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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Compton v. Kittleson (11/09/2007) sp-6197

Compton v. Kittleson (11/09/2007) sp-6197, 171 P3d 172

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

LARRY D. COMPTON, Trustee in )
Bankruptcy for Danilo and Angelita ) Supreme Court No. S-12175
Nelvis, )
) Superior Court No. 3AN-04-7687 CI
Appellant, )
)
v. ) O P I N I O N
)
NICHOLAS KITTLESON, ) No. 6197 November 9, 2007
)
Appellee. )
)
Appeal    from     the
          Superior Court of the State of Alaska,  Third
          Judicial  District, Anchorage,  Sen  K.  Tan,
          Judge.

          Appearances:   Mark  A.  Sandberg,  Sandberg,
          Wuestenfeld    &   Corey,   Anchorage,    for
          Appellant.   Brewster H. Jamieson and  Andrea
          E. Girolamo-Welp, Lane Powell LLC, Anchorage,
          for Appellee.

          Before:   Matthews,  Eastaugh,  Bryner,   and
          Carpeneti,  Justices.  [Fabe, Chief  Justice,
          not participating.]

          BRYNER, Justice.

I.   INTRODUCTION
          Attorney Nicholas Kittleson filed a consumer protection
action  against  an Anchorage used car dealership  on  behalf  of
Danilo  and Angelita Nelvis.  Kittleson represented the  Nelvises
under a hybrid fee agreement that called for Kittleson to receive
a  contingent  fee unless the Nelvises settled the  case  for  an
amount  that  will pay less than $175.00 per hour  for  the  time
[Kittleson]  invest[ed] in the case; in that event, the  Nelvises
would be required to pay Kittleson a fee based on the $175 hourly
rate.  Before trial the Nelvises turned down a $25,000 settlement
offer.   They  lost at trial, and the superior  court  entered  a
judgment  ordering them to pay costs and attorneys fees  totaling
almost  $100,000.  The Nelvises then petitioned  for  bankruptcy,
and  the  bankruptcy  trustee  sued Kittleson  to  recover  their
losses,  alleging  that  Kittleson  committed  legal  malpractice
because   his  fee  agreement  violated  the  Alaska   Rules   of
Professional Conduct.  The sole question raised in this appeal is
whether the type of hybrid-fee agreement at issue here is  barred
as  a  matter  of law.  We hold that Alaska law prohibits  a  fee
agreement that uses a clients decision to settle as a trigger  to
convert contingent-fee representation into an obligation  to  pay
hourly fees because a hybrid agreement of this kind impermissibly
burdens the clients exclusive right to settle a case.
II.  FACTS AND PROCEEDINGS
          In  October  1999 Danilo and Angelita Nelvis  bought  a
used  SUV  in Anchorage from Cream Puff Auto, Inc.  The SUV  soon
developed  serious  engine problems and, by  December  1999,  had
stopped  running  completely.   Dissatisfied  with  Cream   Puffs
response  to  their  complaints,  the  couple  sought  help  from
Kittleson,  contending  that Cream Puff  had  misrepresented  the
condition of the SUV and had failed to honor their extended  care
warranty.
          After  an  initial  consultation,  Kittleson  sent  the
Nelvises  a proposed fee agreement along with a letter estimating
that  their  case  had  a  seventy  percent  chance  of  success.
Kittleson  noted that if they won, the Alaska Consumer Protection
Act could entitle them to recover treble damages.  Kittleson also
advised  that  if  they  lost, they would be  responsible  for  a
percentage  of Cream Puffs attorneys fees and costs;  he  pointed
out  that  the potential cost could reach $10,000 or  more.   The
letter then told the Nelvises that Kittleson would be honored  to
fight for your rights in obtaining a fair settlement/judgment  in
this  case,  that he was attaching a proposed fee agreement,  and
that  the Nelvises could begin the process of bringing a  lawsuit
by executing the agreement and fulfilling its conditions.
          The   fee  agreement  attached  to  Kittlesons   letter
proposed a hybrid arrangement that would start with a contingent-
fee  arrangement entitling Kittleson to thirty-three  percent  of
