The Florida Bar
Choice-of-law principles will determine whether the contingent fee schedule and client statement of rights provisions of Rule 4-1.5 apply to Florida Bar members practicing or residing out-of-state. Similarly, the applicability of these provisions when lawyers licensed in different jurisdictions are representing a client must be determined on a case-by-case basis.
(May 1, 1988)
(May 1, 1988)
RPC: 4-1.5(F), 4-1.5(F)(2), 4-1.5(F)(4), 4-1.5(F)(4)(b)1, 4-1.5(G), 4-5.5, 4-8.5; ABA Model 8.5
Opinions: Maryland 86-28, Michigan CI-709
Case: Bernick v. Frost , No. A-716-84T3 (N.J. Super. 5/13/86)
Rule 4-1.5(F) of the Rules Regulating The Florida Bar establishes certain requirements with which Florida Bar members must comply when contracting for, charging, or collecting a contingent fee. Subsection (4) of this rule contains additional requirements, including a maximum fee schedule, that must be satisfied when the fee is contingent upon the successful prosecution or settlement of a personal injury or wrongful death matter.
The Professional Ethics Committee has been asked by the Board of Governors to address the issue of whether, or to what extent, these rules apply to Florida Bar members who reside or practice outside of the State of Florida.
There is no indication in the rule itself, or in the Florida Supreme Court's per curiam opinion adopting the rule, how such questions are to be answered. However, Rule 4-8.5 provides that an attorney who is admitted to practice in Florida is subject to the disciplinary authority of The Florida Bar "although engaged in practice elsewhere." Problems may arise when the Florida rules of conduct conflict with those in the other jurisdiction where the attorney is engaged in practice. In such situations, the Comment to Rule 4-8.5 is relevant:
In modern practice lawyers frequently act outside the territorial limits of the jurisdiction in which they are licensed to practice, either in another state or outside the United States. In doing so, they remain subject to the governing authority of the jurisdiction in which they are licensed to practice. If their activity in another jurisdiction is substantial and continuous, it may constitute practice of law in that jurisdiction. See Rule 4-5.5.
If the Rules of Professional Conduct in the two (2) jurisdictions differ, principles of conflict of laws may apply. Similar problems can arise when a lawyer is licensed to practice in more than one jurisdiction.
Where the lawyer is licensed to practice law in two (2) jurisdictions which impose conflicting obligations, applicable rules of choice of law may govern the situation.
Thus, it seems that choice-of-law principles should be applied when determining whether the requirements of Rule 4-1.5(F) apply in a particular situation to a Florida Bar member residing or practicing out of state.
This choice-of-law approach has been used by courts and ethics committees from other states. In Bernick v. Frost , No. A-716-84T3 (N.J. Super. 5/13/ 86), the court determined that New Jersey's, rather than New York's, limitation on contingent fees applied to the personal injury action in question. In reaching this conclusion, the court relied on choice-of-law principles usually applied by New Jersey courts in contract cases. The court noted that, under these principles, the applicable law was that of the jurisdiction having the most significant relationship to the parties and to the transaction. This jurisdiction was New Jersey: both attorney and client were New Jersey residents; the fee agreement was executed in New Jersey in a form contemplating application of the New Jersey fee schedule; the attorney-client relationship throughout the case subsisted in New Jersey; and most of the attorney's performance was rendered in New Jersey. Factors such as these are listed by the Restatement, Conflicts of Laws (Second) as factors to be considered in determining which state has the most significant relat ionship to the parties and to the transaction.
The Committee on Professional and Judicial Ethics of the State Bar of Michigan, in its Opinion CI-709, addressed the issue of applicability of the Michigan Bar's disciplinary rules to its members who were also members of the bar of another state. The Committee concluded that an attorney who is admitted in Michigan and in another state, but whose practice in no way involves Michigan, will not be subject to discipline under the applicable Michigan standards for conduct that conforms to the applicable standards of the other state. For an attorney to be subject to the Michigan standards the conduct at issue must in some way involve Michigan or must violate the standards of the other state. In adopting this opinion the Committee implicitly applied the "most significant relationship" choice-of-law principle that was applied by the New Jersey court in Bernick .
Similarly, the Maryland State Bar Committee on Ethics, in Maryland Opinion 86-28, concluded that a Maryland attorney practicing in another state that had ethical restrictions less stringent than those of Maryland should be deemed by Maryland authorities to have acted ethically if he conformed his behavior to the other state's rules of ethics. The Committee apparently viewed this issue as a choice-of-law question, because in reaching this conclusion it relied on the Comment to ABA Model Rule 8.5 (identical to Florida Rule 4-8.5 and Comment).
