What’s a Contingency fee?
Where a lawyer elects to use contingency fee arrangement, he or she is essentially agreeing to take a prearranged agreed upon fixed percentage of any recovery they obtain for the client in lieu of charging an hourly rate. In other words, if the lawyer loses he or she gets nothing, expect for any repayment of court or filing fees when such an arrangement is made. The risks are great but so too can the rewards if they pay off.
When Can I Never Use a Contingency Fee; Verses When Might I be Precluded from Using a Contingency Fee?
If you're a criminal law attorney read no further as you may not charge a contingency fee. In this case, the jurisdiction does not matter, it is not allowed under any circumstance. As to when you might not be able to use a contingency fee arrangement, The ABA Model Rules of Professional Conduct doesn’t allow a lawyer helping his or her client secure a divorce to use a contingency fee. Other jurisdictions, such as Texas allow it. Also part of the mix are states such as California, which requires the fee arrangement not to be against public policy. The best thing to do is to look at your jurisdiction’s ethics rules.
If I Use a Fee How do, I Make it Legit?
The fee must be reasonable in all cases. In most cases it must be put in writing. If this is not a must, it is still a good idea. It must be signed by both the client and attorney. It should at a minimum, identify the attorney and client, list the type of case, who must pay court costs and filing fees and the amount of the fee.
To Use or not to Use a Contingency Fee, that is the Question?
Considerations This is a non-exhaustive list of considerations an attorney should consider before deciding to charge a contingency fee.
- Your Bottom Line: Can you pay your bills if you use a contingency fee arrangement?
- Your Level of Experience: If you are a new lawyer with mounting student debt, or are going into a new area of the law think long and hard.
- Caseload Consider your ability to obtain clients and how many cases you can take on at a given time.
- Mix it Up: You can use a mix of traditional hourly fees and contingency fees
- Type of Law: Some practice areas ban or restrict the use of contingency fees. Others such as personal injury cases are more appropriate. This may exclude medical liability cases given how long most take to get resolved.
- Fee Disputes: Many clients who opt to use a contingent arrangement do so out of necessity due to the inability to pay an hourly rate. What’s more, many clients may be physically or mentally harmed and may not be in a position to knowingly and voluntarily make such an agreement. In other words, do not be surprised if your client turns around and sues you, this happens from time to time.
- You Could (operable word) Get a Lot More Money if you Use a Contingency Fee Supposing that an average case sees a $200,000 recovery and the case settles quickly with the lawyer spending 80 hours on the case. Using an hourly rate where the lawyer bills out at $450 per hour, the lawyer would get a $36,000 payday. Using a contingency fee with a standard 33%, the lawyer will get a $66,000 payout, which is 50% more than they would have gotten had they charged by the hour. Then again, if you lose, that $36,000 is looking pretty good. Obviously, as you spend more and more time, your bet becomes all the riskier.
- Make a Safer Bet: While you cannot always predict, how complex a case may be, you may be well served in taking cases that are more straightforward if you plan to use a contingency fee armament.
- Minimize the Lawyer Jokes: Most people hate lawyers, why not try to change this by giving representation to someone who may not otherwise be able to obtain the legal help?
Sorry, but we have a hung jury. The bottom line is that for most lawyers it is a matter of personal choice. If you could only take one takeaway it would be to make sure you have put in enough hours. This is more likely to mean that you are more financially secure, are able to pick the winners, and can get justice for your client, and live another day to represent a new set of clients.