Contingency Fee Agreements
This article addresses the nature of contingency fee agreements, the reasons personal injury lawyers use them, and potential issues to consider when entering such agreements.
A contingency fee agreement is a contract between a client and their attorney where the attorney’s fee or compensation is contingent on and calculated based on the client’s recovery. Often, these agreements work to the client’s advantage because the attorney has more incentive to settle the case for a higher value. Because the attorney takes a percentage of the total recovery, the more money the client makes, the more money the attorney makes. Also, contingency fee agreements offer legal representation to someone who might otherwise be unable to afford an attorney to prosecute their case.
In Nevada, contingency fee agreements need to be in writing.
Attorneys usually take different percentages depending on whether the matter settles, which is generally 33% of the total recovery, whether the matter proceeds to trial, or whether it settles or recovers on appeal. Generally, attorneys charge 40% in cases filed in court.
Further, if there is no settlement, the attorney does not pay a fee, and the client pays the attorney nothing. However, you need to check your attorney’s fee agreement to see if you are required to pay your attorney’s costs if there is no settlement/award of damages. Also, there are some instances where, if you lose, you will not be required to pay your attorney’s fees, but, as the losing party, you could be required to pay the other side’s fees and/or costs. It may arise when the other side has made an offer of judgment to pay you a certain amount of money to settle, but you rejected the offer and failed to obtain a higher award at trial.
Regarding terminating a relationship with his attorney, the client may usually terminate the contingency fee agreement at any time; however, the attorney can seek to be paid for his hourly rate outlined in the fee agreement.
Finally, a client should always consider whether the fee agreement contains a clause that the attorney will not take more money than the client. If this clause is absent in your agreement, you should ask that it be included. If the attorney disagrees, you may decide that signing the agreement is not in your best interest.
Complexity of the Case and Contingency Fees
A personal injury lawyer can typically charge a larger contingency fee percentage in a riskier or more complex case, provided it is not unjustified or excessive. The attorney’s fee percentage may also be impacted by time limitations set by the client or the anticipated length of the case. In contrast, if the case seems fairly simple or has a good chance of success, the attorney can reduce the contingency fee.
For example, you may have a deal wherein, should the case settle out of court, your lawyer accepts a reduced fee. Your lawyer’s fee may be a larger percentage if your case goes to trial. This contract is sometimes referred to as a graded or staged contingency fee.
When Are Contingency Fees Used?
A contingency fee might be beneficial when a client lacks funds and the case is complicated or expensive. However, most personal injury attorneys will only take on cases to obtain a settlement or judgment, like through an insurance policy or definitive proof of liability. They would only be paid a portion of their client’s compensation.
In civil litigation like personal injury cases or workers’ compensation claims, attorneys frequently take cases on a contingency fee basis. Yet, some attorneys might employ them in:
- Professional malpractice cases
- Sexual harassment cases
- Wage dispute cases
- Class action lawsuits
- Bankruptcy cases
- Employment discrimination cases
- Debt collection cases
When Contingency Fees Are Not Used?
Criminal law cases and divorce cases wherein the fee is contingent on obtaining a divorce, property settlement, or alimony support are prohibited from accepting contingency fees. The legislative bodies of legal services have long supported this decision as a means of guaranteeing attorneys’ professional conduct.
A contingent fee arrangement can financially incentivize a law firm to pursue cases that might not always result in the best interests of all parties. That is particularly true in criminal defense cases, where a financial stake could be seen as endorsing illegal activities, or in family law issues, where the outcome of a divorce or child custody dispute could affect the children’s well-being.
What happens with the litigation costs? Do you still need to pay?
Generally speaking, unless the contingency fee agreement expressly specifies that the client is exempted from these legal fees, the client may still be responsible for covering specific administrative costs even if the lawyer accepts a contingency fee.
These legal fees or litigation costs may consist of the following:
- Expert Witnesses
- Court Filing Fees
- Discovery costs, which may include costs associated with depositions
- Mediation Costs
- Telephone Costs
- Messenger Costs
- Travel Costs
- Investigator Costs
- The cost of acquiring particular evidence, like medical records or official documents
- Incidental charges, like those associated with mailing or creating copies
Before committing to any contingency fee agreement, read your contract and make sure you and the lawyer understand what fees are your responsibility, even if you lose your case.
Variations in Contingency Fee Arrangements
A typical contingency fee agreement has some variations used in specific situations. Your lawyer can tell you if this applies to your situation.
Hourly Contingency Fee
Your attorney will record the hours worked on your case within this fee agreement, and your attorney’s fees will be based on that total. But just like with a regular contingency agreement, you won’t be charged for those legal services unless we get compensation for you.
Under this arrangement, you would be forced to pay your attorney immediately at an hourly rate for their legal services. It is often a small portion of the lawyer’s hourly rate. The remaining amount would be deducted from the payment if a recovery is made.
All law firms do not employ these contingency fee variation methods, and they might not be appropriate or practical in every case involving personal injuries. In addition to working with you to decide how legal expenses will be incurred, your attorney can provide additional information about your personal injury claim.
What to Consider When Creating a Contingency Fee Agreement?
Contracts involving contingency fees must be in writing and signed by the client and any attorneys who will be compensated under the terms of the agreement. The percentage of the recovery that the lawyer can keep, the costs that the lawyer will deduct from the award, and the method by which the lawyer will do so must all be specified in these agreements. State laws often cap the amount of contingency fees an attorney can collect.
State laws often cap the amount of contingency fees an attorney can collect.
Should you have legal representation on a contingency fee basis?
Attorney fees can be confusing and challenging to comprehend. However, they shouldn’t prevent you from claiming your injuries. If you’re searching for a more thorough explanation of contingency fees, you should speak with a reputable and knowledgeable lawyer about your case. They will have the time to review all the legal procedure details and how these agreements work.
Do not delay if you or a loved one is hurt in a personal injury accident. Speak with an experienced personal injury attorney at Hinds Injury Law today and allow our attorneys to fight for the justice you are due while giving you the answers and explanation you need.