Once a divorce has become final, an attorney can enter into a contingent fee agreement with the custodial spouse for collection of delinquent child support payments. However, an attorney acting under a contingent fee agreement may not seek to enforce child support obligations through criminal contempt proceedings. The Disciplinary Rules do not categorically prohibit contingent fee agreements based on the value of future payments, but such fees must be reasonable. The committee believes that, in some cases, a contingent fee based on the value of future child support payments will be unreasonable.
Facts: An attorney has been approached by the custodial spouse for assistance in collecting delinquent child support payments due under a final divorce decree. The attorney raises three questions:
(1) Can the attorney represent the custodial parent on a contingent fee basis?
(2) Assuming that the attorney enters a contingent fee agreement, are there any restrictions on the type of enforcement proceedings which the attorney can initiate against the delinquent spouse?
(3) Can the contingent fee agreement apply to future payments of child support as well as to arrearages?
Discussion: SJC Rule 3:05(3) prohibits a contingent fee agreement made "in respect of the procuring of a divorce, annulment of marriage or legal separation." In the case of Guenard v. Burke, 387 Mass. 802, 807 (1985), the Supreme Judicial Court interpreted this rule to prohibit any contingent fee agreement in a domestic relations case entered into prior to the entry of a final judgment of divorce, even if the fee agreement applied only to disputes over property. Under Guenard v. Burke, contingent fee agreements to collect child support are prohibited in any case where the divorce has not become final.
This case goes a step beyond Guenard v. Burke because it deals with post-divorce proceedings. The language of Rule 3:05(3), read literally, seems to permit contingent fees in post-divorce actions because such fees are not "in respect of the procuring of a divorce ... ." On the other hand, Ethical Consideration 2-20 promulgated by the ABA as part of the Model Code of Professional Responsibility states that "contingent fee arrangements in domestic relations cases are rarely justified." The SJC has not adopted the ABA's Ethical Considerations, but it did refer to them as "a body of principles upon which the Canons of Ethics and Disciplinary Rules ... are to be interpreted." Cases in other states are divided, see Wolfram, Modern Legal Ethics, 541 (1986), but offer limited guidance due to differences in the language of the applicable rules.
Turning to the precise language of Rule 3:05(3), we note that the rule applied literally permits contingent fee agreements in post-divorce proceedings because the fee cannot be "in respect of the procuring" of a divorce which has already happened. Moreover, although the holding of Guenard v. Burke is not squarely applicable to post-divorce proceedings, the Court's opinion in that case evidences a disposition to apply Rule 3:05(3) as written. The Court observed, "The better course is to apply the rule literally and not to open up consideration of the facts of a particular case to see whether the purposes of the rule have or have not been thwarted by a literal violation of the rule." Guenard v. Burke, 387 Mass. at 807. Accordingly, we conclude that, once a divorce has become final, an attorney can enter into a contingent fee agreement with the custodial spouse for the collection of delinquent child support payments.
An attorney engaged to collect delinquent child support may select from among a variety of remedies, including an action in the District Court under the Uniform Reciprocal Enforcement of Support Act or proceedings in the Probate Court for contempt of the Court's prior orders. In general, we believe that an attorney acting under a contingent fee agreement should be free to select the most appropriate form of action, in consultation with his client, with one caveat. SJC Rule 3:05(3) prohibits contingent fee agreements "in respect of the procuring of ... any favorable disposition of a criminal charge." We believe that a criminal contempt proceeding is a "criminal charge" for purposes of Rule 3:05(3). If an attorney who has entered a contingent fee agreement attempts to enforce a child support order by instituting a criminal contempt proceeding, his fee would certainly be contingent upon a disposition of that criminal charge favorable to the custodial parent. One commentator has noted that a contingent fee agreement with the prosecutor of a criminal case poses greater risks to obtaining justice that a similar agreement with a defense lawyer. Wolfram, Modern Legal Ethics, 536 (1986). The attorney who institutes a criminal contempt petition is, in substance, the prosecutor. Accordingly, we conclude that if a lawyer institutes criminal contempt proceedings to enforce an obligation of child support, that lawyer's fee may not be contingent upon the outcome of the contempt proceeding.
In general, SJC Rule 3:05 does not prohibit contingent fees based in part on the value of future payments. Such fees must, however, be reasonable. SJC Rule 3:05(5)(e) and 3:05(6); SJC Rule 3:07, DR 2-106. To pass the test of reasonableness, a fee based on future payments must either be based upon a percentage of each payment as it is received or upon the current value of the future payments. See BBO Private Reprimand no. PR-34, 6 Mass. Atty. Disc. Reports 439 (contingent fee in structured settlement).
In proceedings to collect child support, a number of additional considerations apply.
First, the percentage which the lawyer charges for future payments should reflect the difficulty and risks of non-recovery. When an attorney represents a client concerning rights as to which there is no legitimate dispute, such as the rights of a client under an insurance policy where coverage has not been questioned, courts and ethics committees have generally held that the attorney should either charge a fixed fee or a very modest percentage of the recovery. See MBA Opinion No. 77-7 (PIP benefits); Bar Counsel Comments, Contingent Fees for PIP and Med-Paid Benefits, 21 M.L.W. 3319 (August 23, 1993). The initial enforcement action against a "deadbeat spouse" for past payments may present a substantial risk of non-recovery and hence justify a contingent fee. Subsequent periodic payments, however, will often represent a routine application of a pre-existing order, sometimes reinforced by an assignment of wages, and will thus present no genuine contingency.
Second, we think that fees based on the current value of future support payments should be avoided if there is a risk that the support payments will not be made. In personal injury cases where structured settlements first appeared, the future payments are often funded with annuities from insurance companies. Thus the likelihood that the client will receive these payments is high. In some child support cases, however, future payments may be speculative due to the unemployment or poor health of the non-custodial spouse. Moreover, child support payments may be modified by the Court in light of changed circumstances. If there is doubt that future support payments will be received, or if there is a possibility that such payments may be reduced, it is unreasonable for the attorney to insist on immediate payment of a fee based on the value of those future payments.
Finally, and most important, support payments are usually calibrated to the child's needs. A lawyer who proposes to base a contingent fee on future support payments must be very careful not to deprive the child of funds needed for essential living expenses. At a minimum, we believe that an attorney who plans to charge a fee contingent in whole or in part on future support payments should inform the Court of the fee arrangement so that the Court may be fully informed as to all relevant considerations when it sets the amount of support payments. See Guenard v. Burke, 387 Mass. at 807; McInerney v. Massassoit Greyhound Association, 359 Mass. 339, 350 (1971).
Permission to publish granted by the Board of Delegates on March 22, 1994. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.