What Is A Contingency Fee? Common Questions and Answers

At King Law, we work on a contingency-fee basis for most of our personal injury and mass tort clients. But what does that phrase mean? Simply put, it means our clients only pay us attorney’s fees if we are able to secure them compensation. This page explains what a contingency fee is, how it works, and what clients can expect when we take their lawsuit on a contingency fee.

What Is the Definition of a Contingency Fee?

A contingency fee is a fee charged by lawyers that is contingent upon that lawyer securing compensation for their client. Lawyers who work on a contingency-fee basis only get paid if they secure money for their client.

This means that clients who hire a lawyer on a contingency-fee basis do not pay their lawyer up front. They do not pay an up-front retainer or an hourly fee (in most cases). Instead of charging money up front or charging an hourly rate, lawyers who take personal injury lawsuits on a contingency-fee basis get a set percentage of any recovery made by the lawyer on behalf of their client (i.e., a jury award or a settlement). If a client does not receive a settlement or jury award, then that client does not owe their attorney for legal services.

However, there are some expenses a plaintiff pays if they receive compensation, which are deducted from their award or settlement. For example, the client typically pays court-filing fees, other court-related expenses, any medical liens, or any expert services that the law firm advanced for their client (i.e., paid up front). Clients should consult with their lawyer and ask all questions about payments due before signing a retainer agreement.
One way a contingency-fee structure benefits clients is by making legal representation accessible to people, regardless of their ability to pay an attorney up front.

When Are Contingency Fees Used?

Contingency-fee agreements are used by lawyers who focus on personal injury lawsuits and product liability cases, including mass tort lawsuits. These agreements are used in civil lawsuits where an injured party is pursuing compensation due to an injury. Contingency fees are not used in criminal lawsuits. Plaintiffs who file lawsuits against companies for allegedly dangerous drugs, products, or services often hire lawyers who work on a contingency-fee basis.

How Much Is the Contingency Fee?

The amount a client pays as a contingency fee is a percentage of their compensation. That amount varies depending on whether their case is filed in state or federal court. For personal injury cases filed in New York, our contingency fee is one-third of the recovery. For mass tort lawsuits filed in federal court or as part of an MDL, our contingency fee is 40%. There are multiple reasons the fee is higher for filing a federal case, including the complexity of these cases, the amount of time it takes for these cases to close, and the expert and legal resources required to take on large corporations in court.

When a client reviews a retainer agreement, their contingency fee will be clearly stated in the agreement. When our clients sign a retainer agreement, they agree to the stated contingency fee, which is a percentage of their potential settlement or jury award.

Other Common Questions About Contingency Fees

What Are Other Names for a Contingency Fee?

There are a lot of ways attorneys convey that they work on a contingency fee. Some examples of other terms that mean the same thing as a contingency fee include: a contingent fee, percentage-based fee, success-based fee, and recovery-based fee. You may hear law firms advertising “No fee unless we win,” “No out-of-pocket attorney fees,” or “Attorney’s fee paid from recovery.” All of these phrases mean relatively the same thing, though there are some minor nuances. These phrases mean that a lawyer is working on a contingency-fee basis. However, “No up-front fees,” may imply that a person owes money regardless of the outcome of their case.

Are Contingency Fees Good for Plaintiffs?

In theory, a contingency fee allows many people who could not afford to hire a lawyer a way to seek justice in their case. If an injured person had to pay a lawyer upfront to investigate and pursue their claim, many valid cases would not be pursued. It also gives everyday people the ability to pursue lawsuits against large companies that pay large sums of money to their defense lawyers. Additionally, a contingency fee gives people the assurance that if they lose their claim, they will not owe a lawyer a large sum of money for their lawyer’s legal services. Contingency fees level the playing field so that an injured person can pursue a civil lawsuit, whether or not that person has enough money to pay professional services fees.

When Do People Pay Lawyers Who Work on Contingency Fees?

Typically, lawyers working on a contingency fee receive their payment after compensation is issued. In some cases, the compensation may be put into an account where the lawyer distributes the money to the clients, minus the contingency fee, court fees, and any other litigation fees the lawyer paid on behalf of the client. However, where the compensation is deposited varies from case to case. People should talk with their lawyer to understand precise payment arrangements in advance. They should also consult with a knowledgeable accountant to understand which parts of their compensation may or may not be taxed.

How Do Lawyers Who Use a Contingency Fee Get Paid?

Lawyers taking cases on a contingency-fee basis only get paid after a case concludes through a settlement or a jury award. This means that the lawyer does work up front, but gets paid after the end of the lawsuit. That is part of the reason why many lawyers use strict screening criteria for these cases. Neither the lawyer nor the client wants to spend time and resources on cases that have a very low likelihood of success.

