingent fees in family law cases to collect arrears in child support, maintenance and property division. No problem there.

However, if contingent fees were allowed in divorce actions, and the contingency would be based on the size of the divisible estate, a conflict might arise. In cases where it would benefit the client to have property determined to be nondivisible — usually gifts or inheritances — such a contingent-fee arrangement would make a result maximizing excluded property better for the client but worse for the lawyer. This is the reverse of what is normally intended by a contingent-fee agreement.

If, on the other hand, the contingency fee is determined by the award to the client of all property, divisible or not, the fees may bear very little resemblance to the legal services rendered. Both in short-term marriages and where there is substantial nondivisible property, it may not take very much time to handle such cases, while huge fees could be generated on a contingent basis.

In any event, one has to question Schweitzer’s overall premise. He correctly states the underlying prohibition against contingency fees in divorce is due to a lawyer’s obligation to encourage reconciliation where feasible.

Why is this position no longer compelling? While close to 50 percent of American marriages end in divorce, according to divorcerate.org, the traumatic effects on children are no less than when the rate was far lower.

Shouldn’t lawyers, therefore, still be required to encourage reconciliation in most cases?

There should be a search for a better billing method than strictly by hours. But, sorry, professor, contingent fees in a divorce action is not it.

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