Contingency Fees: Read This Before You Hire a Lawyer - Attorney Aaron Hall (2024)
In this video, you get answers to these questions:
What should you know before hiring a contingency fee lawyer?
What are important considerations when hiring a contingency fee lawyer?
What is a contingency fee agreement?
What other options do you have when paying an attorney?
What practice areas are more likely to work on a contingency fee agreement?
Why should you be cautious about entering into a contingency fee agreement?
Before you hire an attorney on a contingency fee basis, make sure you understand the risks to you and how to protect your rights. This article provides some considerations to protect your interests.
Learn which areas of law generally involve contingency fees and what you should consider before hiring a contingency fee lawyer.
Table of Contents
What is a contingency fee?
A contingency feeis a payment to an attorney that is only owed if the attorney wins money for you.
Why are contingency fees frustrating to clients and lawyers?
Contingency fees can be frustrating to either the client or the attorney. Often, one of them gets a bad deal:
If a case settles quickly or recovers a lot of money, a client may feel frustrated that the attorney was paid more than the attorney deserved.
If a case goes longer than expected or recovers little money, the attorney may be frustrated by how much effort was invested for such a low fee.
In other words, contingency fees are rarely accurate: Either the attorney or client gets shorted. Attorneys understand this risk, so they are selective in the cases they take, improving their odds. Still, clients paying a large fee to an attorney may feel frustrated.
Are contingency fees available for all legal areas?
No. Some people think contingency fees are available for any legal area. Their impression of attorneys is shaped by attorney TV commercials with slogans like
no win, no fee,
we don’t get paid unless we win, or
you don’t pay unless we win.
The truth is, contingency fees are only available for a few areas of law, which happen to be presented frequently on TV.
Often contingency fees are available for:
Car accidents, boat accidents, work accidents, and other personal injuries
Fair Debt Collection Practices Act (FDCPA) violations against creditors for harassing debtors
Defective products that cause injuries
Sometimes contingency fees are available for:
Employment law and hourly wage issues
Collection of large debts
Rarely are contingency fees available for:
Real estate
Business litigation
Never are contingency fees available for:
Criminal defense (DUI, traffic, drug, and other charges)
Adoption
Immigration
Divorce and similar family law issues
Bankruptcy
Drafting a contract, will, trust, or other legal documents
Starting a business
Registering a trademark, copyright, or patent
Why don’t all lawyers use contingency fees?
Lawyers often dislike contingency fees for a number of reasons:
There is a risk the lawyer will get paid nothing.
There is a risk the firm will get paid too much and the client may be frustrated by that.
The lawyer’s fees are delayed until collected from the opposing party.
For these reasons, many attorneys avoid contingency fee work.
How do lawyers decide whether to accept contingency fees?
Here are some of the factors lawyers consider when determining whether to accept a case on a contingency fee basis.
The lawyers who frequently accept contingency fee cases
often practice in an area where contingency fees are common (see the list above),
often represent people without resources to pay by the hour; and
carefully select cases to ensure they won’t lose.
That last factor is a big one. A lawyer will accept contingency fee cases where the lawyer is likely to be paid well. Lawyers can’t stay in business if they accept a bunch of weak cases.
What is atypical percentage for contingency fees?
In general, contingency fee percentages range from 33% to 40%, depending on the amount the client could potentially win, the strength of the case, and other factors. I have seen contingency fees as high as 50% (for small cases) and 15% (for very large cases).
Typical: 33% (one third) to 40%
Highest I have Seen: 50%
Lowest I have Seen: 15%
What is a fair percentage for contingency fees?
A fair percentage depends on the circ*mstances and risk involved. It is based on a number of factors.
One factor affecting contingency fees is the amount of out-of-pocket expenses the firm will need to cover the case. These include mediation fees, court reporter fees, transcript fees, expert witness fees, filing fees, etc. Although the client may ultimately be responsible for these expenses, the firm may not ever recover them, resulting in losses of both time and money if the case does not result in enough money.
Under Minnesota law, the factors to be considered in determining the reasonableness of a fee include the following:
the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
the fee customarily charged in the locality for similar legal services;
the amount involved and the results obtained;
the time limitations imposed by the client or by the circ*mstances;
the nature and length of the professional relationship with the client; and
the experience, reputation, and ability of the lawyer or lawyers performing the services.
