FAQ: What Is a “Contingency Fee” Agreement?

FAQ: What Is a "Contingency Fee" Agreement? 2

The ‘contingency fee’ agreement has become something of a byword for many lawyers, particularly those practising personal injury law cases, where the attorney may expect anywhere from 20 – 50 per cent of the recovery amount received.

A contingency fee is where the lawyer charges a percentage of what is received, being quite different from a fixed hourly fee arrangement. The contingency fee removes the ‘fee risk’ from the client, as the lawyer is only being paid upon success – so it is a genuine ‘success fee’.

Legal attorneys have many ways of getting compensation for their services – hourly, flat fee, or contingency fee. 

Can You Negotiate a Contingency Fee?

Generally a lawyer taking a contingency fee will specify what the percentage of that fee will be, although others will also negotiate, depending on the strength of your case.

The exact fee your attorney receives depends on several factors, including the following:

  • Type of attorney being used – their experience, track record etc
  • Nature of your case, its complexity, likelihood of success
  • Location, the jurisdiction and other issues affecting the nature of the fee and the chances of success.

For example, a riskier or more complex case could attract a higher contingency rate than a low-risk lawsuit. If lawyers deem your case high risk, they could decide to raise the charging rate or avoid it altogether.

Before making any agreements with your lawyer, consider the following:

  • Understand how lawyers calculate contingency fees 
  • Contingency fees are negotiable. If you feel the charge is too high, ask if they can consider a lower amount.
  • Ask the lawyer if they take contingency fees before or after deducting expenses.

Remember too that some cases will have incremental scale charges applying to a contingency fee arrangement, but the general rule will be around one-third of the amount recovered.

Check What the Fee Should Be

Before accepting a contingency fee arrangement you should check to see what is appropriate for the type of case and the jurisdiction where your case is being heard.

You should check with the local bar association or any other licensing body to see what is appropriate and check what is accepted by the ethics committee in the jursidiction.

Some jurisdictions will impose a limit upon how much can be charged under a contingency fee arrangement and it is generally illegal to charge these fees in criminal cases or domestic law cases.

Case Costs Related to Contingency Fee Agreement

Case costs involve the amount of money spent to pursue your case and get recovery on your behalf and these can vary widely, depending upon the case, the jurisdiction and other factors. Depending on your contingency fee agreement, you can settle case costs in the final case stage after getting compensation.

Two types of case costs are: 

Prelitigation Costs – expenses charged in investigations and evidence-gathering processes, including police and investigation reports, postage, fees for bills and medical copies, faxes, etc. 

Trial Costs – additional charges in a civil lawsuit, such as court filing fees and deposition transcripts. Some cases may require additional support from an expert or investigator to help prove certain elements.

Remember too that a lawyer paying the case costs on any such case are not permitted to pay any living or other personal costs of the defendant, which may see them subjected to disciplinary action from the local bar association, law society or other licensing body.

Who Charges a Contingency Fee?

As mentioned, there is a wide range of cases where contingency fees may be charged from personal injury cases where a contingency fee is charged to specific cases involving medical malpractice claims, a Colorado slip and fall attorney or a Florida truck accident attorney. Check what and who will permit the fees because the variation can be significant.

In Texas, it is common to be one-third if there is a settlement, or 40 per cent if litigation commences or goes to judgment.

In New York contingency fees cannot exceed one-third (33 per cent).

In California there is a 30 – 40 per cent limit as with New York with the upper limit reached if there has been a lawsuit filed.

Pros and Cons of a Contingency Fee Agreement

Pros 

In a contingent fee agreement, your interest and attorney’s are met and it is obviously advantageous to take such a fee. Your lawyer will be incentivized to work hard for your case to obtain the fee.

Conversely, an attorney working on an hourly payment (like in other litigation work) can be less incentivized, regardless of what the attorneys may say. Although they may have your best interest, they may also carry personal interests–utilize more hours and maximize pay. 

Lastly, your attorney is less likely to overbill your case because they determine contingency fees upfront and record them on paper, although over-billing is a disciplinary matter and to be avoided.

Cons 

While contingency fee carries several pros, not all law firms accept them. Moreover, they may only work in specific cases, as mentioned, and you need to ensure the amount being charged is fair.

For instance, in the case of an admission of liability a high contingency fee is unreasonable where there is little risk for the attorney in taking the case. In other, more complex cases there can be a real risk for the attorney in terms of time spent, funds expended and other factors.

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