Purpose of Contingent Fee
Under a contingent fee agreement an injured person retains an attorney to pursue the case without having to pay up front, or on a periodic basis as work progresses. 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, covered by state and national regulations and standards.
Validity of Contingent Fee
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 by which the fee is to be determined, including the percentage claimed by the attorney, and whether exenses 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
In a typical personal injury case, the law office must pay for hospital records and other medical reports. Police and other reports cost money. If the case does not settle, there is a court filing fee, and other litigation expenses including 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 to be distinguished from the fee, or the actual income to the law office, as opposed to reimbursement for out-of-pocket costs. The language in the rule above requires that the agreement clarify that the costs are taken either before or after calculation of the fee.
Contingent Fee and Common Uses.
The contingent fee is most often used in 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 wating to get paid until the conclusion of the matter. Experienced personal injury attorneys also reject cases that do not merit further action. Do not expect an attorney to take on business disputes, contract cases or other types of litigation 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 successful attorneys who are called to action to try a case.
Contingent Fee: In Whose Interest?
The best features of the contingent fee arrangement are that (1) it allows those who could not otherwise afford an attorney to retain experienced counsel in their injury case, and (2) there is an incentive built into the agreement, where the attorney will not have a payday until the case is successfully completed, and the amount of the payday depends on the quality of the final result. This is in the favor of both attorney and client.
Contingent Fee: Get a Copy
Any time you sign a document anywhere, you should get a copy. This applies to contingent fee agreements. In fact, the rules require that the attorney provide the client with a copy of the contingent fee agreement, so do not hesitate to ask for a copy. Keep it in your records somewhere for future reference.