Contingency Fees: Read this Before You Hire a Lawyer

Before you hire an attorney on a contingency fee basis, make sure you understand the risks to you and how to protect your rights.

Learn which areas of law generally involve contingency fees and what you should consider before hiring a contingency fee lawyer.

Contingency Fees Can Be Frustrating

Contingency fees can be frustrating to clients and attorneys. In general, contingency fees are usually a problem for the client or attorney:

  • If a case settles quickly or recovers a lot of money, clients may feel frustrated that the attorney was paid more than the attorney deserves.
  • If a case goes longer than expected or recovers little money, the attorney may be frustrated by lost time and expenses.

In other words, contingency fees by nature will not be accurate, and either the attorney or client may feel shorted. Attorneys understand this risk, and they offset being paid too little on some cases with being paid more than expected on others. Still, clients paying a large fee to an attorney may feel frustrated.

Contingency Fees are Not Available for All Legal Matters

Our firm is often contacted by people who have never worked with an attorney. Their impression of attorneys is shaped by TV commercials, shows, and movies. They often think most attorneys are paid on contingency, but in reality, contingency fees are only available for a few areas of law, which happen to be presented frequently on TV.

Contingency fees ARE generally available for these legal areas:

  • Car accidents, boat accidents, work accidents, and other personal injuries
  • Fair Debt Collection Practices Act (FDCPA) violations against creditors for harassing debtors
  • Defective products that cause injuries

Contingency fees MAY BE available for these legal areas:

  • Employment law and hourly wage issues
  • Collection of large debts

Contingency fees are RARELY available for these legal areas:

  • Real estate
  • Business litigation

Contingency fees are NEVER available for these legal areas:

  • Criminal defense (DUI, traffic, drug, and other charges)
  • Adoption
  • Immigration
  • Divorce and similar family law issues
  • Bankruptcy
  • Drafting a contract, will, trust, or other legal documents
  • Starting a business
  • Registering a trademark, copyright, or patent

Which Lawyers Accept Contingency Fees?

Here are some of the factors that lawyers consider when determining whether to accept a case on a contingency fee basis.

In general, most lawyers prefer not to do contingency cases because (1) there is a risk the firm will get paid nothing, (2) there is a risk the firm will get paid too much and the client may be frustrated by that, and (3) any payment is delayed until collected from the opposing party. For these reasons, many firm rarely accept contingency fee cases.

The lawyers who frequently accept contingency fee cases:

  1. practice in an area where contingency fees are common (see the list above);
  2. generally represent people without resources to pay hourly attorney fees; and
  3. are very selective in the cases they accept.

What is a Typical Contingency Fee?

As you probably know, contingency fees mean you only pay attorney’s fees if the attorney wins money for you. In general, contingency fee percentages range from 33% to 40%, depending on the amount the client could potentially win, the strength of the case, and other factors. I have seen contingency fees as high as 50% (for small cases) and 15% (for very large cases).

  • Typical: 33% (one third) to 40%
  • Highest I have Seen: 50%
  • Lowest I have Seen: 15%

What is a Fair Contingency Fee?

One factor affecting contingency fees is the amount of out-of-pocket expenses the firm will need to cover the case. These include mediation fees, court reporter fees, transcript fees, expert witness fees, filing fees, etc. Although the client may ultimately be responsible for these expenses, the firm may not ever recover them, resulting in losses of both time and money if the case does not result in enough money.

Under Minnesota law, the factors to be considered in determining the reasonableness of a fee include the following:

  1. the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
  2. the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
  3. the fee customarily charged in the locality for similar legal services;
  4. the amount involved and the results obtained;
  5. the time limitations imposed by the client or by the circumstances;
  6. the nature and length of the professional relationship with the client; and
  7. the experience, reputation, and ability of the lawyer or lawyers performing the services.

In other words, since every case is different, these factors will need to be applied to the individual facts and circumstances of your case.

Should You Hire a Lawyer on Contingency?

Normally, people who hire a lawyer on contingency do not have the option of paying the lawyer’s hourly rates because they simply can’t afford them. To seek justice, they must accept a contingency fee arrangement.

If you are hiring a lawyer on contingency, keep in mind that the lawyer is first concerned about ensuring the lawyer benefits from the deal. In general, lawyers are far more experienced with contingency fees than clients, so lawyers know better how to calculate contingency fees so the lawyer is not disadvantaged.

Experienced attorneys do not take contingency fee cases if it is a bad deal for them. For example, attorneys routinely reject being paid on contingency for small financial cases, complex cases, and time-consuming cases. However, attorneys routinely accept contingency fee cases that have the potential to win a lot of money, are simple, and will not take much time.

Conclusion: Contingency Fees May Be Unfair

Attorneys who are selective about the contingency fee cases they accept will succeed financially. Attorneys who take small or difficult cases on contingency may struggle financially. As a result, people may feel frustrated because their lawyer makes a lot of money from little work, or people feel frustrated because no lawyer will take their case.

In conclusion, contingency fees are generally a very inaccurate (some would say “unfair”) way to pay attorneys, but since people may not have the funds to pay usual attorney rates, our justice system permits the use of contingency fees. Only in rare circumstances will our firm take a case on a contingency basis.