any  amounts  recovered from all defendants  plus  any  award  of
attorney   fees;   under  the  contingent-fee  arrangement,   the
agreement  explained, [i]f there is no recovery  for  you,  there
will be no fee.  But the agreement would automatically convert to
hourly-fee  representation at the rate of $175 per  hour  if  the
Nelvises decide[d] to drop the case.  Specifically, while  noting
that  the Nelvises retained final discretion to settle this case,
the  agreement provided: If you agree to settle this case for  an
amount  that will pay less than $175.00 per hour for the  time  I
invest, then I shall receive an amount over and above the 33%  to
compensate me at the rate of $175.00 per hour before you  receive
your   portion  of  the  settlement.   The  basis  of  Kittlesons
compensation  thus  hinged  on whether  the  Nelvises  agreed  to
settle,  the amount of the agreed settlement, and the  number  of
hours  Kittleson had invested in the case at the  time  the  case
settled.
          The    Nelvises   signed   the   proposed    agreement,
establishing  an  attorney-client  relationship  with  Kittleson.
Kittleson  then  filed  a complaint against  Cream  Puff  in  the
superior  court in Anchorage.  The complaint alleged  that  Cream
Puff had committed fraud and breach of warranty, and had violated
the  Consumer Protection Act and various Federal Trade Commission
regulations.
          While  the  Nelvises case was pending in  the  superior
court, a similar hybrid-fee agreement that Kittleson had used  in
an  unrelated consumer protection case came under scrutiny  by  a
federal  judge  in  an Anchorage bankruptcy case.1   Prompted  by
questions raised in the bankruptcy matter, Kittleson wrote to the
Alaska Bar Association, requesting an informal ethics opinion  on
his  use  of  the  hybrid-fee agreement.  Bar counsel  issued  an
informal opinion concluding that the fee agreement raised several
ethical   concerns,   including  the  agreements   potential   to
significantly inhibit the clients exercise of his or her right to
settle a matter.  Bar counsel also stated that he believed that a
fee  arbitration panel adjudicating a fee dispute under  the  fee
agreement would find impermissible pressure on the clients  right
to  settle  or not settle a matter and would reduce  the  fee  to
thirty-three  percent  and might possibly refer  the  matter  for
investigation.
          Less  than  a  week  after the bar  issued  its  ethics
opinion,  Cream  Puff  sent Kittleson an offer  of  judgment  for
$25,000,  including  costs  and  attorneys  fees.   In  a  letter
informing  the Nelvises of Cream Puffs offer, Kittleson disclosed
that,  when  calculated at the rate of $175 per hour, his  hourly
fees  for  time  worked  on  the case to  date  already  exceeded
$30,000; thus, Kittleson observed, acceptance of this offer would
mean  no  recovery for you, as it would be less than  the  amount
already   incurred  for  my  actual  attorney  fees.    Kittleson
nonetheless  offered  to  compromise my fee  arrangement  to  the
amount  of  $22,000.00, pointing out that [t]his would then  mean
that  you  would  receive  a  total of  $3,000.   Kittleson  also
attached  a  copy  of  the bar associations  ethics  opinion  and
advised  the  Nelvises they could accept Cream  Puffs  offer  and
pursue fee arbitration against him through the bar association.
          Despite the availability of these options, in his final
analysis  Kittleson  urged the Nelvises  to  reject  Cream  Puffs
offer,  stating  that [i]t is my professional opinion  that  your
recovery  will be much greater than this at trial.   Furthermore,
if  you win the Consumer Protection Act claims, which I think are
your strongest claims, then [Cream Puff] would be required to pay
full  attorney  fees.  In keeping with Kittlesons recommendation,
the Nelvises rejected Cream Puffs offer.
          Two  months  later, in response to the bar associations
opinion and the current status of the case, Kittleson revised his
fee  agreement with the Nelvises.  The new agreement omitted  the
