Attorneys charge their fees either as hourly or contingency fees. These are two different fee formats under which attorneys usually charge plaintiffs for the services rendered.
A contingency fee charges a percentage of a plaintiff’s compensation at the end of a jury trial or when a matter settles via alternative dispute resolution methods such as mediation or arbitration.
Hourly fee bills according to the time an attorney devotes to the case.
A specific basic rule governs the determination of contingency fees, payment of the costs, and other charges to attorneys.
Read on to learn these basics.
When Is the Contingency Fee Charged?
A contingency fee is a charge when there is some monetary benefit at the end of the case.
Criminal cases are barred from charging contingency fees as there is no monetary benefit.
As a rule of thumb, personal injury claims, class action lawsuits, and auto accident claims are contingency fee charge cases.
What Percent Is Charge As Fee?
Attorneys usually charge between 25-30% of the plaintiff’s compensation.
However, there is a catch; while contracting the attorney under a contingency fee, it is prudent to ask for the services covered under the cost and whether the payment will charge on the gross or net compensation received.
What is included in the Fees?
The contingency fee usually includes
- attorney’s fee,
- the case filing fee,
- investigation fee,
- expert witness fee and
- any other incident charges related to the case.
These charges are borne by the attorney and paid after the settlement of the suit.
When Is The Contingency Fee Paid?
At the end of the trial or mediation, the attorney will deduct his fee and other fees mentioned in the previous point once the settlement amount is awarded. Then the money is disbursed to the plaintiff.
If the contingency agreement stipulates expenses being paid first, it will deduct the first expenses, and then the attorney’s fee is calculated.
How Is Fee Calculated?
The plaintiff receives damages to the total amount of $100,000, the total expense incurred by the attorney is $10,000, and the attorney’s contingency fees are 30%.
Now there are two scenarios here:
Scenario 1
Expenses and fees are taken together as a part of an attorney’s fee then
$100,000*30% = $30,000
$30,000 – $10,000 (expenses incurred) = $20,000 attorney’s fee
$70,000 compensation received by the plaintiffs.
In this case, the attorney will earn $20,000 as fees, and the plaintiff receives $70,000 as their final compensation after paying all fees.
Scenario 2
Expenses and fees are separate, expenses are to be deducted first, and then attorney’s fees are to be calculated.
$100,000 – $10,000 (expense incurred) = $90,000(fee to be deducted from this amount)
$90,000*30% = $27,000 (attorney’s fee)
$90,000-$27,000 = $63,000
In this case, the attorney fee increase to $27,000 as expenses are separate from the fees, and the plaintiff receives $63,000 as damages.
As there are various ways to form payment terms, discussing them with your attorney about paying is advisable.
Caveat
There are contingency agreements that stipulate in case of losing an argument. The plaintiff should make good of the expenses incurred during the trial.
In such a scenario, asking your attorney for an itemized bill every month is prudent to keep your expenses in check.
Conclusion Contingency fee allows for a legal remedy for those who cannot afford a lawyer's fee and go through costly trials.