Ethics Opinions
Iowa Supreme Court Board of Professional Ethics and Conduct

Date of Opinion: 09/02/1998

Opinion Number: 98-03


Opinion: You state and ask as follows:
      “The question presented is whether reverse contingent fees are acceptable in Iowa. What I mean by ‘reverse contingent fee’ is a contingent fee based on the difference between the amount assessed by a creditor, and the amount finally agreed to for satisfaction of a debt.

      Specifically, my question is in the context of a social security benefit overpayment case. My client was assessed an overpayment by the Social Security Administration (‘SSA’). (Emphasis added) Under SSA’s rules, a beneficiary may request a reconsideration by the administration of the overpayment amount and/or a waiver of the recovery of the assessed overpayment. Potentially the entire amount could be waived and the client would owe nothing to SSA.

      My proposed fee agreement would be contingent on success of either request before SSA, and would be for 25% of any amount saved, that is, the difference between the initial assessed overpayment and the final amount assessed by SSA.”

The leading American Bar Association ethics opinion on this subject is Formal Opinion 93-373, April 16, 1993. That opinion cites Wunschel Law Firm, P.C. v. Clabaugh, 291 NW2d 331 (Iowa 1980). It is a leading case on this subject but it is readily distinguishable from the case at hand. The ABA Opinion, supra, is predicated upon the Model Rules. The rationale is the same as would be applied under the Model Code under which Iowa operates and that rationale hereby is adopted by the Board.. That ABA opinion provides that reverse contingent fee is permissible so long as the amount saved for the client is reasonably determinable, the fee is reasonable, and the client gives his or her fully informed consent.

In this case the lawyer’s fee is based on the amount of money actually saved the client. Such an arrangement may be in the best interests of the client. The damages sought by the plaintiff in the original action are liquidated damages. Thus the determination of the amount of damages is not speculative but may easily be determined.

It is the opinion of the Board that on the facts presented to the Board it would not be improper in this case to enter into a reverse contingent fee agreement.

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