A contingency fee is a fee that is not earned or paid until and unless a certain event occurs – in injury cases this means there has to be a monetary recovery for the injured person’s damages.
The legislatures and courts in most states have become very involved in regulating and overseeing contingency fee relationships between attorneys and clients. In New York, for example, court rules provide that in personal injury and wrongful death negligence claims, any fee charged or paid to the injured party’s lawyer in excess of certain schedules is unreasonable and unconscionable (subjecting the lawyer to disciplinary proceedings that can result in disbarment and the forfeiture of the excess fee, if not the entire fee).
In a recent medical malpractice case, a lawyer was denied his entire fee when a judge was reviewing a proposed $2,400,000 settlement for an infant and the attorney’s $20,000 miscalculation came to light. There were other factors that appeared to warrant this penalty which was brought to light by New York attorney Andrew Bluestone at his New York Attorney Malpractice Blog.
Here are the fees permitted in New York:
- Flat Fee (most typical): 33 1/3% (one-third) of the sum recovered
- Sliding Scale: 50 % of the first $1,000 recovered, 40% on the next $2,000, 35% on the next $22,000 and 25% on any amount over $25,000
In either event, the percentage fee is calculated on the net sum recovered, meaning that the expenses and disbursements that the lawyer advanced for the case are deducted "off the top" and repaid back to the lawyer. The expenses and disbursements get deducted from the settlement amount and then the percentage is applied to the net amount.
- Some lawyers seek to charge an additional hourly rate fee for their work in collecting benefits you are already entitled to, such as statutory benefits under the No Fault Law in New York car accident cases. Most do not. These fees can be substantial and lower your net recovery. Beware. For an excellent discussion of the benefits available and the procedure under the No Fault Law, check out New York attorney David M. Gottlieb’s blog at No-Fault Paradise.
- The fees in medical malpractice claims are separately regulated. New York’s Judiciary Law 474-a sets out the fees lawyers may charge in medical malpractice cases: 30% of the first $250,000 recovered, 25% on the next $250,000, 20% on the next $500,000, 15% on the next $250,000 and 10% on any amount recovered over $1,250,000.
It should go without saying that you should ask for a complete explanation of your legal fee arrangement before you sign any retainer agreement. If you do not understand it or if it seems to violate the law, do not sign it and seek another opinion.
And, finally, be sure when your case is over that your lawyer charges you exactly the fee and no more than you agreed to in your retainer agreement.