fee-conversion clause and called for Kittleson to be paid a  pure
one-third  contingency  fee from any recovery.   But  Cream  Puff
evidently extended no further offers of judgment.
          In  May  2003  the Nelvises case went to trial.   Cream
Puff  prevailed on all claims.  Given the Nelvises  rejection  of
its  pretrial offer, the dealership moved for an award  of  costs
and enhanced attorneys fees under Civil Rule 68 and AS 09.30.065.
The  court  granted the motion and entered judgment  against  the
Nelvises for fees and costs totaling $99,169.19.
          The   judgment  forced  the  Nelvises   to   file   for
bankruptcy.   Bankruptcy  Trustee  Larry  D.  Compton  then  sued
Kittleson  in superior court for legal malpractice in  connection
with  his  use  of  the convertible fee agreement.   The  parties
stipulated that no issues of fact existed and that the only issue
presented  was  whether  the disputed fee  agreements  conversion
clause  is prohibited by Alaska law; Compton then filed a  motion
for summary judgment and Kittleson filed an opening brief seeking
dismissal of the action.
          After  hearing  oral  argument on the  point,  Superior
Court  Judge Sen K. Tan concluded that the agreement as  written,
on  its  face, leaves the decision to settle with the client  and
does not impinge on the clients right to make that decision.   On
this  basis the court determined that the plain language  of  the
agreement  does  not violate Alaska law.  While recognizing  that
the  agreement might be invalid if it resulted in an unreasonable
fee,  the  court observed that [t]he reasonableness of  the  fees
charged  to  a client is a question of fact and not  before  this
court.   Accordingly,  given the parties stipulation,  the  court
denied  Comptons  motion for summary judgment and  dismissed  the
complaint.
          Compton appeals.
III. DISCUSSION
          On  appeal, the parties address the single point of law
raised  before  the  superior court: whether  the  specific  fee-
conversion  provision  at issue here violates  Alaska  law   more
particularly,  the  Alaska  Rules  of  Professional  Conduct   by
impermissibly burdening a clients right to control settlement.
          Compton   argues   that  Kittlesons   convertible   fee
agreement  interferes with a clients right to settle  a  case  in
violation of the Rules of Professional Conduct.  He insists  that
asking  a  client to agree at the outset of a case to  convert  a
pure  contingent-fee arrangement to an hourly fee upon settlement
penalizes  the  client  for settling and imposes  an  intolerable
restriction  on the clients right to decide whether and  when  to
settle.  Compton suggests that the conversion clauses restrictive
effect  is  deliberate, rather than incidental, emphasizing  that
Kittlesons  use of the clause in small-dollar consumer protection
cases  reflects his desire to maximize his  prospects of  winning
full  statutory attorneys fees under the Consumer Protection Act,
a right that attaches only when a claimant prevails at trial.2
          In   response,  Kittleson  acknowledges  that   clients
generally  retain primary control over settlement  decisions  and
have the right to settle without the intervention, knowledge,  or
consent  of their attorneys.  But he maintains that an  attorney-
client  agreement  does  not violate the  Rules  of  Professional
Conduct  unless it expressly restricts a clients right to  accept
or  reject  a settlement offer  a restriction that, in Kittlesons
          view, the disputed conversion clause did not contain.
          Because the parties have stipulated that there  are  no
genuine  issues  of  material  fact,  their  dispute  presents  a
question of law, which we review independently, adopting the rule
of law that is most persuasive in light of precedent, reason, and
policy.3
          In   ruling   that   Kittlesons   fee   agreement   was
permissible,  the superior court focused largely on  whether  the
Alaska  Rules of Professional Conduct categorically prohibit  the
