Conflict and Solidarity: The Legacy of Evans v. Jeff D.

Georgetown Journal of Legal Ethics, The, Spring 2004 by Nazer, Daniel

The three main options for public interest lawyers in the non-profit sector are as follows. First, these attorneys can break with tradition and charge contingent fees. Second, lawyers can follow Judge Wald's advice and encourage their clients to pursue attorney's fees even when the settlement offer is otherwise adequate. Davies' research suggests that some lawyers do pursue this option.104 My research suggests that this is by far the most popular strategy for lawyers in the non-profit sector.105 Third, lawyers can simply ask their clients to sign retainer agreements conditioning representation on the non-waiver of fees.106 I shall call this the "limited retainer" solution. Davies' research did not uncover usage of this strategy. A recent ethics opinion, along with other evidence, suggests that at least some public interest lawyers have considered this option, however.107

A. CONTINGENT FEES

Fee-related conflicts emerge when a lawyer has an incentive to pursue a fee award even though this pursuit clashes with the clients' interest. In Jeff D., the plaintiffs would have received no extra benefit if their attorney had refused the settlement offer and pursued fees. Contingent fees provide an effective solution to this problem because they can give clients a financial incentive to pursue a statutory fee award. Attorneys can do this by offering to subtract any statutory fee award from the contingent fee.108 Once the client and the attorney share an interest in securing a fee, most conflicts should disappear. The contingent fee solution does not raise difficult ethical problems apart from those ethical issues raised by contingent fees in general.109

Although contingent fees are a good solution to fee-related conflicts, this option is often not available. There are two main reasons for this. First, contingent fees are not an option when only injunctive relief is sought. 110 Second, many public interest lawyers are unable, or very reluctant, to charge contingent fees. Many lawyers are employed by organizations, such as law school clinics, non-LSC funded legal services organizations and other non-profits that have not traditionally accepted contingency fees. 111 Of course, it would beg the question to end the analysis there. Perhaps these organizations should change their practice and begin charging contingent fees.

There are number of reasons why non-profit public interest organizations are reluctant to enter into contingent fee agreements. An amicus in Jeff D. argued that its potential clients "many of whom have already suffered from harassment by legal or governmental authorities, are often reluctant to sign such agreements."112 Thus, public interest lawyers may wish to distinguish themselves from profitseeking attorneys as a way to build client trust. Contingent fees are also unhelpful in cases where the monetary damages will be small. 113

Internal Revenue Service regulations are probably responsible for much of the reluctance to charge contingent fees. Tax-exempt public interest organizations risk losing their tax-exempt status if they collect contingent fees. From 1975 until 1992, the IRS narrowly limited tax-exempt organizations' ability to collect fees from clients. 114 IRS guidance suggested that an organization could be tax-exempt only if it did not "seek or accept attorneys' fees from its clients as compensation for the provision of legal services."115 This restrictive regime forced all tax-exempt public interest organizations to rely on alternatives to contingent fees.