Lawyers' Contingent Fees and Contingent Fee Agreements

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What is a Contingent fee?

A "Contingent fee" is a method of paying a lawyer a percentage of whatever you collect in a case. A contingent fee agreement may be the only practical means by which an individual with a claim can afford to obtain the services of a competent lawyer. Laws vary from state to state as to the form of a contingent fee agreement. In any case, you should always have a written fee agreement with your contingent fee lawyer.


Calculating the fee: gross or net?

It is important to know exactly how the fee will be calculated. Legal cases typically involve the lawyer paying out for court filing fees, witness fees, depositions, exhibits, and legal process. The fee agreement should tell you whether a fee payable from the proceeds of the amount collected on your behalf will be based on the "net" or "gross" recovery. "Net Recovery" means the amount remaining after expenses and deductions. "Gross Recovery" means the total amount of the recovery before any deductions. The estimated amount of expenses to handle your case should be discussed, or set our in writing.


Subrogation, medical liens and reimbursement claims for medical care

If you have a personal injury case, it is likely that your health insurance company will want to be reimbursed for the medical expenses it has paid as a result of the accident. Again, this is a matter of state law, but if the lawyer needs to pay out of the settlement for medical care or insurance benefits, it is important to have it in writing whether this will be done before calculation of the fee or afterward. Your attorney should work to reduce by legitimate means, any claim, lien or interest of any other party to your settlement, thus increasing the net recovery to you.


Representation of children, approval of fees

In most cases where the primary client is a child, the parents, guardian or custodian must seek probate or other court approval in order to protect the child from any unreasonable fees, or improper use of the settlement money. Typically, absent evidence of over reaching, or a conflict between lawyer and client, the probate court will approve the settlement and the agreed upon contingent fee. However, the parents must understand that the benefit of the settlement must go to the child and that trusts or supervised administration may be ordered to protect the child.


Ethics in the contingent fee case

Even though the lawyer has a stake in the outcome, it is still your case. The lawyer may not compromise or settle your claim without your approval. Whenever an offer of settlement is made, the lawyer must inform you and make recommendations. The recommendations are not binding upon you. Every attorney is an officer of the court. He/she has predominant duties relating to ethical and honest behavior which are owed to the courts. By signing pleadings filed with the court, each attorney certifies that he/she has read the pleading; that to the best of the attorney's knowledge, information and belief, the matters set forth in the pleading are well grounded in fact and warranted by existing law, or a good faith argument for the extension, modification or reversal of existing law; and that no matter set forth in the pleading is interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.


Firing a contingent fee attorney

You typically will have the absolute right to terminate the employment of your attorney. And in many cases, and for many reasons, your lawyer may withdraw from your representation. You will nevertheless be obligated to pay your attorney for the work done by your attorney on your behalf. This is typically calculated based upon the reasonable value of the services provided by the attorney. If the attorney and the clients cannot agree how the attorney is to be compensated in this circumstance, the attorney will request the court or other tribunal to determine the fee. Factors a court will consider include whether the client or a later hired lawyer is being unfairly enriched, the outcome, the nature and complexity of the clients' case, the time and skill devoted to the clients' case by the attorney, and the benefit obtained by the clients as a result of the attorney's efforts.

Additional Resources

Chalat Hatten & Koupal PC

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