How Does a Contingency Fee Work?

Contingency fees let people with valid claims hire experienced lawyers without paying upfront (Cornell LII).

How it works

1. You and the lawyer sign a written fee agreement.
2. The lawyer handles the case, often advancing costs.
3. If you recover money through settlement or judgment, the lawyer takes the agreed percentage and is reimbursed for costs.
4. If you recover nothing, you owe no attorney fee, although some agreements make you responsible for costs.

What the written agreement must say

Under the ABA Model Rules, adopted in some form in every state, a contingency fee agreement must be in writing, signed by the client, and state (Model Rule 1.5(c)):

• How the fee is determined, including percentages for settlement, trial or appeal
• Litigation and other expenses to be deducted
• Whether expenses are deducted before or after the fee is calculated
• Any expenses the client must pay whether or not they win

At the end, the lawyer must give a written statement showing the outcome, the payment to the client and how it was calculated.

Typical percentages

Many personal injury lawyers charge around one-third of the recovery, sometimes with a higher percentage if the case is filed or goes to trial. Some states cap contingency percentages in certain cases, such as medical malpractice. Federal law caps fees in some areas, such as Social Security disability claims (42 U.S.C. 406(a)).

Costs vs. fees

Costs include filing fees, medical records, expert witnesses, depositions and investigators. Whether costs come out before or after the fee percentage affects your net recovery.

Example

On a $90,000 settlement with a one-third fee and $6,000 in costs:

• Fee calculated before costs: fee $30,000; you receive $54,000, before any medical liens
• Fee calculated after costs: fee $28,000 (one-third of $84,000); you receive $56,000

Where contingency fees are not allowed

Model Rule 1.5(d) prohibits contingency fees in criminal defense cases and in domestic relations matters where payment depends on securing a divorce or the amount of alimony, support or property settlement.

Negotiating

You can ask about the percentage, especially for cases with clear liability or high value, and about sliding scales. Compare agreements.

Common cases

Personal injury, wrongful death, medical malpractice, some employment cases, product liability and certain consumer cases.

See do you need a lawyer after a car accident, or find personal injury lawyers near you.

Sources

1. American Bar Association: Model Rule 1.5, Fees
2. Cornell Law School LII: Contingent fee
3. Cornell Law School LII: 42 U.S.C. 406(a), Social Security representative fees