In other words, since every case is different, these factors will need to be applied to the individual facts and circ*mstances of your case.
Why might you want to avoid contingency fees?
Normally, people who hire a lawyer on contingency do not have the option of paying the lawyer’s hourly rates because they simply can’t afford them. To seek justice, they must accept a contingency fee arrangement.
If you are hiring a lawyer on contingency, keep in mind that the lawyer is first concerned about ensuring the lawyer benefits from the deal. In general, lawyers are far more experienced with contingency fees than clients, so lawyers know better how to calculate contingency fees so the lawyer is not disadvantaged.
Experienced attorneys do not take contingency fee cases if it is a bad deal for them. For example, attorneys routinely reject being paid on contingency for small financial cases, complex cases, and time-consuming cases. However, attorneys routinely accept contingency fee cases that have the potential to win a lot of money, are simple, and will not take much time.
Conclusion: contingency fees are often unfair
Attorneys who are selective about the contingency fee cases they accept will succeed financially. Attorneys who take small or difficult cases on contingency may struggle financially. As a result, people may feel frustrated because their lawyer makes a lot of money from little work, or people feel frustrated because no lawyer will take their case.
In conclusion, contingency fees are generally a very inaccurate (some would say “unfair”) way to pay attorneys, but since people may not have the funds to pay usual attorney rates, our justice system permits the use of contingency fees. Only in rare circ*mstances will our firm take a case on a contingency basis.
Video Transcript
What should you know before hiring a contingency fee lawyer? I’m Aaron Hall, an attorney in Minnesota representing business owners in the Twin Cities area. Today I’m going to talk to you about important considerations before hiring a contingency fee attorney.
First and foremost, keep in mind that this is an agreement between you and the attorney regarding how much the attorney’s going to get paid. And so as you might imagine, there’s no better expert on this agreement than the attorney. The attorney is looking out for herself or himself first and foremost. They’re not necessarily trying to make sure that it’s a really good deal for you. They need to make sure they’re going to get paid. And a contingency fee agreement is especially crucial because the attorney might not get paid anything.
Here’s how a contingency fee agreement works. You’ve heard the commercials. “If I don’t get pay…” Or, “If you don’t make money, I don’t get paid,” what lawyers will say. In other words, the lawyer getting paid is contingent on you getting money. That seems like a really good deal for you. In other words, you don’t have to pay the attorney by the hour. You don’t have to pay some sort of fixed fee. The only way the attorney gets paid is by getting a cut of the proceeds the attorney wins. What could be wrong with that? It seems like your interest is directly aligned with the attorney.
Let’s look at it this way. If the attorney is getting 40% of whatever the attorney recovers, wouldn’t the attorney want to get the most possible? Not necessarily. And here’s the catch. Attorneys need to get paid for the time they put in. So let’s say you’re an attorney and I tell you, “You can earn $5,000 for a 100 hours of work or $6,000 for 200 hours of work.” Which would you rather do? Well, of course you’d rather get paid 5,000 for a 100 hours of work.
Let’s use a simpler example. Let’s say an attorney is hired to represent you because you got in a car accident and, after putting in three hours of time, the insurance company offers $10,000 to you. Well, the attorney thinks to him or herself, “Hey, if I’m getting a third of $10,000 after just a few hours of time, that’s pretty good money. Do I really want to spend another 50 or a 100 hours litigating this? And maybe I wouldn’t get any money.” So as you can see, attorneys who work on contingency, have a personal incentive to settle early and get settlements quickly before they put in way too much time on something.
People have come to me and said, “I hired an attorney on a contingency fee basis and I don’t think that attorney ever intended to go to trial. The attorney sent a couple letters threatening and when the other side didn’t settle or make a counter-offer, the attorney withdrew from representation.” Now generally that’s permissible. But I understand it’s very frustrating. So what other options do you have? Well, attorneys are paid in a number of different ways. Hourly is one way or a fixed fee is another option. But many times people just say, “You know what? I don’t have the money to pay an attorney by the hour or some sort of fixed fee. And so that’s why certain attorneys, especially in certain practice areas, are more likely to work on a contingency fee arrangement.
