By John Council
PRO BONO-TURNED-CONTINGENT FEE CASE RESULTS IN REPRIMAND
What happens when an attorney accepts a pro bono case from a local bar association-sponsored legal services program and converts the suit into a contingent-fee arrangement? The unusual scenario can result in a public reprimand from the State Bar of Texas and the forfeiture of the fee, according to a recent decision from Houston’s 1st Court of Appeals.
But legal ethics experts disagree over whether a pro bono case should ever be changed to a contingent-fee arrangement. Some say it’s OK if the attorney complies with the Texas Disciplinary Rules of Professional Conduct.
Normally, the kinds of cases in which attorneys agree to represent poor people for free have little chance of economic recovery. That’s why many local bar organizations have volunteer lawyer programs that assist low-income clients who can’t otherwise afford representation in matters such as obtaining protective orders, writing wills and completing no-contest divorces.
But the Oct. 5 opinion in Stephen E. McCleery v. Commission for Lawyer Discipline involves the rare pro bono case where an attorney stood to earn a fee. According to the 3-0 decision, McCleery violated Rule 1.04(a) of the Texas Disciplinary Rules of Professional Conduct by charging an ‘unconscionable fee’ by changing the nature of the attorney-client fee arrangement just prior to trial.
Rule 1.04(a) provides that ‘a lawyer shall not enter into an arrangement for, charge, or collect an illegal or unconscionable fee. A fee is unconscionable if a competent lawyer could not form a reasonable belief that the fee is reasonable.’
The opinion sets out the following: In 1998, McCleery agreed to represent Alonzo Williams in a case involving a dispute over a contractor’s lien on Williams’ house. Because of the lien, Williams’ house was threatened with foreclosure. McCleery received the case as a referral from the Houston Volunteer Lawyer Program (HVLP), a Houston Bar Association program.
Williams and McCleery, a Houston solo, signed an HVLP professional services agreement in which McCleery agreed to represent Williams at ‘no charge.’ It was also HVLP’s written policy that its volunteer-attorneys donate any fees recovered during litigation to HVLP.
The evening before the May 22, 2000, trial of Williams’ suit, McCleery presented a contingent-fee contract to Williams in which McCleery would receive 40 percent of ‘all sums collected.’ Williams signed the contract. After Williams won a $450,000 jury verdict, the case settled for $50,000. As part of that settlement, McCleery received $20,000 in attorney’s fees.
Williams later filed a grievance against McCleery with the State Bar of Texas. A Bar grievance panel recommended that McCleery receive a private reprimand and make restitution. McCleery rejected the proposed disciplinary action and appealed to a state district court.
A state district court issued a public reprimand ordering McCleery to pay Williams $20,000 in restitution — a decision the 1st Court affirmed.
‘The trial court found that McCleery’s eleventh-hour fee agreement was unconscionable. We do, too,’ wrote Justice George C. Hanks Jr. in an opinion joined by Justices Evelyn Keyes and Tim Taft.
‘We hold that the evidence is legally and factually sufficient to support the trial court’s finding that McCleery violated Rule of Professional Conduct 1.04(a),’ Hanks wrote.
The 1st Court also found that McCleery had failed to advise Williams that he should have an independent lawyer review the contingent-fee contract before Williams signed the document. It also found McCleery violated Rule 1.04(c), which states that fee agreements between lawyers and clients shall be communicated ‘within a reasonable time after commencing the representation.’
When asked why he changed the nature of his fee agreement with Williams from pro bono to a contingent-fee arrangement, McCleery says the answer is simple: ‘My client asked that I do that. I think he thought we were doing a really good job in this case and there were some more important issues to him than getting a recovery’ — namely saving his house from foreclosure.
McCleery also says he never believed the suit would amount to much of a recovery — $5,000 at most. But McCleery says he worked so hard on the case, Williams stood to win more at trial.
But in trial court testimony in McCleery v. Commission for Lawyer Discipline, Williams disputed the notion that he suggested McCleery recover a fee and said the first he learned about the new arrangement was at trial. ‘He never explained to me nothing about how it worked, was going to be charged or nothing,’ Williams testified according to the 1st Court opinion.
