1998-01

“ETHICS OPINION

OFFICE OF GENERAL COUNSEL

RO-98-01

QUESTION:

In 1991, the Disciplinary Commission of the Alabama
State Bar issued formal opinion RO-91-05 which held that an
attorney may enter into a contingency fee agreement to
collect child support arrearage where the client is unable
to pay a reasonable attorney’s fee on a non-contingent
basis. Since the issuance of this formal opinion, there
have been two significant developments which are material
to
the conclusions reached therein. First, Alabama appellate
courts have held in a number of recent child support cases
that the money due for support belongs to the child, not
the
custodial parent. Second, there have been federally
mandated changes in child support proceedings which require
the Department of Human Resources to provide collection
services to any individual regardless of his or her
economic
status or ability to pay. The question presented is
whether,
in light of these developments, RO-91-05 continues to
accurately reflect the position of the Disciplinary
Commission of the Alabama State Bar with regard to the
collection of child support arrearage on a contingency fee
basis.

ANSWER:

In view of changes in the responsibilities of the
Department
of Human Resources for the collection of back child
support,
the Disciplinary Commission has difficulty envisioning any
circumstance under which a contingency fee contract would
be
in the best interest of the child. However, the Commission
does not, at this time, conclusively prohibit such
contracts
out of concern that unforeseen circumstances could result
in a situation where a contingency fee contract is the only
means available to the child to collect past due child
support and would, therefore, be in the child’s best
interest.

DISCUSSION:
Rule 1.5(d) of the Rules of Professional
Conduct of the Alabama State Bar prohibits contingency fees
in any “”domestic relations matter.”” The rationale behind
this prohibition is a public policy concern that a
lawyer-client fee arrangement should not discourage
reconciliation between the parties. Obviously, this
rationale has limited applicability in child support
arrearage cases, and most states allow attorneys to collect
child support arrearage on a contingency fee basis where
the
right for child support has already been judicially
established and the sole purpose of the representation is
to
collect past due payments. However, these states all
impose conditions upon the use of contingency fees in
arrearage cases similar to the conditions imposed by the
Disciplinary Commission in RO-91-05.
The concluding paragraph of RO-91-05
provides as follows:
“”For these reasons, it is our view that it would not be
a violation of Rule 1.5(d) to charge a contingent fee in
a case involving collection of arrearages in unpaid
child support, subject to the following conditions:

(1) that the fee is fair and reasonable;

(2) that the client is indigent and no alternative
fee arrangement is practical, and

(3) there are no means available to the client
(similar to those mentioned in your question)
to collect the arrearage.””

While RO-91-05 continues to accurately reflect, in
substance, the position of the Disciplinary Commission, the
Commission is of the opinion that, in light of the changes
in DHR’s mandate and responsibilities, further restrictions
on the use of such contracts would appear to be
appropriate.
It is, therefore, the opinion of the Disciplinary
Commission that an attorney may enter into a contingency
fee
agreement to collect child support arrearage only when to
do so is in the best interest of the child and, even then,
subject to the specific conditions discussed below.
One of the conditions imposed in RO-91-05 on
contingency fees in arrearage cases is that there be “”no
means available to the client (similar to those mentioned
in
your question) to collect the arrearage.”” The opinion
request makes specific reference to an income withholding
order which may be obtained from the court for payment of a
modest fee. More significantly, at the time RO-91-05 was
issued, the Department of Human Resources provided child
support arrearage collection services only to custodial
parents who met the department’s indigency requirements.
It would appear, therefore, that at the time the
Disciplinary Commission issued RO-91-05, the Commission
intended that an attorney not accept a contingency fee
if the custodial parent qualified for the same services to
be provided free of charge by DHR. However, since that
opinion was issued, there has been a federally mandated
change in child support procedures which now requires the
Department of Human Resources to provide arrearage
collection services to any custodial parent regardless of
his or her economic status. It is, therefore, no longer
feasible to tie the propriety of contingency contracts to
whether the custodial parent would qualify for free DHR
services, since all custodial parents may now avail
themselves of these services.