Contingency fees are often seen in these practice areas: accidents like car accidents, motorcycle accidents, personal injury, class action lawsuits. You may see a contingency fee there or a fee approved by the court on an hourly basis. But it’s often typically the people who are the parties in the case, the clients, are not having to pay out of pocket for attorney’s fees. There are number of other areas where you might see this, as well. Malpractice might be one of those. Here’s areas where you rarely, if ever, see it. You’re not going to see when one in bankruptcy. You won’t see one in family law, like a divorce. You won’t see contingency fee in criminal law.
Think about it. If the attorney wins in criminal law so that you don’t go to jail, what is the attorney getting a cut of? Nothing. I mean, by winning, you won some freedom. You didn’t have to go to prison, but you didn’t win money. So attorneys typically are going to be getting attorney’s fees or contingency fees when you’re suing for money. It’s pretty clear some money is owed. And maybe there’s even an insurance company, so there’s some guarantee that there is a way to collect money on this. And so the big question is how much money is owed? You often don’t see contingency fee agreements in business disputes or general civil litigation, because there may be counterclaims going back and forth. And so there’s just too much opportunity to not get paid.
So the really high level, the reason to be cautious about an attorney’s fee, that’s based on a contingency, you may be paying a lot more than you would if you got paid by the hour. Think about it. The attorneys are only going to do a contingency fee if they believe it’s in their best interest to do that. So I’d be cautious about that before entering into a contingency fee agreement.
To find out more tips and pitfalls and considerations before entering into a contingency fee agreement, contact or visit my website at aaronhall.com. There’s a URL in the description below. And for similar videos like this, you can subscribe to this channel or subscribe to our email list.
I’m Aaron Hall, an attorney in Minneapolis, Minnesota, generally representing business owners. Feel free to look in the description below to find out related information.
That said, the most common lawyer contingency fee average ends up being 33%, or ⅓ of the total earnings of a case, but can go up to 40% (in some jurisdictions) as the complexity and risk involved in taking the case increases.
Contingent fees can vary from attorney to attorney and case to case. The average cost of a contingency is between 30% – 60% depending upon the number of possible wins for a client, the strengths of the case, or other factors. Contingencies fees can be up to 50% and 15% in large cases.
However, Model Rule 1.5(d) prohibits contingency fee agreements for domestic relations matters—such as divorce cases—and for the representation of a defendant in a criminal case. Most states, including California and New York, have adopted such prohibitions on contingent fees.
Contingency fees mean you will pay the lawyer a certain percentage of the money you receive if you win the case or settle the matter out of court. If you lose your case, the lawyer does not receive any payment from you.
Typically, most construction projects use a contingency rate of 5% to 10% from the total project budget. This is typically enough to cover any unexpected costs that may arise throughout the project.
For instance, if you win your case, your attorney charges $250 per hour and your attorney spent 10 hours on the case, you will pay your attorney $2,500. You do not pay this $2,500 amount unless you obtain a recovery.
For example, if the project team feels they need a 10% contingency reserve for a $1,800,000 project, they would add $180,000 (10% of $1,800,000) to the cost of the project - for a total project cost of $1,980,000. Sometimes, different percentages are used for labor and materials.
The most common type of “retainer” fee is actually an advance fee deposit, usually between $500 and $5,000. These advance fee deposits are paid up front, like a down payment, and then the lawyer subtracts her hourly fees and costs. Most lawyers require advance fee deposits for most kinds of cases.
Any unearned retainer fees that are not used can be returned to the client. Earned retainer fees, on the other hand, refer to the portion of the retainer that the lawyer is entitled to after work begins. Earned retainer fees may be granted to the lawyer bit by bit, depending on the number of hours worked.
As such, contingency fees are only used in cases where money is being claimed: personal injury, medical malpractice, wrongful death, workers' compensation, disability, and some employment law claims, for example.
In short, the contingency rules theory recognizes that all persuasive choice-making behavior takes place within boundaries that expand and contract as a function of relatively fixed potential contexts. An actual context is a function of human choice-making behavior within potential contextual boundaries.
