When seeking legal representation, many people assume they’ll need to pay hefty hourly rates or upfront fees to hire an attorney. However, in some cases, lawyers offer an alternative: contingency fee agreements. In this model, an attorney represents a client without any upfront charges. Instead, their fee is contingent on achieving a successful outcome, typically calculated as a percentage of the settlement or court award.
This method is particularly common in personal injury, medical malpractice, and other civil cases, where the client may not be able to pay hourly rates or substantial retainer fees. So why do lawyers work on contingency cases? Read on for the advantages for both clients and attorneys, the types of cases best suited for this fee arrangement, and how this system plays out.
What is a Contingency Fee ?
A contingency fee is a payment structure where the attorney’s fees are contingent upon winning the case or achieving a favorable settlement. If the lawyer does not win the case, they do not receive any payment for their services. Typically, the fee is a percentage of the amount recovered, which can range from 20% to 40% depending on the agreement and jurisdiction.
How Does It Work ?
Agreement: The client and attorney enter into a written agreement that specifies the percentage of the recovery that will be paid as a fee.
No Upfront Costs: Clients do not need to pay any upfront fees, making legal representation accessible to those who may not afford hourly rates.
Payment Upon Success: The attorney only receives payment if they successfully recover damages for the client through a settlement or court verdict.
Types of Cases Typically Taken on Contingency
The contingency fee system is commonly used in various civil legal matters where plaintiffs seek monetary compensation. Here are the primary types of cases that attorneys typically take on a contingency fee basis:
Personal Injury Cases:
This is where contingency fees are most common, covering car accidents, slip and falls, workplace injuries, and other events where a person seeks damages for injuries suffered because of the actions or inaction of another party.
Medical Malpractice:
Medical malpractice cases, resulting from a failure to provide the proper standard of care of healthcare providers.
Also read: 5 Shocking Pittsburgh Medical Malpractice Cases
Medical Malpractice Lawyer – Detailed Guide
Product Liability:
This includes lawsuits against manufacturers or sellers of defective products who cause injury or harm to consumers.
Workers’ Compensation:
If there is a third party involved, some lawyers will take workers’ compensation cases on a contingency basis, although not all states permit this.
Insurance Claims:
Finally, cases in which people seek to get paid by insurance companies to whom they submitted claims that were denied or paid out, involve contingency work as well if litigation is necessary to make the amounts right.
Class Action Lawsuits:
The cases can require significant time and resources, so attorneys for groups of plaintiffs in class action suits typically contract on a contingency fee basis.
Condemnation Cases:
These include disputes over property rights when the government seeks to take (eminent domain) the private property for public use. These cases are often highly complex, so an attorney may take these suits on contingency.
The Process of a Contingency Fee Case
Here’s a simplified breakdown of the process when a lawyer takes a case on contingency:
Initial Consultation: The lawyer meets with the client, often at no charge, to evaluate the merits of the case.
Agreement: If the lawyer accepts the case, the lawyer and the client sign a contingency fee agreement that details the lawyer’s percentage and how much responsibility each party has.
Investigation and Legal Work: The attorney conducts a comprehensive investigation, gathers evidence, and builds the case. This may include hiring experts, collecting medical records and depositions.
Settlement or Trial: If the lawyer negotiates a settlement with the opposing party, it may be in the best interest of their client to accept it. If victorious, the attorney takes a percentage of the award or settlement as their fee.
No Win, No Fee: The lawyer is compensated only if the case is successful, meaning if money is recovered for the client (although the client might still have to pay for some expenses, such as filing fees or expert witness fees).
Pro’s of Contingency Fee Arrangements
No Upfront Costs:
This is very beneficial for clients that may not typically be able to afford hourly rates or flat fees, as they are not required to pay attorney fees upfront. This means someone can go to court without being scared of a huge legal bill in case they lose the case.
Access to Justice:
The use of contingency fees also helps equal the relative power between the parties, especially when one side is a large corporation or an insurance company. Clients are able to compete on a level playing field without the obligation of paying upfront fees to the attorneys.
Motivation for Attorneys:
Also, lawyers only earn their payment if they are able to win the case or negotiate a settlement, meaning they have a vested interest in working hard and well for their clients. This aligns the interests of both the parties towards achieving a successful outcome.
Predictable Payment Structure:
If the client wins, they know exactly what they’ll owe — and the attorney’s fee is a percentage of the recovery. Predictability this can enable the clients to better budget during their critical seasons.
Con’s
High Percentage Fees:
The most common disadvantage is that lawyers frequently take a large cut of the settlement, generally between 25% and 40% or more, depending on the case and its complexity and risk. As a result, clients can end up with far less from their recovery than they anticipated.
Potential for Conflict Over Settlement Offers:
Clients and attorneys may disagree over settlement offers. Attorneys may pressure clients to settle quickly in order to guarantee their fee even if it doesn’t fit with the client’s best interests or desired compensation.
Costs Deducted from Recovery:
In addition, clients can also be responsible for litigation costs ( e.g. filing fees and expert witness fees ) that are deducted from the settlement before an attorney fee is calculated. Which can further reduce what little they get.
Selective Case Acceptance:
Attorneys may pick and choose which cases to work on a contingency basis, avoiding very high risk cases and those that don’t appear to have a strong basis for success. This could leave some potential clients without representation.
Higher Overall Costs in Quick Settlements:
If a case settles quickly, clients might end up paying more in fees than if they had hired an attorney at an hourly rate, especially since lawyers receive a percentage regardless of how long they worked on the case.
Also read: Lawyer vs. Attorney: What’s the Real Difference ?
Frequently Asked Questions :
1. Can I change lawyers during a contingency case?
You can change lawyers if you are unhappy with the service but you might have to pay any costs incurred, and the new lawyer may set their own contingency percentage.
2. What happens if I lose my case?
If you lose, you don’t owe the attorney any fees, but you may be liable for other costs, such as court costs or expert witness fees.
3. Can I hire a lawyer on contingency if I can’t afford to pay anything upfront?
Yes, lawyers will take contingency fees for clients who cannot afford to pay upfront. You only pay if you win the case.
4. Are contingency fees taxed differently than hourly fees?
Contingency fees are taxed as income for the lawyer, but clients don’t pay taxes on the fee amount directly.
5. How does the lawyer decide if my case qualifies for contingency?
Before a lawyer is willing to agree to a contingency arrangement, he or she will consider the merit of the case, its potential value and its chance of success.
6. Are contingency fees available for all types of cases?
No. They are most common in personal injury, medical malpractice, employment disputes and class actions, but rare in criminal or family law cases.
7. Can I negotiate the contingency fee with my lawyer ?
Yes, you may negotiate the fee, especially if the case is large or straightforward.
8. How do lawyers get paid if the case is settled out of court?
If the case is settled before trial, the lawyer takes their percentage from the settlement amount. Any costs (like court fees) are deducted from the settlement before you receive your share.