In view of Rule 4-8.5 and the authorities discussed above, the Professional Ethics Committee believes that whether Rule 4-1.5(F) applies in a particular situation to a Florida Bar member who resides or practices in another state must necessarily be determined on a case-by-case basis. In making such a determination, the overriding consideration will be whether Florida or the other jurisdiction in question has the most significant relationship to the client and the case. Important factors to be examined include the client's state of residence, the state where the cause of action arose, and the state (or states) where suit may be filed.
In order to provide some guidance to Florida Bar members who may be uncertain whether they must comply with the requirements of Rule 4-1.5(F) in a particular situation, several examples will be analyzed below.
1. A Florida Bar member is also licensed in another jurisdiction whose contingency fee rules differ from Florida's. He accepts representation of a client on a contingency fee basis in a personal injury matter. The client is a resident of the other jurisdiction, the cause of action arose in the other jurisdiction, and suit will be filed there.
In this situation, the requirements of Rule 4-1.5(F) should not apply to the attorney's contract with the client. See Michigan Ethics Opinion CI-709. The client and the case have no relationship to or connection with the State of Florida. Whether the Florida Bar member resides in Florida or the other jurisdiction is relatively insignificant.
2. A Florida Bar member is also licensed in another jurisdiction whose contingency fee rules differ from Florida's. He accepts representation of a client on a contingency fee basis in a personal injury matter. The client is a resident of the other jurisdiction and the cause of action arose there. Because the potential defendant is a Florida resident, suit could be filed in Florida.
The requirements of Rule 4-1.5(F) should not apply to the attorney-client employment contract in this situation, even if suit is actually filed in Florida. The relationship of the case to Florida is too attenuated to warrant requiring the attorney to comply with the rule. Further, if the applicability of the rule were dependent solely on where suit was filed, a Florida Bar member who is also licensed in another jurisdiction with more attractive contingency fee rules might be tempted to "forum shop" in order to obtain a higher fee.
The conclusions reached in the above general examples will not differ regardless of whether the Florida Bar member resides in Florida. When determining which jurisdiction has the most significant relationship to the client and the case, where the attorney resides is less important than where the client resides and where the cause of action arose. As Rule 4-8.5 provides, an attorney licensed in Florida is subject to the Florida Bar's disciplinary jurisdiction regardless of where he practices.
More complex questions arise when lawyers from different states are involved in a case. The examples below have been presented by a Florida attorney. In these examples, the Florida attorney is licensed only in Florida (unless otherwise noted).
3. An out-of-state lawyer representing an out-of-state client has entered into a contingent fee contract lawful in his state calling for payment of attorneys' fees upon a schedule different than that set forth in Rule 4-1.5(F)(4). After doing a substantial amount of work on the case, he decides that the case must be placed in suit in Florida and forwards the case to a Florida attorney to represent the client. From that point forward the Florida attorney will be doing a very substantial amount of the work in the case although the out-of-state lawyer will be participating in certain features of the case, particularly those matters necessarily being handled in the residence of his client. Two questions arise:
A. Must the client be furnished a copy of the Statement of Client's Rights before the Florida attorney becomes associated?
B. If the out-of-state lawyer is unwilling to modify his contract to comply with Florida's limitations, can the Florida attorney represent the client by limiting his "share" of the fee to the limitations set forth in Rule 4-1.5(F)?
The answer to question 3.A is "yes" if the Florida attorney is participating in the contingent fee. Rule 4-1.5(F)(4) provides that, in a personal injury action, any lawyer who "enters into an arrangement ... whereby the compensation is to be dependent or contingent in whole or part upon the successful prosecution or settlement thereof" must comply with certain listed requirements, one of which is that the client be furnished a Statement of Client's Rights. Thus, the Florida attorney must provide the client with a copy of the Statement of Client's Rights before he may ethically share in the fee in question.
Question 3.B also must be answered "yes." Obviously, the Florida attorney has no control over the contract between the out-of-state attorney and the client. He can, however, conform his own conduct in dealings with the client to Rule 4-1.5(F)(4). Further, the Florida attorney should be aware that he may not ethically share in the fee unless the total fee charged to the client is reasonable. Rule 4-1.5(G).
4. An out-of-state attorney who has a contract with an out-of-state client decides it is necessary that suit be filed in Florida. In order to comply with local rules, he must associate a Florida attorney.
