If you are a large company, you can afford a floor of lawyers who will
work round the clock for you. But how does someone living paycheck to
paycheck hire a lawyer, especially if they've been injured and are
unable to work? They can often barely afford to pay for food and housing.
Who will represent them? Not the public defender; they only represent
individuals accused of crimes, not people seeking compensation for injuries. Who then?
The Purpose of a Contingency Fee Agreement
Over the years, a system has developed so that the littlest of little guys
can get top flight representation. The name is called a "contingency
fee" agreement. Basically, the lawyer isn't paid up front; he
or she isn't even paid in the middle. The lawyer only gets paid when
he/she has produced a result, usually a sum of money that was obtained
on behalf of the client. The attorney's fee is "contingent"
on winning and that almost always comes after most of the work is completed.
At the very end of the case, the lawyer and the plaintiff's will divide
the money according to the agreed upon percentage. The typical split is
1/3 to the lawyer, 2/3 to the client if the case is settled before a complaint
is filed with the court; 40% percent to the lawyer, and 60% percent to
Rates are obviously negotiable (and I offer better rates than those--email
me and I will send a copy of my free agreement), but the principle is
no success, no fee. If the lawyer isn't successful, there's nothing to divide. The
lawyer walks away with his tail between his legs, and the client get nothing,
which is why smart lawyers screen their cases carefully, take only those
they believe will win. But the division is never as simple as that because
of two other factors: case costs and liens.
How Case Costs Effect Contingency Fee Rates
Case costs are expenses incurred to develop the case. This includes both
pre-filing costs and cost that incurre after filing.
This costs include things like:
- Police report
- Investigator fees
- Medical reports
- Medical bills
- Filing fees
- Costs of service
- Deposition costs
- Arbitrator fees
- Mediation fees
- Expert witness fees
Experts can run into tens of thousands of dollars. They are typically delayed
until just before the case goes to trial because they are so expensive,
but some very good firms bring their experts in early to help them develop
the case. The point is, how are these costs allocated? The answer depends
on the contract you sign. Some attorney's take the costs off the top
and then divide the fee. Some take their fee, and take the costs out of the
clients share. I have seen good firms do it both ways.
Schedule an appointment with our attorney to discuss your contingency fee agreement!
How Liens Effect Contingency Fee Rates
However you allocate costs, after you pay the various fees and your attorney,
does the rest of the money go into your pocket? Again it depends. Some
people incur liens on their case. Ambulance bills and emergency room care
are the standard automatic liens. They have liens by statute so they can
be guaranteed payment if there is a settlement. Their liens are often
"automatic." Some, not all, will reduce the amount they are
re-paid by the amount of the attorney's fees, but it's complicated
and depends on the type of lien.
Like a second mortgage on a house, it must be paid off before the house
can be sold. The attorney doesn't have a choice about it because defendants
will put the name of the lien holder on the check before they disburse
any money. The smarter attorneys will resolve this before checks are written
and negotiate the amount and then have the carrier issues separate checks.
There are also liens which are not automatic, but that the lawyer and client
agree to. If the client has no means to pay for medical care, they will
often offer the doctor a lien if they can get the treatment. Like the
lawyer, the doctor is again waiting to get paid until the case is over.
The doctor is taking a big gamble, but without such agreements, many people
would never get care.
What if Your Lawyer Loses Your Claim?
Does that mean that the client never has anything to pay? No. When a lawyer
says "you'll never have to pay anything...", what they really
mean is that you'll never have to pay anything to that lawyer unless
they are successful. But, if the case goes the whole distance, all the
way to a trial, and the lawyer loses, the defendant will be entitled to
recover their costs. There are legal mechanisms called statutory offers
to settle if the defendant is willing.
What if the Jury Offeres Less Than the Offer?
What happens if the jury comes back with less than the defendant has offered
pursuant to these special codes sections (CCP 998)? Then the plaintiff
has to pay the defendants costs. In even a small case, it's very easy
to spend ten thousand dollars in costs. In the worst case scenario, the
plaintiff is stuck with paying those costs.
This is why an attorney's ability to win is so important. The next
time a firm tells you how many times they've won, stop them and ask,
"How many times have you lost?"
Contact the Fetto Law Group today to discuss how we can help provide you financial security!