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Can a contingent fee be unreasonably high?
Choose one answer.
Lionel, a sole practitioner, is sitting in his office. Johnny Ray, a prospective client, breezes into his office. Lionel offers Johnny a seat and exchanges his usual first-meeting pleasantries before getting to the heart of the matter. Johnny explains that he is getting a divorce, that his wife Edith is extremely wealthy, and he wants to continue living in the luxurious style to which he has become accustomed.
After fleshing out the details, and determining that Johnny may have a sizable amount of money coming his way, Lionel says: “Well, I charge $300 an hour, plus applicable taxes, and I charge for disbursements, which means…”
“Whoa— I don’t have that kind of money! Edith cut off my allowance once I told her I wanted a divorce. Everything is in her name, you see, so I just have a couple hundred bucks, a snowboard, and my car. We had what progressive folk might call a marriage of convenience. She liked my looks and cavalier attitude, and I found her money convenient. I want her money.”
“Whew…ok, listen, I can work on a contingency basis. It would work like this: My fee will not be charged upfront. Instead, when you either receive a settlement from your wife or an award at trial, I will be entitled to be paid based on a percentage of that sum. Given the risk to me, I charge 55%. That would mean, for example, I would get $55 of every $100 you are awarded as a settlement or at trial.”
“That seems like a big percentage!”
“That all depends on the size of the settlement or award.”
Johnny furrows his brow. “I suppose. So how does this work?”
Lionel explains the process. They agree to proceed on the matter. When Johnny asks if he needs to sign anything, Lionel says: “No—I’m old school, a handshake is good enough for me. We can get the particulars down on paper later if we need too.”
Select the answer that best describes what Lionel should have done.
Choose one answer.