If I Lose My Case, Do I Owe My Lawyer Money?

If your lawyer is working on a contingency fee and you do not receive a settlement or lose your case, you will not owe your lawyer any percentage-based compensation. However, depending on your retainer agreement, you may owe your attorney for court-filing fees, deposition fees, life-care-planning fees, or other expert fees. Your retainer agreement will explain how these advanced fees will be handled. Please note that your lawyer does not get a percentage or any payment related to these fees. The lawyer simply advances these fees and does not financially benefit from them.

If There Are Two Attorneys or More Working on My Case, Do They Both Charge a Fee?

It is not uncommon for lawyers to work together on cases. Lawyers will even partner with lawyers from other firms to ensure their clients are properly supported throughout litigation. This arrangement is called co-counsel. At King Law, if two or more lawyers work together on your claim, you will not need to pay multiple contingency fees. No matter how many lawyers contribute to your case at King Law, your contingency fee does not change. It is up to the lawyers to determine how they will divide the percentage paid for attorney services. However, different firms may have different agreements with their clients.

Are There Any Exceptions to the “No up-front” Cost Arrangement?

There are costs associated with filing a lawsuit that are not attorney fees. Some of the other costs may include court-filing fees, expert witness fees, medical record retrieval costs, deposition expenses, and other expert services. However, not all of these expenses apply to each case. Some law firms, including ours, may cover these costs initially and deduct them from your settlement or verdict amount if you receive compensation. Make sure to talk to your attorney about these expenses, whether or not the fees will be advanced by the firm, and who covers these expenses if you do not receive compensation.

What Should You Look for in a Contingency Fee Before Signing a Retainer Agreement?

It is crucial to understand all costs, fees, and services before signing a retainer agreement. Some of the things you should look for before signing a retainer agreement with a contingency fee include:

• What percentage of compensation will your attorney receive?
• Is that percentage similar to what other attorneys charge and fair?
• Who will cover court-filing fees and other fees up front?
• Will you reimburse your attorney for court fees and similar fees if you do not receive compensation?
• What services will your lawyer provide for this fee?

It is important to ask questions up front so you understand the agreement and the representation you are securing.

Can Contingency Fees Be Used in Criminal Defense Cases?

Professional ethics rules and the American Bar Association (ABA) Model Rule 1.5(d) prohibit attorneys from using a contingency-fee arrangement in a criminal case. Criminal defendants do not receive compensation as part of the conclusion of their criminal case, so this arrangement would not be viable in a criminal defense lawsuit.

What Is an Example of a Contingency Fee?

Here is an example of a contingency fee. A person learns that their nerve damage may have been caused by a spinal cord stimulator. So, that person decides to file a claim against the company that made their neuromodulator device. They speak to an attorney taking spinal cord stimulator injury lawsuits and proceed with filing a federal lawsuit against the manufacturer. In their retainer agreement, it says the attorney would be paid 40% of their potential compensation. After a few years of their case moving through the court, the device manufacturer offers a $100,000 settlement. At the conclusion of the case, the attorney receives $40,000 in legal fees, and the injured party receives $60,000, minus any court fees, liens, or other fees the lawyer paid in advance.

What Is the Difference Between a Contingency Fee and a Retainer?

The word “retainer” can refer to a fee paid to secure a lawyer’s services. A “retainer agreement” is the contract establishing the terms of the attorney-client relationship. Lawyers who work on a contingency-fee basis ask their clients to sign a retainer agreement that clearly states the applicable contingency fee. This retainer agreement is a contract that secures the provider’s time, availability, and services in exchange for a future payment that is contingent on compensation. When a lawyer works on a contingency fee, the retainer agreement states that the lawyer will receive a percentage of any potential compensation.

Does it Pay to Shop Around for the Best Contingency Fee?

In some cases, you can benefit from talking to more than one lawyer about what each one charges as their fee. However, a lower contingency fee does not mean you will have a better outcome. Most reputable lawyers charge very similar contingency fees. People should be wary of lawyers who charge very low or very high fees. Ultimately, people should choose an attorney whom they feel is reliable and gives them the best chance of compensation through their lawsuit.

What a Contingency Fees Mean for Our Clients

At King Law, we use a contingency-fee arrangement for most of our mass tort and personal injury cases. By using this arrangement, injured people can hire an experienced and knowledgeable attorney without worrying about up-front costs. If you are injured and interested in legal representation, contact King Law for a free case evaluation. We are ready to answer your questions and hear about your case.

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