Understanding Contingency Fees
If you have browsed law firm websites, you probably came across the phrase, “We work on a contingency fee basis” or “We do not get paid unless we win.” Understanding contingency fees is critical if you are looking for an attorney and do not know how your prospective attorney will charge you for their services. If you or someone you love has suffered injuries in an accident, consider speaking with an experienced attorney to learn about your legal rights and determine how you would pay your attorney for their legal representation. Schedule a free Strategy Session with our attorneys at The Mark Casto Law Firm to discuss your situation. Call 706-940-4030.
What Are Contingency Fees?
What does an attorney mean when they say that they work on a contingency fee basis? According to the American Bar Association, the term “contingency fees” refers to an arrangement (a form of billing) in which an attorney is paid a fixed percentage of the damages awarded to their client at the end of their case.
Basically, if an attorney wins a case for their client, they will get paid for their services by taking an agreed-upon percentage of the recovery. However, if the attorney does not win, they will not get paid. In some cases, a client still has to pay court filing fees and other legal costs associated with bringing a lawsuit regardless of whether they win or lose.
How Much Do Attorneys Charge in a Contingency Fee Arrangement?
In most cases, attorneys agree to approximately one-third of the damages awarded to their clients. However, the fixed percentage depends on the state where the attorney represents their client, the complexity of the case, and the details of their agreement. Contingency fees usually range from 25% to 45% of the recovery. Since an attorney's fees are “contingent” on winning their client's case, the attorney does not get paid if they do not win.
What Are the Rules for Signing a Contingency Fee Agreement?
The Model Rules of Professional Conduct, which were created by the American Bar Association, set forth specific requirements for contingency fee agreements. Model Rules of Professional Conduct 1.5(c) requires the following:
- The agreement must be in writing;
- The client must sign the contingency fee agreement;
- The agreement must clearly state the method by which the attorney's fees are determined, including the fixed percentage of the recovery;
- The agreement must clearly state what other expenses, if any, will be deducted before or after the attorney's fees are calculated; and
- The agreement must clearly notify the client of the expenses, if any, for which the client will be liable during the case.
Model Rules of Professional Conduct prohibit attorney fees that are “unreasonable.”
When Do Attorney Charge Contingency Fees?
Most often, attorneys charge clients on a contingency fee basis in civil cases involving personal injury and workers' compensation. However, it is not uncommon for attorneys to agree to a fixed percentage of the final settlement, verdict, or a jury award in cases involving:
- Professional malpractice
- Employment discrimination cases
- Wage and hour disputes
- Sexual harassment cases
- Class action lawsuits
Under Model Rules of Professional Conduct 1.5(d), attorneys are prohibited from charging contingency fees in family law matters, including divorce cases, and when representing defendants in criminal cases.
What Are the Pros of the Contingency Fee Arrangement?
Understanding contingency fees is much easier when you know the pros and cons of the contingency fee arrangement. Paying an attorney a fixed percentage of the recovery if they win the case offers several advantages to the client:
- Do not worry about up-front fees. When you hire an attorney on a contingency fee basis, you do not have to worry about any up-front fees or costs. However, you may still have to pay the legal costs associated with your legal cases, such as filing fees and other administrative costs.
- The attorney has an incentive to win. A contingency fee arrangement provides a solid incentive for the attorney to do their best to ensure a favorable outcome for the client because if they do not win, they do not get paid.
- Less risk. When a client is not confident that they will win their case, a contingency fee arrangement can provide them with peace of mind knowing that they will not have to pay their attorney if they end up losing.
Whether or not you can benefit from hiring an attorney who works on a contingency fee basis depends on your particular situation and the type of your case. Consider speaking with an attorney at The Mark Casto Law Firm to help you understand your options.
What Are the Cons of the Contingency Fee Arrangement?
As with anything, there are both advantages and disadvantages to hiring an attorney on a contingency fee basis. Consider the following cons of the contingency fee arrangement:
- You will have to negotiate. Before signing a contingency fee agreement with your attorney, you will have to negotiate and agree upon a fixed percentage of the damages awarded to you at the end of your case. Some lawyers offer flexible contingency fees.
- It can be difficult to get an attorney to accept your case. Many attorneys who work on a contingency fee basis are more selective about the cases they accept. Thus, an attorney is likely to refuse to take on your case if it is too risky or the attorney is not confident that they can win.
Can a Judge Invalidate a Contingency Fee Agreement if It Is Unreasonable?
Yes, a judge may lower the percentage of the contingency fee or invalidate the agreement altogether if the agreement is unreasonable or unfair. When reviewing the validity of a contingency fee agreement, judges consider the following factors:
- Typical contingency fees for similar cases
- The complexity of the client's case
- The amount of time the attorney spent working on the case
- The agreed-upon percentage and the total amount of damages awarded
- The experience and reputation of the attorney
Free Strategy Session with a Columbus Personal Injury Attorney Today
If you are looking for a personal injury attorney and need help understanding contingency fees, consider contacting our knowledgeable and results-driven attorneys at The Mark Casto Law Firm. We can explain our fee structure, evaluate your case, and determine if we can assist you with your specific case. Call 706-940-4030 to get a free case review and Strategy Session.