At one point or another, you’ve likely received legal advertisements from personal injury lawyers promising that they don’t collect compensation unless they successfully recover compensation on your behalf. For many individuals facing legal issues, this type of arrangement may seem like the perfect solution. Few people actually understand what these promises mean and this type of fee arrangement works on an individual case basis.
To help clear up some of this confusion and provide you with a better understanding of how these contingency fee agreements work, we have created this blog post. In it, we will dive into the topic of contingency fees, and go over what they are, what cases they apply to, and how you can determine if they suit you and your case.
Contingency Fees—The Basics
A contingency fee is a form of payment to an attorney for legal services. However, compared to a fixed hourly fee, a contingent fee arrangement provides that lawyers receive as payment a percentage of their clients’ monetary amount when their case settles or wins. As a result, in a contingency fee agreement, attorneys only receive compensation if they have successfully recovered compensation on behalf of their clients. The amount that the attorneys receive depends upon the result they obtain and on the phase of the litigation in which the dispute settles.
Generally, the contingency fee amount constitutes an agreed-upon percentage that is often around 33 percent. However, the exact amount that the attorney will receive in payment will depend on several factors, including the risk involved in the case, the litigation costs, the amount of time the case will take, and the lawyer’s experience.
Case Complexity and Risk
Usually, the more complex a case, the higher the contingency fee percentage your lawyer will likely require. More specifically, complicated cases may require you to pay a higher percentage of your recovery, such as 40 percent, while a relatively straightforward case may require a lower contingency fee percentage.
The Costs of Litigation
You should also consider the costs associated with bringing your lawsuit when determining how much money your attorney will collect.
These costs often include:
- Discovery costs, such as deposition expenses
- Mediation costs
- Court fees
- Filing fees
- Expert witnesses
- Obtaining evidence, including copies of medical records and public documents
- Investigator costs
- Travel expenses
- Incidental and overhead expenses, such as copying and postage costs
In most cases, even if a lawyer is willing to work on a contingent fee basis, the client may still bear responsibility for the administrative costs, unless the contingency fee contract explicitly indicates otherwise. Additionally, you should also consider when the attorney will collect payment for these costs, as it can make a significant difference in how much you will ultimately receive.
Situations That Allow Contingency Fees
Contingency fees tend to prove beneficial for costly and/or complicated legal cases, or when the client does not have much money. Because an attorney will not get paid unless the client receives some amount of compensation, most lawyers do not accept cases unless they determine that the client qualifies to receive a judgment or a settlement, such as through an insurance policy.
Typically, contingency fee cases involve civil cases, such as personal injury claims and workers’ compensation issues.
However, contingency fees may also apply to other situations, such as:
- Wage dispute cases
- Employment discrimination cases
- Sexual harassment cases
- Professional malpractice issues
- Class action lawsuits
- Debt collection cases
- Bankruptcy cases
Situations That Don’t Allow Contingency Fees
Although the contingent fee structure is a great option for many clients, the law prohibits such fees in certain cases. For instance, for clear-cut legal issues, a lawyer should give the client a reasonable rate based on how much work will go into the case. This prohibition intends to prevent attorneys from taking advantage of the clients.
In addition, contingency fees are not allowed in criminal law cases or family law cases, because it would appear as if the lawyer encourages a divorce or criminal activity.
The Advantages of Contingency Fee Agreements
Contingency fee agreements include many advantages, including:
- No Upfront Fees: One of the most beneficial benefits that come with a contingency fee arrangement is that you do not have to deal with legal bills as your case progresses. This arrangement often helps individuals with lower incomes have better access to legal representation.
- Don’t Have to Pay Attorney Fees: Another significant benefit is that you will not have to pay your attorney fees if you lose your case. However, you may still bear responsibility for the administrative expenses.
- Incentives for Your Lawyer: Since your attorney only gets paid if you receive some sort of compensation, your attorney will be highly motivated to do everything possible to fight for maximum damages on your behalf.
Oral Contingency Fee Arrangements Do Not Count
A proper contingency fee arrangement must be in writing and state the method by which the fee is to be determined. In addition, it needs to include the percentage the attorney will accrue in the event of a trial, settlement, appeal, and litigation, as well as the expenses that the attorney will deduct from the recovery, and if this deduction will happen before or after the calculation of the contingent fee.
Once the case has concluded, the lawyer will need to provide the client with a written statement indicating the outcome of the matter, and if the case resulted in a financial recovery, showing the payment to the client and the method of its determination.
Additionally, no firm or lawyer can participate in this fee agreement without the client’s written consent. This agreement will also need each participating lawyer to sign the contract with the client and agree to assume joint legal responsibility. Once all parties have signed the agreement, the client must receive a copy of the signed agreement and any subsequent notices.