Linda Acevedo, first assistant disciplinary counsel for the State Bar who represented the Commission for Lawyer Discipline throughout the grievance case, says the 1st Court reached the right conclusion.
‘Typically if you take on a case pro bono, it’s pro bono,’ Acevedo says. But the change in the fee agreement might have been permissible if McCleery had handled it differently, she says. If McCleery had given Williams plenty of notice about the change and advised Williams that he should have an independent lawyer review the fee change proposal, the arrangement could have been acceptable, Acevedo says.
It’s the circumstances of the case that make it egregious, Acevedo says. ‘The opinion was very fact-specific.’
Rex Davis, a shareholder in Waco’s Sheehy Lovelace & Mayfield who represents McCleery and a former chief justice of the 10th Court of Appeals, says his client is considering appealing the decision.
McCleery adds that he cleared the contingent-fee contract with someone at HVLP before Williams signed it, but he can’t recall who he talked to.
‘I even called the HVLP and said, ‘Hey, can I do (that?’ ‘ McCleery says. ‘And they said, ‘Whatever the nature of your arrangement is with your client is your own.”
Peggy Montgomery, who chairs HVLP’s board of directors, doubts anyone associated with the organization would have blessed McCleery’s fee arrangement.
‘That is not what he would have been told by HVLP. If he’s a volunteer lawyer and he gets a recovery, that goes back to HVLP,’ says Montgomery, in-house counsel with ExxonMobil Corp.
Montgomery says HVLP generally does not accept cases that could generate fees. The program usually refers damages cases to lawyers not involved with HVLP, she says.
McCleery’s situation is atypical, she says.
‘I’ve been involved with pro bono for more than 20 years, and I’ve never seen this,’ Montgomery says.
What to do?
While McCleery’s fee arrangement with his client was unusual, even some advocates of pro bono work say that lawyers should not be forbidden from receiving compensation for their work for pro bono clients.
An attorney who accepts a pro bono case has an obligation to keep the case as a pro bono case, says Frank Newton, the former dean of Texas Tech University School of Law and a former State Bar president. ‘Arguably the pro bono client could choose to make a gift to the lawyer after the fact, if it were truly a gift and was completely voluntary.’
‘There’s nothing wrong with an attorney who encounters a client in a pro bono environment and recognizes that the case has some economic merit and signs them up on a contingent-fee basis,’ says Daniel Sheehan, a legal malpractice attorney with Dallas’ Daniel Sheehan & Associates. ‘The real problem here is he took it . . . and changed the fee [arrangement] well into the representation. It raises a presumption of unfairness.’
But Ellen Pryor, an associate provost at Southern Methodist University Dedman School of Law who has long been involved with pro bono work, says there is no circumstance in which a lawyer should accept a fee for working on a pro bono case.
‘It raises the interesting point that pro bono work is needed for cases where there will be some economic recovery,’ Pryor says. Pro bono organizations have to take some cases where only a small fee recovery is possible — so small that for-profit lawyers will not accept the cases.
‘[O]nce you say you’re the lawyer pro bono, I can’t imagine a circumstance where you should change that,’ Pryor says. ‘I can’t imagine a situation where you could get away with it.’
Bruce Campbell, a partner in Dallas’ Campbell & LeBoeuf who defends attorneys in the disciplinary system, says lawyers should be careful when turning pro bono cases into contingent-fee arrangements.
‘Contingent fees on the whole are looked at much more carefully by courts and in the disciplinary process than ever before,’ Campbell says. ‘And this is just a good example of what can go wrong if you wait until the last minute and you don’t give the required notice to seek independent counsel.
‘He’s being punished for outstanding results,’ Campbell adds of McCleery. ‘If he’d only gotten 5,000 bucks, it’s unlikely that anybody would have raised a stink about it. It doesn’t make it any more right. But it would have gone under the radar.’
McCleery says if he had it to do all over again, he probably wouldn’t have signed a contingent-fee contract with Williams.
Notes McCleery, ‘In retrospect, would I have still taken the fee from him? After all of this, probably not, because of what happened, not because I think it was the wrong thing to do.’