What is a Contingency Fee?

A contingency fee is a payment method for a lawyer’s services that is based on a percentage of compensation obtained through a settlement or verdict. Contingent fee agreements allow clients to obtain legal representation when they may not have funds to pay an attorney upfront.

In contrast to the fixed hourly fee charged by many attorneys, contingency fees only compensate attorneys if they win the case. In other words, payment to the attorney is contingent upon winning the case. If the attorney wins the case, the contingent payment is a percentage of the client’s award or settlement. If the attorney loses the case, they receive nothing for their work.

The risk of no payment if the case is lost acts as a motivation for the attorney to work diligently. This arrangement aligns the interests of the client and the attorney as both parties will benefit from a favorable outcome.

What is a Standard Contingency Fee Amount?

The standard contingency fee amount can vary widely based on the nature of the case, its complexity, and the attorney’s discretion. However, it’s common for a contingency fee to range between 33.3% and 50% of the settlement or award.

Personal injury or workers compensation cases often see contingency fees on the lower end of this spectrum, between 33.3% and 35% pre-suit (i.e., before a lawsuit is filed). If a case goes into litigation (i.e., a lawsuit needs to be filed), personal injury contingency fees typically increase to between 40% to 45%. Further, some attorneys charge a higher contingency fee if a case must be appealed, due to the additional time involved.

In more complex or risky cases, like certain class action suits or mass torts, fees may rise to as high as over 50%. It’s crucial for clients considering this arrangement to clearly understand the fee structure and percentage before agreeing to it.

Contingency Fee wording with magnifying glass and money.

Are Other Fees and Expenses Charged on Top of a Contingency Fee?

Yes, in addition to the contingency fee, there are often other costs and expenses that a client could be responsible for. These are usually expenses that the attorney incurs while preparing for and litigating the case. These costs might include:

These expenses can add up quickly and significantly increase the overall cost of legal representation. Therefore, it is common for the total percentage paid to be higher than the initially agreed-upon contingency fee.

The client should ensure that the agreement specifies whether these costs will be deducted from the recovery amount before or after the contingency fee is calculated. It’s vital for clients to have a clear understanding of all potential fees and costs before signing a contingency fee agreement.

Tricks Unscrupulous Attorneys May Use to Increase Fees

While contingency fee arrangements can be beneficial for clients with limited finances, it is essential to be aware of some tactics that unscrupulous or unethical attorneys might employ to levy additional charges. These practices can increase the overall cost despite a lower upfront contingency fee.

  1. Bait and Switch Tactics:  Some attorneys may offer a lower contingency fee if the case is settled within an unrealistically short time period. This can be appealing to clients seeking quick resolution. However, if a settlement isn’t reached within this stipulated time, these attorneys then charge a much higher fee for filing a lawsuit.
  2. Interest on Advanced Costs:  Some lawyers might advance costs necessary for the litigation process, such as court fees, expert witness fees, and others. However, they might charge interest on these advanced costs, which can significantly increase the overall expense.
  3. Hidden Costs:  Some attorneys might not disclose all the costs associated with the case initially. This could include miscellaneous expenses such as unnecessary or extravagant travel costs, or charging for obtaining medical records using in-house employees.
  4. Double Dipping:  In some instances, lawyers might calculate the contingency fee after adding the litigation costs. This practice, known as double dipping, can result in a higher actual fee than what was agreed upon.
  5. Neglecting to Negotiate Down Medical Liens:  Attorneys may neglect to negotiate down legal claims by healthcare providers on the client’s settlement funds, such as hospital liens. By reducing these liens, attorneys can effectively increase the net amount to the client.

It’s imperative for clients to thoroughly read and understand the terms of the contingency fee agreement. Seeking clarification for any ambiguous clauses can help avoid unexpected costs and ensure a fair arrangement.

Do All Personal Injury Lawyers Work on a Contingency Fee Basis?

While many personal injury lawyers do indeed work on a contingency fee basis, it is not a universal practice. Some attorneys may prefer to work on an hourly fee structure, especially if the case is particularly complex or time-consuming. Others may offer a flat fee for their services, which is determined at the outset and is not contingent on the outcome of the case.

The choice of fee structure can depend on the lawyer’s business model, the nature of the case, and sometimes, the client’s preference. We recommend clients discuss payment options with potential attorneys before making a hiring decision and inquire as to other fees they may charge outside the base contingency rate.

