Most personal injury case retainer agreements provide for a one-third legal fee contingent upon a recovery (by verdict or settlement) and will include language something like this:

The percentage fee is calculated on the net sum recovered after deduction for expenses and disbursements properly chargeable to the case such as investigation and expert fees.

So what’s that mean?

It means that the expenses and disbursements (we’ll give examples in a moment) are deducted from the total sum recovered from the defendant (and reimbursed to the lawyer who, after all, advanced those items out of his own bank account). The result is the "net" fee,  and it is a percentage of that lower figure on which your lawyer’s fee is calculated.

  • Insider Tip #1: Your lawyer may not charge or take a fee in these cases that is one-third of the gross recovery and then have you the client reimburse him for his expenses out of your share.
  • Insider Tip #2 (You won’t like this one): Your lawyer is not permitted to guarantee you that you will not be responsible to repay his expenses and disbursements, even if the case is lost. This would violate Judiciary Law 488 which prohibits lawyers from "buying" lawsuits. It’s OK to take a case on a contingent percentage and to advance the disbursements (which are really client expenses) but telling a client he will never be liable for these disbursements is what’s prohibited. The law aims to keep attorneys from using their own financial clout to compete for clients. [That said, I know of no lawyer who ever made serious efforts to get his disbursements paid by his client after he lost a case.]

So the one-third legal fee is on the net, fine. But what are the expenses and disbursements that are "properly chargeable?"

Let’s get the easy ones out of the way first. Here are several typical plainly proper categories and also some typical amounts you might see on the closing statement. (The closing statement is what your lawyer files with the court system at the end of your case to advise the authorities of the recovery, his fee and his disbursements.):

  • court filing fees (e.g., $210 to start the lawsuit)
  • investigator (e.g., $250-$1,500 to take scene photos and get witness statements)
  • medical records (@$0.75 per page, this can be $100-$2,500 depending on treatment)
  • doctor’s narrative report – ($500-$1,500 for your treating doctor to write a report detailing in lay terms your injuries, their causation and your prognosis)
  • deposition transcripts (approx. $5 a page, could be $500 -$2,500 depending on length and number)
  • experts fees ($2,000 -$15,000 or more depending on how many doctors testify for you in court and if other experts such as engineers, accident reconstructionists, etc. are needed that can drive up this cost many thousands more)

Here are expenses and disbursements that are plainly wrong and have resulted in lawyer disciplinary action:

  • financial assistance to the client for personal fiancial obligations (lawyer disciplined with public censure in Matter of Arensberg
  • charging client for non-existent expenses or for which the lawyer hasn’t paid (lawyer disbarred in Matter of Mann)
  • making loans to client (lawyer suspended in Matter of Cellino)

Here are some other expenses and disbursements that have been held may not be charged to the client, but did not result in lawyer disciplinary action:

The key for clients is this:

Make sure your questions about expenses and disbursements are answered to your satisfaction, and that when you sign a contingency fee retainer agreement for your personal injury claim, it accurately and completely answers your concerns.

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.

Insider’s Tips:

  • 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.