Ads for lawyers offer clients representation on a contingency basis. What is a “contingency fee,” and is it a good deal for the client?
A contingency fee is one in which the client and lawyer agree that the lawyer’s fee will be a percentage of the proceeds of the case. No matter how much work the lawyer does on the case, the fee can never be more than the agreed percentage of any recovery. This applies whether the case settles or goes to trial (although, the percentage might be less if the case settles before trial).
Pros of Contingency Fee Agreements
A benefit of contingency fee agreements is that the client never gets a bill for fees from the lawyer. When a case settles, the client gets a check, which is reduced by the agreed percentage for legal fees and litigation expenses. If the case goes to trial and the client loses, the client pays no fee.
In a pure contingency fee, the lawyer only gets paid if the client gets paid. The client never has to worry about paying a lawyer with client funds. This is especially helpful after an accident, when the client is worried about medical bills and lost wages and can ill-afford legal fees.
Another benefit of contingency fees is that the lawyer and client are partners in the case. The lawyer and client benefit together when the case goes well. The lawyer only succeeds if the client succeeds. And no matter how much time the lawyer and staff spend on the case, the fee never increases.
Hybrid Fee Agreements
Sometimes, lawyers offer hybrid fee agreements. The lawyer will charge an hourly fee to a certain point in the litigation, after which the fee will switch to a contingency, with the client receiving credit for hourly fees already paid. This arrangement might be attractive to the client where there is a legitimate expectation of a quick settlement.
Determine if a fee agreement is right for you
If you are injured in a crash, here are some important questions to ask when hiring a lawyer:
• Does the lawyer offer a contingency arrangement?
• Are there graded percentages: for example, 25% if the case settles pre-suit, 33% if the case proceeds to suit, and 40% if the case goes to verdict?
• If the case is near settlement, does it make more sense to hire the lawyer on an hourly or hybrid basis?
• How are costs handled – is the contingency calculated before or after costs are repaid?
• Can I get a specific example of how the contingency would work?
If your case settles quickly and your lawyer hasn’t invested a lot of time preparing for the case, he or she may recognize significant profit. But lawyers also take risk – if the case requires a lot of work to get to settlement or verdict, or if the case is lost, he or she could lose money on the case.
Rules of ethics for lawyers require contingency fee agreements to be written. Note, the rules do not prescribe the percentage to be charged or other specific terms. Still, there some terms that are rather uniform. Often, the percentage for the lawyer’s fee will be one-third.
Frequently, that fee will rise to 40% if there is an appeal. (Appeals are rare, but they require extensive additional work by the lawyer, and so, merit a higher fee.)
Generally, the lawyer will advance all litigation costs (filing fees, court reporter charges, expert fees, and the like) and recover them only if the case results in payment from a defendant.
Robert J. Kasieta is the founder and managing member of Kasieta Legal Group, LLC, in Madison. His practice focuses on civil litigation, personal injury, civil rights, discrimination, business law, and employment law. He is a member of the State Bar of Wisconsin Lawyer Referral and Information Service, which connects residents with lawyers throughout the state. Learn more at wislaw.org.
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