use of agreements providing for hybrid fees.  The court concluded
that  hybrid-fee  agreements  do  not  violate  the  professional
conduct  rules  per  se,  as long as the fee  ultimately  charged
complies  with Rule 1.5s directive that a lawyers  fee  shall  be
reasonable.4    As   a   general  matter,  this   conclusion   is
unassailable.   The plain language of Rule 1.5,  which  regulates
attorneys  fees, implicitly recognizes that hybrid-fee agreements
are  not categorically barred: A fee agreement which is in  whole
or  in  part contingent shall be in writing and shall  state  the
method by which the fee is to be determined . . . .5
          Moreover, even though we have never squarely upheld the
validity  of  hybrid-fee agreements under  Alaska  law,  we  have
tacitly  condoned their use on at least one occasion by upholding
a   hybrid  agreement  against  a  challenge  directed   at   the
reasonableness  of  the particular fee at issue  in  the  appeal,
noting  that  [a]lthough the combined hourly and  contingent  fee
arrangement  was  unconventional, it was not unreasonable.6   Our
recognition that hybrid agreements may properly be used  in  some
situations  appears  to  reflect the  prevailing  view  in  other
jurisdictions.7   We  thus conclude that an attorneys  use  of  a
hybrid-fee agreement does not necessarily breach the Alaska Rules
of Professional Conduct.
          Yet the conclusion that hybrid agreements may sometimes
be  properly  used  hardly establishes that such  agreements  are
always  facially  valid  or that the particular  type  of  hybrid
agreement used by Kittleson was permissible as a matter  of  law.
Here, the hybrid agreement combines two active ingredients into a
potent mix: first, it uses the clients decision to settle as  the
trigger for converting from contingent to hourly fees; then, once
the  conversion  is  triggered,  it  operates  retroactively   to
encompass  all  work performed from the inception  of  the  case.
Whether  Alaska law prohibits this type of hybrid-fee arrangement
presents  a  question  of  law that  cannot  be  decided  without
assessing  the  combined effects of these features  in  light  of
requirements imposed by the Alaska Rules of Professional  Conduct
and other relevant provisions of Alaska law.
          Alaskas  Rules  of  Professional  Conduct  follow   the
mainstream  in  recognizing  that  clients,  and  not  attorneys,
possess  the  right to decide whether to settle or drop  a  case.
Because this right is personal to the client, an attorney  cannot
demand   relinquishment  of  the  right   as   a   condition   of
representation.  Rule 1.2(a) provides that [a] lawyer shall abide
by a clients decision whether to accept an offer of settlement of
a  matter.  Other authorities support this strict view  that  the
right belongs to the client alone.  The American Bar Associations
          Annotated Model Rules of Professional Conduct emphasize that [a]
lawyer  has no inherent power, by virtue of the fact that  he  or
she  represents  a  client, to settle the  clients  claim.8   The
Restatement  (Third) of the Law Governing Lawyers  explains  that
the  decision  to  settle is reserved to  the  client  because  a
settlement definitively disposes of client rights.9  And  Charles
W.  Wolframs treatise, Modern Legal Ethics, notes that  a  lawyer
may,  at times, have a duty to encourage a client to settle,  but
the decision whether or not to settle is for the client to make.10
          Applying  these  principles, courts  have  consistently
declined  to enforce fee agreement provisions that give attorneys
control over settlement by requiring the attorneys approval or by
requiring  the  client  to  accept an  offer  that  the  attorney
considers favorable.11  Because these cases rest their outcomes on
the  personal nature of the right to settle, they do not consider
it  relevant to inquire into how clients choices might affect the
economic interests of their attorneys.  For example, in Mattioni,