A. If he pays the Florida attorney on a non - c ontingent basis, either on a flat rate or an hourly basis, can the Florida attorney participate in the case without providing the client with a Statement of Client's Rights?
B. If the ultimate payment of the fee is contingent upon success but is not based upon a percentage of the recovery, can the Florida attorney without court approval participate without providing the client with the Statement of Client's Rights?
Question 4.A must be answered "yes." As noted above, the requirements of Rule 4-1.5(F) concerning the Statement of Client's Rights apply when the Florida Bar member's fee is "dependent or contingent in whole or part" on successful resolution of the case. For this reason, the answer to the question asked in example 4.B is "no." (Whether the contingent fee is based upon a percentage of recovery is not relevant except in determining whether the maximum fee amount permitted pursuant to Rule 4-1.5(F)(4)(b)1 has been exceeded.)
5. The Florida attorney represents a client and for various reasons finds it necessary to file a "protective suit" in some foreign jurisdiction. This might be in a circumstance in which jurisdiction over a defendant is questioned, and in order to prevent the statute of limitations from running in a foreign jurisdiction the Florida attorney employs an out-of-state attorney to file a lawsuit to toll that statute of limitations.
A. If the Florida attorney defers payment of that attorney and agrees to pay him a fee upon the contingency that the Florida attorney recovers, must the Florida attorney have him sign a contract with the client?
B. If the Florida attorney immediately pays that attorney an attorney's fee for the service, must he have that attorney sign a contract with the client?
Rule 4-1.5(F)(2) provides that every attorney who, in connection with a particular matter, enters into an employment agreement in which his compensation is to be contingent in whole or part upon the successful outcome of that matter must reduce the fee agreement to a written contract signed by the client and himself. In example 5.A, the out-of-state attorney's compensation for services rendered in the action is contingent upon the successful outcome thereof.
It is true that Rule 4-1.5(F) governs the conduct of Florida Bar members and, of course, the out-of-state attorney in this example is not a member of The Florida Bar. However, Rule 4-1.5(F)(2) further provides that each attorney who participates in the fee shall sign a written contract with the client. Consequently, it would be unethical for the Florida attorney to share a fee with the out-of-state attorney unless that attorney enters into a written contract with the client. (Because the out-of-state attorney will not be paid unless there is a recovery, the paying of that attorney by the Florida attorney for services performed must be viewed as a division of fees.)
In example 5.B, the out-of-state attorney's payment is not contingent on the outcome of the action. Therefore, the requirements of Rule 4-1.5(F) are inapplicable and the out-of-state attorney need not enter into a written contract with the client.
6. In representing a client the Florida attorney finds it necessary to file a lawsuit in some foreign jurisdiction. In accordance with that jurisdiction's requirements, the Florida attorney employs a local attorney to serve as local liaison counsel. The attorney will have little, if any, real responsibility.
A. If the Florida attorney pays the attorney on a non-contingent basis, must he have the attorney sign a contract with the client?
B. If the Florida attorney pays the attorney out of his fee upon the contingency that he wins, must he have the attorney sign a contract with the client?
C. If the Florida attorney pays the attorney out of his fee upon the contingency that he wins with the other attorney's fee being in some way contingent upon the amount of the recovery, must the other attorney sign a contract with the client?
The answer to question 6.A is "no." The fee arrangement is not a contingent one, and accordingly, the requirements of Rule 4-1.5(F) are inapplicable in this situation.
For the reasons discussed in connection with example 5.A, the answer to questions 6.B and 6.C is "yes."
7. An out-of-state attorney with an out-of-state client and an out-of-state lawsuit seeks to have a Florida attorney participate in the trial of the case. The Florida attorney will be paid on a contingent basis. (Presumably the Florida attorney is either licensed in the other state or will be admitted pro hoc vice so that he may appear in the case.)
A. Can the Florida lawyer participate without court approval if the out-of-state fee contract does not comply with Rule 4-1.5(F)?
B. Must the Florida lawyer obtain a signed copy of the Statement of Client's Rights from the out-of-state client?
The answer to question 7.A is "yes." The other state clearly has a more significant relationship to the client and the cause of action than does Florida, and so that state's contingent fee rules will be applicable. As previously noted, the fact that the Florida attorney resides in Florida is relatively insignificant.
Similarly, question 7.B must be answered "no" because the client and the cause of action have a more significant relationship to the other state than to Florida.