Summary: A lawyer may properly advertise contingent fee rates or percentages, provided that the advertisement specifies whether the advertised rate is computed net or gross of any expenses for which the client is responsible, and provided that the advertisement is not otherwise deceptive or violative of any other disciplinary rule.
Facts: Several attorneys have inquired whether there is any Massachusetts ethical prohibitions on the advertisement of contingent fee rates. One proposed an advertisement reading, "25% Contingency Fees for Personal Injury Cases." Another noted that DR 2-101(B)(22) of the ABA Model Code of Professional Responsibility--not in force in Massachusetts--permits advertisement of contingent fee rates "provided that the statement discloses whether percentages are computed before or after deduction of costs."
Discussion: The propriety of advertising contingent fee rates is not specifically addressed in the version of the Code of Professional Responsibility adopted by the Supreme Judicial Court in its Rule 3:07. And while SJC Rule 3:05 governs both the propriety and the content of contingent fee agreements themselves, it does not speak to the issue of advertisement. Advertisement of contingent fee rates is governed instead by DR 2-101(A), which broadly prohibits attorneys' use of public communications "containing a deceptive statement of claim."
We believe that unqualified statements such as "25% Contingency Fees for Personal Injury Cases" risk being deceptive because they are subject to at least three reasonable interpretations. First, a prospective client reading such an advertisement might not think about costs at all, or might assume that costs are deducted from the attorney's share of the final award. Such a client might reasonably conclude that she could expect to take home a full 75% of any prospective settlement or judgment. Second, the client might reasonably conclude that the advertising attorney will charge 25% of what is left of the settlement or judgment after reimbursable costs have been netted out. Third, the client might conclude that the advertising attorney will, after having been reimbursed for his costs, still charge 25% of the gross settlement or judgment amount.
By way of illustration, we can imagine a personal injury case with a settlement value of $100,000, in the preparation of which an attorney incurs $20,000 in reimbursable costs. A prospective client seeing an unqualified advertisement of a "25% Contingency Fee" might conclude that she will simply receive $75,000 of the award ($100,000 less the attorney's 25%). (This client may, if she thinks of costs at all, assume that the $20,000 is deducted from the attorney's $25,000 share.) Alternatively, the prospective client might believe that she stands to receive $60,000, or 75% of the $80,000 left after costs have been deducted from the gross $100,000 award. Finally, she may believe that she will receive only $55,000 ($100,000 less $20,000 in expenses and less an additional $25,000, representing 25% of the gross award.
An unqualified advertisement for a set contingency fee percentage thus risks being deceptive because it is vague and subject to multiple reasonable interpretations. To correct those problems and to satisfy DR 2-101(A), advertisements of contingent fee rates should specify whether the advertised contingency rates are computed net or gross of any costs or expenses for which the client is responsible. We therefore advise that if such specification is made--and if the advertisement is not otherwise deceptive or violative of the disciplinary rules--contingent fee rate advertisement is permissible.
Permission to publish granted by the Board of Delegates on September 20, 1994. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.