Mattioni  &  Mattioni, Ltd. v. Ecological Shipping Corp.,  a  law
firm  sued  a  former  client based on a  provision  in  its  fee
agreement  stating that the client agrees not to  compromise  its
suit without its attorneys consent after the client negotiated  a
settlement  without the firms involvement.12  The  United  States
District Court held that despite the firms reasonable expectation
of a very substantial fee for its work on the clients behalf, the
consent provision of the fee agreement violated public policy and
could  not  support the firms claims against its former client.13
The court went on to observe that if the clients actions unfairly
deprived   the   attorney   of   a  reasonable   expectation   of
compensation, the attorneys proper remedy would not be to enforce
the  void  fee  agreement  but rather to  seek  recovery  of  the
reasonable  value of services rendered under a theory of  quantum
meruit.14
          Also  relevant  are  cases  declining  to  enforce  fee
agreements that interfere with the clients analogous right to end
the attorney-client relationship.15  In confirming that this right
belongs  exclusively to the client, courts have  invalidated  not
only  agreements  that directly restrict the clients  ability  to
exercise the right, but also agreements that use mechanisms  such
as  nonrefundable retainers16 to discourage exercise of the right
by  burdening it indirectly.17  As the New York Court of  Appeals
stated  in  In re Cooperman, an attorney disciplinary  case,  the
problem with special nonrefundable retainers is that they alter[]
and  economically  chill[] the clients unbridled  prerogative  to
walk away from the lawyer.18  The court added that to answer that
the client can technically still terminate misses the reality  of
the economic coercion that pervades such matters.19
          In  their  treatise,  The Law of Lawyering,  professors
Geoffrey  C. Hazard, Jr. and W. William Hodes conclude  that  the
pressure  inherent  in  convertible  fee  agreements  makes  them
unacceptable.  Describing an analogous fee-conversion  provision,
albeit one triggered by a clients decision to reject a settlement
offer, they write:
          Even  if  an adequately counseled client  had
          agreed in advance to such an arrangement,  it
          probably could not stand in the face of Model
          Rule   1.2(a)  and  Restatement   22,   which
          allocate  decisions as to settlement  to  the
          client  .  . . .  Although a lawyer  can  and
          should forcefully argue against rejection  of
          an  offer  that  ought to  be  accepted,  she
          cannot use this form of economic coercion  to
          force the issue.[20]
          A  number  of  bar association ethics opinions  support
this  view, ruling that conversion agreements are invalid if they
change  contingent fees to hourly fees when a  client  wishes  to
accept a settlement that the attorney thinks is inadequate.   The
State Bar Professional Ethics Committee of Wisconsin has written,
after describing such an agreement:
               In  that situation, it would be improper
          for  the  lawyer to attempt to charge  on  an
          hourly  basis.  If the lawyer were  permitted
          to  charge on an hourly basis, the client, to
          some extent, loses control of his case as  he
          or  she  would face the choice of  a  lawyers
          bill he cannot afford and a lawsuit which  he
          or  she doesnt want to pursue.  Moreover, the
          large  attorneys fees which are generated  by
          the  contingent  fee can  only  be  justified
          because of the risks the lawyers must bear of
          not  making an adequate recovery to cover his
          or  her  time in certain cases.  The  clients
          desire  to  accept  a less than  satisfactory
          settlement offer is an inherent part of  that
          risk.   To suggest a lawyer can have it  both
          ways  with the use of the proposed clause  is
          not acceptable to the committee.
