Contingency fees are fixed fees charged by an attorney for legal services provided to a client. The contingency fee is typically 33 to 40% of the amount awarded to a client in a court case if the client is successful. The agreement between the attorney and his or her client is based on a “no-win-no-fee” basis. They are the norm in personal injury cases in the United States, but they are less common in other types of litigation.
How Contingency fees work?
In personal injury and workers’ compensation cases, lawyers are paid on a contingency basis only if the case is successfully resolved.
By agreeing to a contingent fee arrangement, you agree to pay the attorney who assists you in winning your case a fixed percentage of the amount of compensation you receive. If your case is successful, the compensation award will cover all of your attorney fees.
If the attorney who is handling your case does not win the case, no one is compensated. However, you will not be held liable for the attorney’s fees for work done on your case.
Medical Malpractice Contingency Fees
In medical malpractice cases, many states place additional restrictions on contingent attorney fees. Contingency fees for medical malpractice cases were regulated in 16 states as of 2003 (California, Connecticut, Delaware, Florida, Illinois, Indiana, Maine, Massachusetts, Michigan, New Jersey, New York, Oklahoma, Tennessee, Utah, Wisconsin, and Wyoming).
Fees in some states are capped at a fixed rate, such as 33.33 % of net judgment or recovery in Tennessee and Utah.
Other states have a fee structure that is based on a sliding scale. Connecticut, for example, uses a sliding scale fee structure, but it can be waived in complex cases with a cap of 33.33 percent. California allows contingency fees of 40% of the first $50,000 in recovered damages, 33.33% of the next $50,000, 25% of the next $500,000, and 15% of any recovery in excess of $500,000.
Fee limits in Florida vary depending on the stage of the case at the time damages are recovered. For example, if the case goes to trial, it allows for a higher limit, and even more, if the case is appealed.
Four of the states that limit attorney fees explicitly allow a court to authorize a higher fee (Illinois, Maine, New York, and Wisconsin). Wyoming expressly allows the client and attorney to agree on a higher fee.
Six states (Hawaii, Iowa, Maryland, Nebraska, New Hampshire, and Washington) require or authorize court approval of the reasonableness of attorney fees under various circumstances, rather than a specific limit or a sliding scale.
Advantages of Contingency fees
- The biggest advantage of a contingency fee agreement is that you don’t have to pay any money to a lawyer to take your case if that lawyer accepts it on a contingency fee basis.
- One of the most appealing aspects of contingency agreements is that if you lose the case, you do not have to pay the attorney for the work done. It’s also advantageous because, in many cases, the plaintiff cannot afford to hire a lawyer unless the case is won. This also provides an incentive for the attorney to do their best work possible, or else they will not be paid.
Disadvantages of Contingency fees
- The main issue with a contingency fee agreement is that if the case settles quickly, it may cost the plaintiff more than standard hourly rates for a lawyer. A standard contingency fee can range from 33-40% of the final award. Your lawyer will receive the same amount of your settlement whether he or she works for one week or one year.
- When attorneys work on a contingency basis, they may be more selective in the cases they accept. They may try to avoid cases that they do not believe will result in easy victories, or they may negotiate higher fees for “riskier” cases.
- Additionally, there may be fees associated with your cases, such as filing fees, discovery costs, and service of process fees. Make sure to read the entire agreement to understand what costs you are responsible for, in addition to the percentage of the overall award at the end.
- Furthermore, when it comes to setting compensation caps, laws differ from state to state. If your case qualifies for a damage cap, a lawyer may refuse to partner on a contingency agreement because he or she will be limited in what they can earn. The right lawyer, on the other hand, can challenge damage caps and win you the compensation you deserve.
In general, contingency fee agreements have their uses. They are not suitable for everyone. If you have the money to pay on an hourly basis, you might be better off doing so. However, for those who are unable to pay hourly, contingency fee agreements are a useful tool for you to enter into an agreement with a lawyer so that the lawyer can fully and effectively represent you in a trust or will contest.
Disclaimer: Every effort was made at the time of publication to ensure the accuracy of this publication. Individual circumstances will vary, and the law may have changed since publication, thus it is not intended to provide legal advice or imply a certain outcome. Readers considering legal action should seek legal advice from an experienced attorney to learn about current laws and how they can affect their case.