Controlling Legal
Costs:
The Contingency Fee
In this
article, you will learn what a contingent legal fee is, when it is
useful, and how to control the costs of it. A "contingency
fee" is normally based on an agreed percentage of the money
recovered by your lawyer for you as a result of negotiation or trial.
It is used in situations where you are claiming money.
Most personal injury cases are handled in this manner, as well as debt
collections. Contingent fees are not allowed in criminal and
domestic relations cases.
A
contingency fee enables you to retain a lawyer even though you do not
have the money to pay in advance of recovery. If there is no
recovery, there is no fee. On the other hand, you probably will
have to pay court filing, motion and jury fees, deposition costs and
similar charges in any event, as few law firms are willing to pay
these expenses out of their pockets.
There are
two significant ways to control the cost of contingent fee
arrangements. First and foremost, do not agree to a single
percentage no matter what stage of the proceeding your money is
collected. To do otherwise may encourage settlements too early
and too low, since discovery and trial phases involve substantial time
and effort. Also, to pay the same fee whether your money is
collected after one letter or a lengthy trial means that the fee will
probably not be commensurate with the actual effort involved.
To offset
these inequities, simply agree to a sliding scale of percentages, one
for each of the major phases of a legal matter. In the example
of a personal injury matter, settlement after a demand letter and
before filing of a lawsuit might be 10%. After filing of a
lawsuit, but before discovery could be 20%. During discovery
could be 30%, and during trial, 40%. Although 40% for trial may
be more than what a single percentage for the whole case might be
(usually a third), it more accurately represents the effort involved
and gives the lawyer more incentive during the difficult trial period.
Since most cases are settled, you will probably end up paying less
than a third of your money for legal fees.
The second
way to control the cost of contingent fees is to subtract the expenses
of the lawsuit from your recovery before calculating the contingent
fee. If you subtract the $2,000 of expenses you have already
paid to the courts and other outside parties from a $10,000
settlement, the lawyer’s fee at a third is $2,666. If you
don’t subtract these expenses first, then the “same” fee is
$3,333, a significant difference.
Obtain free
initial consultations with several lawyers and discuss the above
particulars with each of them. Legal fees are negotiable, and do
not let any lawyer tell you otherwise. Contingency fee
agreements must be in writing in California. Ensure that all of
the above matters are provided for in detail in the agreement.
While you are at it, make sure this agreement provides that any
settlement check be made out jointly to you and your lawyer and
deposited into the lawyer’s client trust account. Ensure also
that your lawyer is not authorized to settle your case prior to your
informed consent.
Caveat:
I publish these articles for your interest and to provide information
on legal issues that may affect you. Although I use only
reliable sources for the contents, every case is different depending
on its particular facts. You should not take any action based
only on the advice in this article. You should discuss any
proposed reliance or action based upon this article with me or another
lawyer first.