               Therefore,   to  include  the   proposed
          language in the contingent fee contract so as
          to  permit  charging a client  on  an  hourly
          basis  if the lawyer deems a settlement offer
          inadequate,  is,  in  the  opinion   of   the
          committee,   overreaching   and,   therefore,
          unethical.[21]
          The  Nebraska  State Bar Associations ethics  committee
reached a similar conclusion:
               It  is the opinion of the Committee that
          a  contractual  agreement  whereby  a  client
          electing to settle a case for an amount  less
          than  the  amount which the attorney believes
          is  the reasonable value of the case, may  be
          charged  an  hourly  fee,  instead   of   the
          contingent fee otherwise agreed upon,  unduly
          restricts  the  clients  ability  to   accept
          settlement offers and may result in excessive
          charges.  Such a contractual provision is not
          permissible.[22]
          And   the   Ethics  Committee  of  the   Colorado   Bar
Association  has  similarly  indicated  that  a  contingent   fee
          agreement that converts to an alternate fee if the client settles
a  claim  (or  refuses to accept a settlement)  contrary  to  the
attorneys advice is void.23
          The case at bar exemplifies the tensions created by the
structure  of  hybrid agreements like the one used by  Kittleson.
Under  a  pure contingent-fee agreement, the Nelvises would  have
recovered  approximately $15,000 from Cream Puffs  $25,000  offer
only  slightly  less than the price they paid for the  used  car.
But  under  the fee-conversion provision, Kittlesons  fees,  when
calculated at the agreements hourly rate, exceeded the amount  of
Cream  Puffs offer, leaving the Nelvises with less than  nothing:
under  the  hybrid  agreement, accepting  the  offer  would  have
triggered  the  conversion from contingent to hourly  fees,  thus
obliging the Nelvises to pay Kittleson more than $30,000 in  fees
while giving them only $25,000 to satisfy the new obligation.24
          The  impact of this fee surprise is compounded  by  the
predictable  difficulty of forecasting the effects  of  the  fee-
conversion  provision.   Given the number of  variables  involved
the merit and strength of the clients claims, the probable timing
and  size of a settlement offer, and the work required to achieve
settlement   it  seems  unrealistic to  expect  that  prospective
clients  like the Nelvises would be able to appreciate the  risks
and  benefits of the disputed fee provision.  It seems  unlikely,
too, that the attorney-client agreement between Kittleson and the
Nelvises,  with  a single sentence devoted to the  fee-conversion
provision, satisfies an attorneys duty to fully explain the terms
of a fee agreement in such a way that the client can understand.25
          In  defense  of  his agreement, Kittleson  argues  that
attorneys  fees are a constant pressure in almost any  litigation
and  quite  often influence settlement decisions. Kittleson  also
contends  that the Nelvises would have been in exactly  the  same
position   had  they  entered  into  a  traditional  hourly   fee
agreement.   While it is true that the costs of litigation  often
influence strategy, Kittlesons response ignores a key distinction
between  a  convertible fee agreement and one based  on  straight
hourly   fees:  the  delayed  impact  of  actuating  a  springing
obligation  to  pay for work already performed but  never  before
chargeable to the client.  Because the potential cost of a future
obligation of this kind and the potential value of the right  the
client is asked to forgo to avoid the obligation are both largely
incalculable    at   the   inception   of   the   attorney-client
relationship, when the fee agreement is signed, we conclude  that
the  fee-conversion provision at issue here impermissibly burdens
the clients right to settle a case.
          Kittleson  nonetheless  defends  the  convertible   fee