Other Ways Lawyers Charge: Pros and Cons

  1. Hourly Rates:  This is the most traditional fee arrangement where lawyers charge based on the number of hours they work on your case. The rate can vary based on the lawyer’s experience, reputation, and specialization.
    • Pros:  This arrangement can be cost-effective for simple, straightforward cases that don’t require a large amount of time.
    • Cons:  In complex cases that require extensive research or litigation, hourly fees can quickly add up. Additionally, it can be difficult to predict the total cost given the uncertainty of how long the case will take.
  2. Fixed Fees:  Some lawyers charge a flat fee for specific services, such as drafting a will or a contract.
    • Pros:  This arrangement provides certainty regarding the cost, which can aid in budgeting for the legal expense.
    • Cons:  This may not be advantageous if the case turns out to be more complicated than initially anticipated, as the lawyer might not dedicate additional time unless further payment is provided.
  3. Retainer Fees:  Lawyers charge a retainer fee as a down payment toward future work. This is common in ongoing legal advice or representation situations.
    • Pros:  This assures the client of the lawyer’s time and availability when needed.
    • Cons:  If the entirety of the retainer fee isn’t used, getting a refund can sometimes be a complex process.
  4. Blended Rates:  Lawyers who work in a firm may offer a blended rate, where different tasks are billed at different rates based on who performs them (e.g., partners, associates, paralegals).
    • Pros:  Blended rates can be more affordable as routine tasks are often assigned to less experienced (and less expensive) legal professionals.
    • Cons:  The quality of work might vary based on the experience of the individual performing the task, and it may be challenging to predict the total cost due to the variable rates.
  5. Statutory Fees:  In certain cases (like probate or bankruptcy), the court determines the fee, known as a statutory fee.
    • Pros:  The fee is set and predictable, reducing worry about escalating legal costs.
    • Cons:  These fees might be higher than what a lawyer would charge under a different fee arrangement.

State Laws Related to Contingency Fees in the United States

Yes, various states have specific laws and regulations in place to govern contingency fee agreements in order to protect clients. Rules may differ from state to state, and it’s essential to be aware of these legal provisions.

  • Texas:  The State Bar of Texas requires that contingency fee agreements be clearly communicated and recorded in writing. The agreement must clearly detail the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial, or appeal. Furthermore, litigation expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated should be specified in the agreement. The agreement must also specify whether the client will be responsible for any costs in the event no recovery is obtained (Texas Disciplinary Rules of Professional Conduct, Rule 1.04).
  • California:  The State Bar of California mandates attorneys to put contingency fee agreements in writing, clearly describing the manner in which the fee will be calculated, other expenses for which the client could be held responsible, and how these costs will be deducted (California Rules of Professional Conduct, Rule 1.5).
  • Florida:  The Florida Bar has set upper limits on contingency fees that attorneys can charge, which vary depending on the size of the settlement or award. It’s also required to provide the client with a signed copy of the contingency fee agreement (Florida Rules of Professional Conduct, Rule 4-1.5).
  • New York:  New York State mandates contingency fees in personal injury and wrongful death cases to be in accordance with a sliding scale described in the Judiciary Law (22 NYCRR 1015.15).

It’s always recommended that clients consult with their attorney or seek independent legal advice to understand the specific laws applicable in their jurisdiction.

Example of How a Contingency Fee Works in a Personal Injury Case

Suppose you’re involved in an auto accident and decide to hire a car accident lawyer in Texas who charges a 35% pre-suit contingency fee, along with a $200 flat fee for miscellaneous expenses. Let’s say after negotiating with the at-fault driver’s insurance company, your lawyer manages to secure a settlement of $30,000 on your behalf.

In this scenario, the first step is to calculate the lawyer’s contingency fee. This is done by taking 35% of the $30,000 settlement, which amounts to $10,500. Next, you would deduct the $200 flat fee your attorney charges for other expenses.

After these deductions, you’re left with $19,500 from the settlement (i.e., $30,000 – $10,500 – $200) to split between you and any medical providers you may owe. Typically, your injury attorney will then negotiate down your medical bills, and the remainder is what you would walk away with in-pocket.

This example demonstrates clear and tangible benefits of a contingency fee arrangement, especially for clients who don’t have the financial means to pay an attorney’s fees upfront. The lawyer only gets paid if they successfully secure a settlement or win the case, which also motivates the lawyer to work hard on your behalf.

Why You Should Inquire About Other Potential Fees

Assume in the example above, a different lawyer charges a 33.3% contingency fee. However, they also charge $500 to handle your vehicular property damage, and itemize other expenses (e.g., postage, investigation work, medical records processing) which amounts to $300.

In this scenario, the first step is to calculate the lawyer’s contingency fee. This is done by taking 33.3% of the $30,000 settlement, which amounts to $10,000. Next, you would deduct the $500 property damage fee and $300 in itemized expenses.

After these deductions, you are left with only $19,200, or $300 less than the attorney charging the higher 35% contingency fees. Thus, paying attention to all fees charged by an attorney – instead of just the contingency fee amounts – allows you a more complete picture of what your fee amounts will total.

Contact Thompson Law if You Need an Injury Attorney to Work on a Contingency Fee Basis

If you’ve been injured and need legal assistance, Thompson Law is here to help. Our experienced injury attorneys are ready to work on a contingency fee basis, meaning you won’t have to pay us a dime until we win your case.

This approach allows you to focus on recovery, while we concentrate on securing the compensation you deserve. Reach out to us via our online form or call us at (844) 308-8180. We’re committed to fighting for your rights and ensuring justice is served.

No Win No Fee - Contingency fee arrangements with personal injury attorneys

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