In view of the fact that collection of back child support
is
provided free by the state, the Disciplinary Commission is
of the opinion that only in the rarest of instances should
an attorney accept such collection cases on a contingent
basis. The determinative consideration should always be
the
best interest of the child, which may not necessarily
coincide with the desires or expectations of the custodial
parent. An attorney should not enter into a contingency
fee
agreement without giving serious consideration to whether
an hourly or contingent fee is in the best interest of the
child.
The Commission frankly has difficulty envisioning
any circumstance under which a contingency fee contract
would be in the best interest of the child. However, the
Commission does not, at this time, conclusively prohibit
such contracts out of concern that certain circumstances,
of
which the Commission is not cognizant and cannot at this
time foresee, could result in a situation where a
contingency fee contract is the only means available to the
child to collect past due child support and would,
therefore, be in the best interest of the child. The
Commission emphasizes again, however, that an attorney
should not enter into a contingency fee agreement unless
the
attorney can conclusively make a good faith determination
that the interests of the child are best served by such an
agreement. The Disciplinary Commission is further of the
opinion that, in those rare instances under which an
attorney can make a good faith determination that a
contingency contract is in the best interest of the child,
the attorney must advise the parent, in writing, that the
collection of child support is available at no expense to
the parent or child through either the Department of Human
Resources or the Child Support Collection Division of the
District Attorney’s Office. In fact, the Disciplinary
Commission is of the opinion that the parent should be
advised of the free service offered by the state,
regardless
of whether the representation is on a contingency or set
fee basis. The Disciplinary Commission is also of the
opinion that failure of the attorney to adequately inform
the parent of the availability of DHR or the DA’s services,
or any attempt by the attorney to discourage or dissuade
the
parent of using such free services, would constitute a
violation of the Rules of Professional Conduct of the
Alabama State Bar, including, but not necessarily limited
to, Rule 1.4(b). Attached to this opinion as an addendum
is an acknowledgment form which gives notice to the parent
of the availability of free services and also contains an
affirmation by the parent that the attorney has discussed
and explained the option of using the Department of Human
Resources or the District Attorney’s Office to collect the
arrearage. The Disciplinary Commission of the Alabama
State
Bar is of the opinion that Rule 1.4(b) requires every
attorney who proposes to enter into a contingency contract
or a set fee contract to collect past due child support to
obtain the signature of the custodial parent on this
acknowledgment. Another requirement of RO 91-05 is that
the
fee must be fair and reasonable. The Disciplinary
Commission
has serious concerns that, in the absence of significant
militating factors to the contrary, any contingency fee
which exceeds the actual value of the services rendered by
the attorney, when calculated on the basis of a reasonable
hourly rate for time actually expended, would be excessive.
In fact, the Disciplinary Commission is of the opinion that
there should be a rebuttable presumption that any
contingency fee which exceeds the actual value of the
services calculated on an hourly basis must be deemed
excessive. In other words, in those rare instances where a
contingency fee is determined to be in the best interest of
the child, the fee may not exceed the amount the attorney
would receive were he em ployed on an hourly basis. Any
attorney who accepts a child support arrearage case on a
contingency fee basis should carefully consider the amount
of his fee and should make a good faith determination that
the fee is reasonable when measured by the above standard
and the factors set forth in Rule 1.5. All attorneys who
accept contingency fee arrearage cases should be aware that
their fees are subject to scrutiny by the Office of General
Counsel and the Disciplinary Commission to determine
compliance with the Rules of Professional Conduct and this
opinion. Any attorney whose fee is challenged as being
unreasonable will bear the burden of showing that the above
standard, as well as the criteria in Rule 1.5, have been
applied in determining the fee.
The final condition imposed by RO 91-05 is that the
client must be truly indigent and, therefore, unable to pay
for the legal services on any basis other than a
contingency
fee. If the client is able to pay the prevailing hourly
rate for an attorney’s services, the attorney has an
ethical obligation to work for an hourly rate fee rather
than taking a substantial portion of the back child support
which, in virtually every instance, would result in a much
higher attorney’s fee than would an hourly rate. Again,
the
determinative criteria is the best interest of the child.
When an attorney takes a percentage of back child support
as
his fee, he deprives the child for whom the child support
was intended of obviously needed resources. As referenced
in the question, Alabama Courts have held, and repeatedly
confirmed in recent decisions, that child support belongs
to the minor child, not the custodial parent, and the
parent
may not, by agreement with the non-custodial parent or
others, deprive the child of the monetary support to which
the child is entitled. Representative of such cases is
Floyd v. Edmonson, 681 So.2d 583 (Ala.Civ.App. 1996), which
holds, in pertinent part, as follows:
“”‘Although child support is paid to the
custodial parent, it is for the sole benefit of the
minor children.’ State ex rel. Shellhouse v. Bentley,
666 So.2d 517, 518 (Ala. Civ.App. 1995). ‘Parental
support is a fundamental right of all minor children ….
The right of support is inherent and cannot be waived,
even by agreement.’ Ex parte University of South
Alabama, 541 So.2d 535, 537 (Ala. 1989). ‘A child has
an inherent right to receive support from his parents,
and that right cannot be waived by the parents
by agreement even if a waiver of support provision
is included in the final decree.’ Davis & McCurley,
Alabama Divorce, Alimony & Child Custody Hornbook §
22-8 at 247 (3d ed. 1993). See also Ex parte
State ex rel.Summerlin, 634 So.2d 539 (Ala. 1993).
It is ‘the public policy of this state that parents
cannot abrogate their responsibilities to their minor
children by mutual agreement between themselves so as
to deprive their minor children of the support to
which they are legally entitled.’ Bank Independent
v. Coats, 591 So.2d 56, 60 (Ala. 1991).””

