Plaintiffs' lawyers use contingency fee agreements when they agree to receive payment only if they win the lawsuit. These arrangements benefit clients who can't pay their legal fees out-of-pocket. Contingency fee arrangements may cover many kinds of cases, but in some types, lawyers may not accept contingency fees for ethical reasons.
Contingency Fee Agreements
Typically, lawyers will only accept a contingency fee pursuant to a written agreement. These agreements will lay out the lawyer-client relationship and state the amount of the contingency fee. The lawyer will only collect the contingency fee if the client's lawsuit is successful. Generally, a contingency fee will range between 20 and 50 percent of the plaintiff's recovery.
Paying the Contingency Fee
Lawyers must follow strict rules if they choose to enter into a contingency arrangement. If lawyers aren't prepared to adhere to these rules, they may not be willing to enter into a contingency fee agreement. Lawyers' rules of professional responsibility set forth the proper procedure for paying out a contingency fee. Those rules require agreement in writing on the fee. The written agreement must include how the lawyer will calculate the fee, including whether an appeal will increase the fee percentage and who will pay for costs. The agreement must also identify any costs, such as court filing fees, for which the client will be liable even if he loses his case. Finally, when the lawyer pays out the client's award, he must include a written statement describing how he calculated the fees and costs.
Lawyers can't take contingency fees in criminal cases. They must adhere to rules of professional responsibility, which prohibit taking a contingency fee in criminal cases. This prohibition came about because criminal trials determine guilt or innocence rather than a monetary award, and criminal defense lawyers should have incentives to ensure their client has a fair trial but shouldn't have money driving them to win at all costs.
As in criminal cases, lawyers can't take contingency fees in domestic cases where the fee would depend on securing alimony for their client. The rules of professional responsibility prohibit lawyers from taking fees in these cases because of their sensitive nature. As such, the rules encourage lawyers to focus on the needs of their clients and not on winning a contingency fee.
Erika Waters is a business lawyer licensed to practice in California. She has experience working with nonprofits including Teach for America, as well as entrepreneurs and startups. Waters has contributed to several blogs, including the Business & Media Institute and other online publications and has worked as an editor for an academic publication.