agreement  as justified on public policy grounds.  He notes  that
Alaskas  consumer protection laws are designed to  encourage  the
use  of  private damages actions as a means of curtailing  unfair
trade practices.26  He further notes that, to encourage attorneys
to handle such cases, Alaska law also authorizes an award of full
reasonable attorney fees at the prevailing reasonable  rate  when
the client wins a claim at trial.27  According to Kittleson, then,
to  give full effect to the legislative intent, the attorney must
be   allowed  to  include  an  hourly  component  to  a  standard
          contingent-fee agreement in order to promote the attorneys
ability to earn full fees.  It is not the law or an ethical canon
that  an  attorney  must  work for free, Kittleson  reasons,  and
because  the  Legislature wants to encourage private  enforcement
and  representation . . . it is imperative that attorneys in  the
consumer  protection arena be allowed to utilize  fee  agreements
that lead to adequate compensation.
          Moreover, Kittleson alleges systematic abuses  in  such
cases  by  defendants who use a divide and conquer strategy  that
aims  to  encourage early settlement by clients for modest  sums,
while   driving  up  unrecoverable  costs  to  their   attorneys.
Kittleson  suggests that a hybrid hourly fee provision  like  the
one  he  uses  is  justified as a response to  these  abuses;  he
asserts  that  as  matters currently stand, it is  difficult  for
consumers  like the Nelvises to find attorneys willing to  handle
small unfair practices claims.
          Although Kittleson offers no support for his claim that
a  shortage  of willing attorneys exists, we readily  accept  his
premise  that  the attorneys fees provisions of Alaskas  consumer
protection  laws were designed to encourage attorneys  to  handle
consumer  protection complaints, even when they are  small.   Yet
the policy of encouraging attorneys to participate in these cases
subserves  the  Consumer  Protection  Acts  overarching  goal  of
encouraging small consumer protection claims.  It hardly  follows
that  this broader policy goal would be served by a fee agreement
enabling  attorneys to compromise the procedural rights of  their
clients   the parties whose rights the law ultimately strives  to
promote.   To the contrary, it would seem anomalous to  encourage
the successful resolution of consumer rights claims by adopting a
practice  designed  to  penalize the  claimant  for  accepting  a
reasonable  offer  to  settle.   In  light  of  the  ethical  and
practical dangers posed by the hybrid agreement, then,  we  think
that Kittlesons policy arguments lack merit.
IV.  CONCLUSION
          We  conclude  that  the  type of  hybrid-fee  agreement
disputed   here   is  prohibited  under  the  Alaska   Rules   of
Professional Conduct and other provisions of Alaska  law  because
of  its potential to restrict a clients exclusive right to accept
or  reject  an  offer  of  judgment.  We  therefore  REVERSE  the
superior  courts order dismissing Comptons complaint  and  REMAND
for entry of summary judgment in favor of Compton.
_______________________________
     1     In  response to questions raised by the judge and  the
opposing  counsel  in the bankruptcy matter, Kittleson  explained
that  he  had added the fee-conversion provision to his  standard
contingent-fee  agreement after a client in an  earlier  consumer
protection  case  had  decided  to  settle  before  trial,   thus
preventing  Kittleson  from  recovering  a  statutory  award   of
attorneys  fees  under the Consumer Protection  Act.   While  the
settlement  left  his  client  satisfied,  Kittleson  noted,  the
contingent-fee share of the recovery yielded just  $2,500  for  a
case in which Kittleson had invested roughly $16,000 worth of his
time.   The bankruptcy judge authorized the trustee in bankruptcy
to  enter  into  the  fee agreement with Kittleson,  noting  that
actual fees would have to be approved by the court at the time of
any settlement.