The easiest way to do this is to multiply the probability percentage by your estimated cost impact, providing a risk contingency for each line item. For example, a risk probability of 20% multiplied by a cost impact of $40,000 equals a risk contingency of $8,000.
A contingency is a potential occurrence of a negative event in the future, such as an economic recession, natural disaster, fraudulent activity, terrorist attack, or a pandemic.
A contingency clause often states that your offer to buy property is contingent upon X,Y, & Z. For example, the contingency clause may state, “The buyer's obligation to purchase the real property is contingent upon the property appraising for a price at or above the contract purchase price.”
A construction contingency is the amount of money allocated to pay for additional or unexpected costs during the construction project. Typically, a 5-10% calculation of the construction budget should be allocated to your construction contingency.
Should You Accept a Contingent Offer? In general, you should proceed with caution before accepting a contingent offer — or avoid contingencies altogether, if you receive an offer without any. Contingent offers are riskier, because if the contingencies aren't met, the deal will fall through.
The main problem with a contingency fee agreement is that it could cost the plaintiff more than standard hourly rates for a lawyer if the case settles quickly.
Treat the related contingent attorneys' fees as a miscellaneous itemized deduction. Under this treatment, a winning claimant can effectively be forced to pay federal income tax on most or all of the contingent attorneys' fees, even though that fee is subtracted from the amount received by the claimant.
The four contingencies are positive and negative reinforcement, punishment, and extinction. Positive reinforcement occurs when the desired behavior results in positive outcomes. This type of reinforcement is also referred to as a reward.
This contingency is normally calculated as a percentage. If the phase is 100 days of effort, contingency at 20% would be another 20 days. As the project progresses, the level of risk reduces as the requirements and issues become known, so the percentage will be reduced.
The left-side column lists all of the values for one of the variables. ...
The top row lists all of the values for the other variable. ...
In the body of the table, the cells contain the number of outcomes that fall into both of the categories corresponding to the intersecting row and column.
Commissions & contingent fees are prohibited if the CPA is engaged in an audit or compilation and/or examination of financial information such as preparing an original or amended tax return or claim for a tax refund.
Various examples of contingent liability include lawsuits, product warranties, changes in government policies, foreign exchange fluctuations, pending cases/investigations, lawsuits of patents, and bank guarantees.
Most jurisdictions in the United States prohibit working for a contingent fee in criminal cases or certain types of family law claims, as made clear in Rule 1.5(d) of the Model Rules of Professional Conduct of the American Bar Association. Some jurisdictions, however do allow contingent fees in criminal cases.
If the leader rates the person they would least like to work with favorably, they are considered a relationship-oriented leader. Their strengths would include managing conflict well and developing strong workplace relationships.
Contingency Line Item means the line item in the Budget identified as “Contingency” which is intended to cover the eventuality of unforeseen costs or cost overruns.
Telling your lawyer the truth and disclosing important facts that can affect your case is important. This is especially true in criminal cases. If you withhold information from your lawyer, it can jeopardize your case.
As a client, you have the final say about whether you want to settle your case or go to trial. It is your lawyer's responsibility to present you with both options and provide clarity, legal interpretations, and recommendations to help you make an informed decision.
Yes.Attorney-client privilege has nothing to do with money, and instead, has to do with an individual's reasonable belief that he/she is speaking with his/her attorney.
Attorneys typically charge an average of $100 to $300 an hour, while a consultant may charge $50 to $150. No matter your profession, though, it's good to find a reasonable rate that works with your experience level and your success rate in the industry.
The costs of replacing clear plastic retainers can vary greatly. For a set, you can pay anywhere from $150 to $800. To narrow down the price range, it helps to take a look at specific brands, like Invisalign (Vivera) or Essix retainers.
Without dental insurance, retainers can cost around $300, with the most expensive options costing around $5,000. If you have coverage for orthodontic treatment, the cost of your retainer may be fully or partially covered by insurance.
A contingent fee, also known as a contingency fee, is a method of compensation for legal services. A lawyer who works on contingency receives a percentage of their client's monetary award as compensation rather than billing a fixed hourly rate.