681 So.2d at 585. See also, State Dept. of Human Res. v.
Sullivan, 701 So.2d 16 (Ala.Civ.App. 1997); State Dept. of
Human Res., ex rel. Nathan v. Nathan, 655 So.2d 1004
(Ala.Civ.App. 1995). The Disciplinary Commission has
serious concerns that the practice of allowing contingency
fees in child support arrearage cases can result in a
substantial portion, sometimes as much as half, of the
funds
that should be used to clothe, feed and educate dependent
children, going to attorneys in the form of contingency
fees. If the custodial parent may not deprive the child of
support by forgiving the support obligations of the
non-custodial parent, it would appear equally questionable
for the parent to deprive the child of support by giving a
substantial percentage thereof to an attorney as legal
fees.
This concern becomes even more compelling if the parent has
the ability to pay the attorney from funds other than those
designated for support of the child. It is the opinion of
the Disciplinary Commission that any attorney who desires
to take a child support arrearage case on a contingency fee
basis must take all reasonable steps to investigate the
financial condition of the custodial parent and make a good
faith determination that the parent is, in fact, unable to
pay a reasonable hourly rate or to obtain legal
representation on any other than a contingency fee basis.
It is further the opinion of Disciplinary Commission that
an
attorney who accepts a child support arrearage on a
contingency basis when he knows that the parent is
financially able to pay an hourly fee, or an attorney who
fails to adequately investigate the financial resources of
the parent in order to make such a determination, is in
violation of Rule 1.5(d) and is subject to discipline
therefor.

In summary, it is the opinion of the Disciplinary
Commission
of the Alabama State Bar that rarely, if ever, are
contingency fee contracts in the best interest of the child
and that before any attorney enters into a contingency fee
contract for the collection of child support arrearage, the
following conditions must be satisfied:

1. The attorney has made a good faith determination that
a
contingent fee or hourly fee is in the best interest of the
child.

2. The attorney has required the custodial parent to sign
a written acknowledgment affirming that the parent
understands that the same collection services are available
from the state at no cost.

3. The contingent fee is reasonable and not excessive.
There shall be a rebuttable presumption that any
contingency fee which exceeds the actual value of the
services calculated on an hourly basis must be deemed
excessive.

4. The attorney has conducted sufficient inquiry to make
a good faith determination that the parent cannot pay an
hourly rate from funds other than those designated for
support of the child.

ADDENDUM TO RO 98-01

I, _____(name of parent)______, acknowledge that I have
been
informed and understand that the Department of Human
Resources, and/or the District Attorney for the Judicial
District in which I reside, will collect the past due child
support to which my child is entitled at no cost to me or
to
my child. I further acknowledge that my attorney has
explained to me the procedures which I may follow to avail
my child of this free service and that my attorney has done
or said nothing to discourage or dissuade me from using
this
service. With full knowledge of the availability of this
free service, I hereby make the conscious and informed
decision not to take advantage of such free service to
collect the support due my child, but instead I have
decided to pay my attorney either an hourly rate of $______
per hour or a percentage of the money due my child in
accordance with the terms of the attorney’s proposed
contingency fee contract. My signature on this
acknowledgment affirms that I fully understand my rights
and
obligations with regard to the back child support due my
child.

Signed this the _____ day of ____________________,
19____ .

______________________________

signature of parent

“

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