What Is a Contingency Fee?

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A contingency fee is a payment arrangement where a lawyer’s fee is a percentage of the money recovered in a case.  If the lawyer does not obtain a settlement or win at trial, then the lawyer usually does not get paid a fee.  This makes the lawyer’s compensation “contingent” on the case outcome.

A.    How does a Contingency Fee Agreement work?

Generally, your lawyer will ask you to sign a written Fee Agreement prior to legal representation.  With a Contingency Fee Agreement, your lawyer’s fee is an agreed-upon percentage of any monetary recovery.  Depending on the particular Fee Agreement, the client is usually responsible for case expenses, such as filing fees, deposition expenses, etc.  Sometimes, lawyers advance upfront expenses, and then reimburse those expenses out of any monetary recovery.  But depending on the particular Fee Agreement, if there’s no monetary recovery then case expenses might still be owed by the client.  Generally, under a Contingency Fee Agreement your lawyer does not get a fee if you do not win/settle your case. 

There is no single standard contingency fee percentage that lawyers use.  A 33⅓% contingency fee is common for straightforward cases.  40% contingency fees are sometimes applied in cases that go into litigation or trial.  And 45%-50% contingency fees might be applied to very complex cases, like medical malpractice, appeals, or cases with hard-to-prove liability. 

Factors that help determine applicable contingency fees include: (i) case complexity; (ii) risks involved; (iii) whether the case goes to trial or appeal; (iv) state laws and caps; and (v) the lawyer’s experience.  Your lawyer can discuss further with you why a particular contingency percentage is merited for a specific case.

B.    What Types of Cases Use Contingency Fees?

Contingency fees are common in cases where clients seeks money damages, such as:

• Personal injury (car accidents, slip-and-fall, medical malpractice)

• Product liability

• Wrongful death

• Workers’ compensation (with statutory limits)

• Some employment law cases (e.g., discrimination, unpaid wages)

• Some business tort or commercial litigation cases involving monetary damages

  
  

Contingency fees are generally prohibited in criminal defense cases and most family law matters, such as divorce and child custody.  However, exceptions may exist for collecting past-due familial monetary support.

C.    Why Are Contingency Fees Important?

Contingency fees help balance the legal system by making it possible for people without much money to hire quality lawyers.  Many people cannot pay lawyers’ standard hourly rates (approx. $200–$800+/hr). With a contingency fee, the lawyer works for free upfront and only gets paid after a successful result. This opens the door to legal representation for injured people, consumers, and workers who otherwise would have no recourse.

With a Contingency Fee Agreement, much of the case risk shifts to the lawyer.  The lawyer invests time, labor, and sometimes money on a case they might lose.  In this way, contingency fees align the lawyer’s interests with the clients’ interests, because both want the highest monetary recovery possible.  The contingency fee lawyer is motivated to work hard for a maximum recovery.

Overall, contingency fees promote access to justice.  The contingency fee lawyer only chooses cases they believe have merit, and thus the client has confidence that their lawyer truly believes in their case.  Contingency fee clients don’t need thousands of dollars to hire a lawyer.  Contingency fees allow underprivileged clients to pursue valid claims against powerful and/or well-funded defendants, like large corporations, insurers, and financial institutions. 

D.    What Other Types of Legal Fee Arrangements Exist?

Contingency Fee Agreements are a common type of legal fee structure.  However, lawyers also utilize other types of fee structures:

1.     Hourly Billing – Many lawyers handle cases on an hourly basis, keeping track of their time involved in the case and charging a standard hourly rate.  Most hourly lawyers require an upfront retainer deposit to bill against as they work.  If the initial retainer is exhausted prior to case completion, the lawyer would request replenish retainers as needed.  This is most common in business, criminal, family, and civil defense work. 

2.     Flat Fees – Sometimes, lawyers charge a single set fee for the entire case.  This is common in wills, uncontested divorces, simple contracts, immigration filings, and criminal defense for standard matters.

3.     “Hybrid” Fees – Lawyers can combine fee structures.  For instance, a lawyer may charge a ½ hourly rate, plus a reduced contingency fee.  Or, a lawyer could charge a flat fee plus an agreed-upon bonus upon successful case completion.

A primary downside of many of these other fee structures is that they require the client to spend money upfront on a lawyer.  Contingency fee structures, however, generally do not require any upfront client payment.

E.    Conclusion

When you’re choosing your lawyer, it’s important to understand your legal fee structure.  With contingency fees, your lawyer’s fee is a percentage of the money recovered in your case.   This means your lawyer only gets paid if you win.  Overall, contingency fees promote access to justice and help balance the legal system by making it possible for people without much money to hire quality lawyers.  

When you’re deciding which lawyer to hire for your case, you want a trusted and experienced trial lawyer who believes in your case.  Attorney Peter Isakoff regularly handles cases on a contingency fee basis.  If you need representation for a civil dispute, please contact The Law Offices of Peter Isakoff anytime, day or night, at (336) 863-8348 (Main) or (336) 864-9115 (Español).

DISCLAIMER: The information in this article is provided for informational purposes only. It is not offered as and does not constitute legal advice. The accuracy of the information may change pending changes in applicable law. If you have questions about a specific matter, you should contact a lawyer. The use of this article or any information provided in it does not establish any lawyer/client relationship.