Contingent means that an event may or may not occur in the future, depending on the fulfillment of some condition that is uncertain. This term is often used in contracts where the event will not take effect until the specified condition occurs.
Limits such contingency fee to 20% of the amount recovered by the plaintiff. For specified consumer-protection claims, limits court-ordered attorneys' fee awards to 20% of amount recovered in the lawsuit. Does not restrict fee arrangements for defendants' attorneys.
Some of the most common real estate contingencies include appraisal, mortgage, title and home inspection contingencies. Many home buyers also include a sale of prior home contingency, which allows them to withdraw an offer if they are unable to sell their current home within a specified timeframe.
The loan contingency period is typically contracted to last 30 – 60 days and must be agreed on by the buyer and seller in a purchase contract. The buyer is usually expected to secure financing and gain approval for a mortgage before closing on the house can begin.
Time: Contingency planning is time-consuming, especially where the external environment is constantly changing. Risks: The firm will need to assess the range of risks and decide which of these requires plans to be updated. Safety: Breaches of health and safety legislation could have huge financial consequences.
It effectively means you are under budget. If there is leftover contingency, then just like a project that is under budget, the funds will be returned to the sponsor, customer, supplier or back into the business, depending how the project/contract is setup.
Set aside a well-researched amount, typically between 5% and 10% of the overall project budget. Allocate funds to cover the most likely and expensive contingencies first and then assign the remaining funds to cover the remaining events and risks.
Contingent Expenditure means all incidentals and other expenditure including expenditure on store which is incurred for the management of an office, for the working of technical establishment such as laboratory, a workshop, an industrial installation, a farm and a like.
As a general rule, the personal injury lawyer will receive 33% of the final settlement amount in the case. However, cases that go to trial often incur different costs. The goal of this fee structure is to minimize the client's financial risk in hiring an attorney to represent them.
In California, you will usually not see a contingency fee over 40% for most law firms. * In such cases (frequently called “medical malpractice” cases), the portion of the recovery which may be charged for an attorney's contingency fee cannot exceed statutorily designated percentages.
A retainer is by default non-refundable and is not returned. Instead, it gets applied to the total. Think of a security deposit for an apartment or a cleaning deposit for an event venue rental (separate from the actual fee for the event cost itself). These are fees that are separate from the total.
1998 – The Tobacco Master Settlement Agreement - $206 Billion. The Tobacco Master Settlement Agreement was entered in November 1998 and is still the largest lawsuit settlement in history.
Kiser, principal analyst at DecisionSet, states, “The vast majority of cases do settle — from 80 to 92 percent by some estimates.” Other sources even claim that this number is closer to 97 percent. However, not all cases are created equally.
Here in California, the contingency fee for a personal injury lawyer successfully winning the case on your behalf is about 33 percent – or one-third of the jury award or settlement.
Unconscionable fees means charges or bills for treatment submitted for services performed that are unreasonable charges for those services as compared to the usual and customary charges by a chiropractor or by a health care provider other than a chiropractor for the same or similar services in the locality where the ...
Upon request by the client, the attorney shall provide a bill to the client no later than 10 days following the request unless the attorney has provided a bill to the client within 31 days prior to the request, in which case the attorney may provide a bill to the client no later than 31 days following the date the most ...
How Much do Car Accident Lawyers Charge in California? [Average 2023 Fee] Short Answer: in 2023, California car accident lawyers will typically charge from 33% to 40% of the settlement amount a client receives.
A contingent fee agreement is a legal agreement that allows you to hire a lawyer for your case without having to pay any out-of-pocket upfront fees unlike a retainer fee. The lawyer getting payment is contingent on you winning your case. If you do not win your case, you don't have to pay your contingency lawyer.
Attorneys typically charge an average of $100 to $300 an hour, while a consultant may charge $50 to $150. No matter your profession, though, it's good to find a reasonable rate that works with your experience level and your success rate in the industry.
A retainer for a lawyer is a fee paid upfront by the client to secure the services of an attorney. It essentially "reserves" the time and expertise of a lawyer, making them accessible to the client for an agreed-upon time. The amount of the retainer fee can vary and may be a flat fee or an hourly rate.
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