A contingency fee is a form of billing used by attorneys that requires clients to pay nothing unless the case is successful. Generally, the client is charged no upfront cost. Instead, if the case is successful, the attorney will receive a predetermined percentage of the settlement or court award for damages. In addition, some contingency fee agreements may provide for the attorney to receive money for the cost of the litigation on top of his normal fee.
How Much is the Contingency Fee?
The contingency fee will be a predetermined percentage of the total funds received from the settlement or court award. The percentage is negotiable, but must be reasonable, and will be stated in the attorney-client retainer agreement. The agreement should also state whether the fee is calculated before or after expenses.
Typically, contingency fees will be around 33%-40% of the final award but they can often be higher for smaller value cases and lower for higher value cases. Some attorneys offer a sliding-percentage scale, where the percentage depends on how far the case goes in the litigation process. Even though you won’t pay expenses until the case is settled, it is a good idea to keep track of the costs. You should ask your attorney to send you a bill on a regular basis.
Can the Percentage or Amount Be Limited or Lowered by a Judge?
Attorneys and clients are generally given great discretion in negotiating contingency rates. However, if the court finds a contingency fee agreement is unreasonable or unfair, it may be invalidated or amended by the court.
In addition, the attorney could be subject to court sanctions, probation, or even disbarment. What constitutes a reasonable contingency rate varies from case to case. Some of the factors the court uses to determine if a fee is reasonable include:
- The time the lawyer spent preparing the case;
- If taking the case prevented the lawyer from taking other work;
- The typical attorney fee for the type of case;
- The amount of money involved and how much was recovered;
- The lawyer’s experience and reputation; and
- The likelihood of success.
When are Contingency Fee Agreements Used?
Contingency fee agreements provide clients with access to legal services they otherwise might not be able to afford. The costs of litigation can be substantial and recovery for successful claims may take months or even years to be received.
Without contingent fee agreements, many individuals could be precluded from pursuing valid legal claims simply because they don’t have the necessary funds to pay for the costs of litigation.
Contingency fee agreements are typically used in:
- Personal injury cases (see also this article about personal injury lawyer fees);
- Property damage cases;
- Claims against creditors harassing debtors;
- Employment and wage issue cases;
- Collection of large debts; and
- Class action lawsuits.
When is a Contingency Fee Not Allowed?
Contingency fee agreements are prohibited by law in certain cases, and cannot be offered even if the attorney is willing. There are some variations between states, but usually contingency fee agreements are prohibited in:
- Criminal cases;
- Drafting contracts, wills, trusts, or other legal documents;
- Business formation;
- Registering a trademark, copyright, or patent; and
- Domestic relations cases, such as:
Seeking Legal Assistance
Contingency fee agreements can be a valuable tool if you believe you have a strong legal claim, but are not able to pay the costs of litigation upfront. If you think that you might have a case and would like to know more about a possible contingency fee agreements, then consulting your attorney or speaking to personal injury attorney can answer your questions.