Will a Judge Ever Lower the Amount of the Contingency Fee?
Typically, clients and attorneys can use their own discretion when entering a contingency fee agreement. However, if a court determines that the contingency fee agreement proves unfair, the court may step in and either amend it to make it more reasonable or invalidate the deal altogether.
However, before a court can determine if the original fee agreement is unreasonable, the court first needs to ask:
- What do the typical attorney fees for these types of cases or similar issues look like?
- How much time has the attorney spent working and preparing the case?
- How much work has the lawyer turned down to meet the demands of this particular case?
- Assess the reputation, ability, and experience of the lawyer involved in the case.
- Determine the total amount of damages that the court has awarded for the case?
- Evaluate the likelihood of success in the case?
Entering into a Contingency Fee Arrangement—Make Sure You Ask the Right Questions
If you find yourself considering whether to enter into a contingency fee arrangement with a lawyer, you need to make sure that you ask plenty of questions before signing the dotted line. These questions can help you understand how much compensation you should seek and also help you build confidence in your lawyer.
Some questions you should consider asking your lawyer:
- How much money do you believe I can recover?
- Can you establish the probability of obtaining this amount?
- How will you approach this lawsuit?
- What does the contingency fee amount to?
- How did you come to that amount?
- Will I bear liability for any advanced case costs if we lose?
Once you sign a contingency fee agreement, neither party can change the terms of the contract unless both parties agree to the changes. For these reasons, make sure you ask all the questions, consider everything, and read the contract thoroughly before finalizing the document.
Negotiating a Contingency Fee Agreement With Your Lawyer
Since lawyers don’t receive compensation unless they win, contingency fee cases come with a certain amount of risk. However, if the lawyer determines that you have a strong case, the lawyer will likely feel more comfortable taking your case due to the likelihood of success. In these situations, you should view the amount of the contingency fee as negotiable. Keep in mind, however, that if you want to request a lower percentage, you may have to put in additional work to find an attorney willing to accept that amount.
Although some attorneys may prove more than willing to work out a fee agreement based on a lower percentage, others may offer you a variable contingency fee based on the time spent on your case. For instance, your attorney may charge you less if the case settles before trial, 33 percent if the case goes to trial, and a higher percentage if the case goes through the appeal process. In some cases, a lawyer may even offer a variable fee based on the amount of the award. For instance, the attorney may take 30 percent of the first $100,000 and 20 percent of the next $100,000. In addition, lawyers can also mix hourly fees with contingency fees, such as billing $300 per hour, but only requiring payment for $50 per hour until you win the lawsuit, at which point the attorney will collect the remaining amount from the damages award.
However, these unique arrangements will depend on the parties’ discretion, and you should discuss the fee arrangement thoroughly before deciding on an attorney.
Should You Accept a Contingency Fee Agreement?
People often have a hard time understanding lawyer fees, especially with all the factors that go into that determination. However, this should not stop you from bringing a claim for the harm you sustained because of another person’s wrongful actions. Working with a skilled lawyer can help you understand this whole legal process, ensure that you get the legal assistance you need, and help you fight for maximum compensation.
Once retained, your lawyer can:
- Discuss your case in detail and determine if you have a viable claim.
- Answer all of your questions and concerns, and provide you with the support you need during this difficult time.
- Investigate your case thoroughly, and secure the evidence required to prove fault and damages.
- Hold all the parties that caused your harm accountable for the damages you’ve suffered.
- Bring in the experts, such as accident reconstructionists, engineers, doctors, and economists, to substantiate your claims.
- Handle all the discussions and negotiations with the other side and the insurance company, and make sure to go after a fair settlement amount.
- Ensure the proper preparation and filing of all documents before time expires.
- Take your case to trial, if needed, and work tirelessly to obtain a successful resolution to your lawsuit.
Working on a contingency fee basis can often benefit both the attorney and the client. Clients don’t have to provide an upfront payment that they can’t afford, and attorneys can receive sufficient payment after winning a complex and lengthy case. However, before parties enter into this agreement, they must understand the rewards and risks associated with a contingency fee agreement. Plus, not every case will lend itself to a contingency fee arrangement, since some cases simply will not deliver enough compensation to cover the lawyer’s work.
If you still feel unsure about this whole process or would like further information regarding contingency fee agreements, do not wait any longer to get these issues clarified. Instead, contact an experienced personal injury lawyer today to schedule a free consultation. There, you can discuss your accident and injuries, ask questions regarding your legal options, and determine your eligibility to pursue compensation for the full cost of your injuries. You shouldn’t attempt to handle a personal injury claim on your own, and don’t let a fear of high attorney’s fees stop you from retaining the legal representation that will ensure you protect your rights to compensation.