Can a contingent-fee agreement set the fee on the greater of the trial recovery or a settlement offer the client rejected against the firm's advice?

Plain-English summary

A lawyer asked about a contemplated provision in a contingent-fee contract. The proposed provision would set the fee on the greater of (1) the recovery obtained at trial, or (2) the amount offered in settlement, and would be triggered only if the client rejects a settlement offer that the firm deems "reasonable in light of the circumstances."

The committee responded that the provision infringes on RPC 1.2(a), which requires an attorney to abide by the client's decision whether to accept or reject a settlement offer. The committee's editor's note directs readers to Formal Opinion 191.

Currency note

This opinion was issued in 1994, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a contingent fee be based on a settlement offer the client turned down?

A: The committee said a provision setting the fee on the greater of the trial recovery or a rejected settlement offer infringes RPC 1.2(a).

Q: Why does tying the fee to the rejected offer create a problem?

A: The committee said RPC 1.2(a) requires the lawyer to abide by the client's decision whether to accept or reject a settlement offer, and the provision pressures that decision by penalizing rejection.

Background and rules framework

The opinion applied RPC 1.2(a) (ABA Model Rule 1.2), which allocates settlement authority to the client and requires the lawyer to abide by the client's decision to accept or reject a settlement offer. The committee read a fee provision that rewards the firm when the client rejects a settlement the firm considers reasonable as infringing that allocation of authority.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.2 (scope of representation; client's settlement authority); Washington RPC 1.2(a)

Other opinions cited:

• WSBA Formal Opinion 191 (cross-referenced in the committee's editor's note)

See also

• WA Ethics Op. 1025: Contingent Fee in a Civil Forfeiture Proceeding
• WA Ethics Op. 1198: Contingent Fee From Sale Proceeds

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=653

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 1572
Year Issued: 1994
RPC(s): RPC 1.2(a)
Subject: Contingent fee based on greater of recovery at trial or settlement offer

I have been instructed by the Rules of Professional Conduct Committee to respond to your ethics inquiry regarding a contemplated contract provision in a contingent fee contract.

In response to your inquiry, the RPC Committee has evaluated your proposed provision for a contingent fee agreement based on the greater of (1) the recovery obtained at trial, or (2) the amount offered in settlement. The provision would be triggered only if the client rejects a settlement offer that the firm deems "reasonable in light of the circumstances." The response by the Committee was that the provision infringes on RPC 1.2(a) that requires an attorney to abide by the client's decision whether to accept or reject a settlement offer.

[Editor's Note: See Formal Opinion 191]