Contingent fee agreements allow those who have sustained an injury to retain an attorney to pursue their case with no initial payment and no monthly legal bills. Instead, the attorney gets a percentage in the end.
While there has been some controversy about this arrangement in the past, and some people, including some attorneys, still have issues with the contingent fee agreement, this is a perfectly valid fee arrangement.
State and national rules regulate contingent fee agreements.
Under the American Bar Association’s Model Rules for Professional Conduct, the contingent fee agreement must be in writing. It must be signed by the client. It must state the method for determining the fee, including the percentage claimed by the attorney, and whether expenses are taken before or after the percentage is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable. [ABA Model Rule 1.5.]
Costs Under Contingent Fee Agreements
Typical personal injury cases require a law office to pay for hospital records and other medical reports “up front”. Police and other reports cost money. If the case does not settle, getting into court requires a court filing fee. Other litigation expenses include the cost of depositions. These and other costs are paid as the case goes along, often by the law office alone, and these costs are separate from the fee.
Look at it this way: a contractor working on your house charges for materials. Separate charges apply to labor. The language in the above rule requires that contingent fee agreements indicate whether costs are taken before or after calculation of the fee.
The contingent fee applies to personal injury cases. In fact, the rules prohibit use of the contingent fee in a criminal case or a domestic relations case. Attorneys use the contingent fee in an injury case due to the attorney’s ability to screen cases. Where liability and damages warrant going forward with a case, then a contingent fee is an appropriate mechanism for waiting to get paid until the matter concludes. Experienced personal injury attorneys also reject cases that do not merit further action. Do not expect an attorney to accept business disputes, contract cases or other matters under a contingent fee arrangement.
Generally a 33% fee is the usual fee taken against a settlement. However, due to the expertise required, the extent of the work, and other factors, do not be surprised if an experienced attorney requires more if the case can not be settled. Under the rules, the fee agreement may specify different percentages for settlement, arbitration or mediation, trial or other contingencies. A 45% fee is not unheard of for experienced, seasoned and successful attorneys who are called to action to try a case.
Two features of the contingent fee agreement are:
- It allows those who could not otherwise afford an attorney to retain experienced counsel in their injury case.
- There is an incentive built into the agreement. The attorney receives nothing until the case is successfully completed. The size of the paycheck depends on the quality of the final result. This favors both attorney and client.
Always Get a Copy of Any Document You Sign
Any time you sign any document anywhere, get a copy. This applies to fee agreements. In fact, the rules require that the attorney provide the client with a duplicate of the contingent fee paperwork. Do not hesitate to ask. Keep it in your records for future reference.