     2    See AS 45.50.537.

     3     In  re  K.A.H., 967 P.2d 91, 93 (Alaska 1998)  (citing
Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979)).

     4    See Alaska R. Prof. Conduct 1.5(a).

     5    Alaska R. Prof. Conduct 1.5(c) (emphasis added).

     6     State,  Pub. Employees Ret. Bd. v. Cacioppo, 813  P.2d
679, 685 n.14 (Alaska 1991).

     7     See, e.g., City of Burlington v. Dague, 505 U.S.  557,
560  (1992) (Fees for legal services in litigation may be  either
certain  or contingent (or some hybrid of the two).); Gilbert  v.
Evan,  822  So.  2d  42,  46 (La. App. 2002)  (There  is  no  law
prohibiting  this  hybrid contingency fee contract  nor  has  any
court  declared such contracts invalid because they  are  against
public policy.).  But cf. Neal v. Bavarian Motors, Inc., 882 A.2d
1022,  1032 n.12 (Pa. Super. 2005) (The absence of any  provision
in  the  [Pennsylvania Rules of Professional Conduct] for  hybrid
agreements   suggests   that  such  agreements,   while   perhaps
permissible, should be closely scrutinized.).

     8     Ann.  Model  Rules  of  Profl  Conduct  R.  1.2  legal
background at 16 (4th ed. 1999).

     9     Restatement (Third) of the Law Governing  Lawyers   22
cmt. d (2000).

     10    Charles W. Wolfram, Modern Legal Ethics  4.6.2 (1986).

     11     See,  e.g.,  Mattioni, Mattioni & Mattioni,  Ltd.  v.
Ecological Shipping Corp., 530 F. Supp. 910, 913 (E.D. Pa. 1982);
In  re Lansky, 678 N.E.2d 1114, 1116 (Ind. 1997); Parents Against
Drunk Drivers v. Graystone Pines Homeowners Assn, 789 P.2d 52, 55
(Utah  App.  1990);  Butler v. Young, 2 S.E.2d  250,  251  (W.Va.
1939).  But see  Ramirez v. Sturdevant, 26 Cal. Rptr. 2d 554, 561
(Cal.  App.  1994)  (holding that term in  supplemental  retainer
agreement requiring client to accept settlement offer of $150,000
or more did not breach attorneys fiduciary duty to client).

     12    Mattioni, 530 F. Supp. at 912.

     13    Id. at 912-14.

     14    Id. at 914.

     15    Alaska R. Prof. Conduct 1.16(a)(3); Restatement (Third)
of  the  Law  Governing Lawyers  31 cmt. d (A client  and  lawyer
cannot  validly  enter  a  contract  forbidding  the  client   to
discharge the lawyer.).

     16     Some  courts  refer  to such  agreements  as  special
retainers   to   distinguish  them  from  generally   permissible
nonrefundable  fees that are paid in exchange  for  an  attorneys
promise  to  be  available  to perform legal  services  during  a
specified period of time.  See Wong v. Michael Kennedy, P.C., 853
F.  Supp. 73, 79-80 (E.D.N.Y. 1994); In re Cooperman, 633  N.E.2d
1069,  1070 (N.Y. 1994); Cuyahoga County Bar Assn v. Okocha,  697
N.E.2d  594, 597 (Ohio 1998) (nonrefundable retainers appropriate
only  when used to make lawyer available or preclude lawyer  from
providing services to clients competitor).

     17     See, e.g., Wong, 853 F. Supp. at 79-80 (nonrefundable
retainer  requiring client to pay $225,000 for specified services
invalid);  AFLAC, Inc. v. Williams, 444 S.E.2d 314,  316-17  (Ga.
1994)  (damages  clause of retainer agreement providing  monetary
penalty  in  event that client prematurely terminated  multi-year
retainer invalid as unreasonable infringement on clients right to
discharge  attorney);  In re Cooperman,  633  N.E.2d  at  1072-73
(divorce   lawyer  disciplined  for  routinely  charging   $5,000
nonrefundable retainer).

     18    In re Cooperman, 633 N.E.2d at 1072.

     19    Id.

     20     1 Geoffrey C. Hazard, Jr. & W. William Hodes, The Law
of  Lawyering   8.15  (3d ed. Supp. 2003).   We  note  that  this
discussion  of convertible fee agreements did not appear  in  the
edition  of Hazard and Hodes that was in circulation at the  time
that the fee agreement in this case was made.

     21     Wis. State Bar Profl Ethics Comm., Formal Op.  E-82-5
(1982).

     22    Neb. State Bar Assn Lawyers Advisory Comm., Formal Op.
95-1 (1995).

     23    Colo. Bar Assn Ethics Comm., Formal Op. 100 (1997).

     24     While  Kittleson  did offer to  reduce  his  fees  to
$22,000,  allowing the Nelvises to recover $1,500 after repayment
of  costs,  this limited, post-offer-of-judgment concession  does
not  alter  the  analysis  of whether the  hybrid  agreement  was
legally valid at the time it was made.

     25     See  Restatement (Third) of the Law Governing Lawyers
18  cmt.  d.  (In  entering  a  contract  at  the  outset  of   a
representation, the lawyer must explain the basis and rate of the
fee  . . . and advise the client of such matters as conflicts  of
interest,  the  scope of the representation,  and  the  contracts
implications for the client . . . .) (emphasis added).

     26    See AS 45.50.531.

     27    AS 45.50.537.

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