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January 28, 2004

Fiduciary Duties and Contingency Fees

Filed under: pre-06-2006 — David Giacalone @ 9:49 pm

laughing man fiduciary what?”

An important law review article on lawyer fiduciary obligations relating to contingency fees (and the ABA’s undermining of those duties) is finally available online.  The article, The Continuing Assault on the Citadel of Fiduciary Protection: Ethics 2000’s Revision of Model Rule 1.5 (2003 U.Ill.L.Rev. 1181 [Number 5]) is written by Cardozo Law Professor Lester Brickman, whose continued battle against the revisions to Model Rule 1.5 were spotlighted here last year.
The article, which first describes in detail the development of the attorney’s general fiduciary obligation to clients, is summarized in this introduction:

Beginning with a detailed examination of both the origins of fiduciary obligations and previous efforts at establishing a lawyer’s duties in presenting alternative fee structures, Brickman lays the foundation of the modern contingency fee structure and a lawyer’s corresponding fiduciary obligations. Brickman then turns to the role of the Ethics 2000 Commission in clarifying a lawyer’s obligations, examining the Commission’s changes to the Comment to Model Rule 1.5 addressing contingency fees. He finds that, rather than stem the tide of what he identifies as widespread contingency fee abuse and disregard for fiduciary obligations, the Ethics 2000 Commission not only removed well-established protections for clients, but facilitated abuse in the contingency fee system.

Despite early efforts indicating that the Commission would place a renewed emphasis on the reasonableness of contingency fees, Brickman finds the Commission ultimately found that increased scrutiny of contingency fees posed too great a threat to the status quo. He concludes that the changes fly in the face of an attorney’s historical fiduciary obligation and materially diminishes the protections afforded to contingency fee clients.

[Prof. Brickman was kind enough to allow me to comment on a draft of the article and to thank me in the article for my (meager) assistance.]
Despite the ABA’s recent assault on clients’ fiducial protections, and the triumph of lawyer self-interest at Ethics 2000, the fight is not over.   Thus, we stated last year:
The battle over the new model rule governing contingency fees is being fought right now across the country, on the state level.  As reported in our posting 6/30/03, Arizona recently adopted a version of Rule 1.5 that considerably improves upon the Ethics 2000 proposal, while North Carolina became the first state to adopt the new rule without changes.   Your Editor gave his version of the problems with New Model Rule 1.5 in an Open Letter to the FTC (April 11, 2002), on the ABA and the standard contingency fee.

As we reported last month, the Florida Bar’s Board of Governors is expected to finalize a report that rejects the New Model Rule1.5 this week.

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