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 is charged as a percentage of the compensation that a plaintiff receives at the end of a jury trial or when a matter settled via alternation dispute resolution methods such as mediation, arbitration.
Hourly fee is billed according to the time an attorney devotes to the case.
There is a specific basic rule that governs the determination of contingency fees and payment of the costs and other charges to attorneys.
Read on to know these basics.
When Is Contingency Fee Charged?
A contingency fee charged 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 in the end.
As a rule of thumb, personal injury claims, class action lawsuits, and auto accident claims are the cases where the contingency fee is charged.
What Percent Is Charged As Fee?
Attorneys usually charge between 25-30% of the compensation received by the plaintiff.
There is a catch, though; 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 be charged on the gross or net compensation received.
What Is Included in the Fee?
Contingency fee usually includes
- attorney’s fee,
- case filing fee,
- investigation fee,
- expert witness fee and
- any other incident charges related to the case.
These charges are initially 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, once the settlement amount is awarded, the attorney will deduct his fee, other fees mentioned in the previous point, and then the money is disbursed to the plaintiff.
If the contingency agreement stipulates expenses being paid first, then the first expenses will be deducted, 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:
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.
Expenses and fees are separate and expenses to be deducted first and then attorney’s fees is 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 attorney fee increase to $27,000 as expenses are a separate from the fees and plaintiff receives $63,000 as damages.
As there are various ways to form payment terms, it is advisable to discuss them first with your attorney as to how he would like to be paid.
There are contingency agreements that stipulate in case of losing an argument; the plaintiff is supposed to make good of the expenses incurred during trial.
In such a scenario, it is prudent to ask your attorney for an itemized bill every month so that you can keep your expenses in check.
Contingency fee allows for a legal remedy for those who cannot afford lawyer’s fee and go through costly trials.