What you know about contingency fees may be based on various news stories about excessive payouts after trials. The Kentucky Supreme Court recently ruled in a case where the Attorney General’s office selected law firms to represent the state in opioid litigation, but the Kentucky General Assembly was concerned about the potential size of the contingency fee payout to the firm. The committee which rejected the contract stated it was protecting taxpayer dollars by raising concerns over the large percentage to be awarded to the law firm after litigation, without a cap on the amount. The court ruled it was acceptable for the government to reject the contract based on the problematic contingency fee arrangement. The General Assembly subsequently capped contingency fees in government contracts.
It is true that in extended litigation or complex cases and class actions, contingency fee payouts can be quite large. However, they also compensate firms for years and years of work without payment, notwithstanding awards of attorneys fees. Contingency fee arrangements are common payment methods for personal injury attorneys. What should you know about contingency fee arrangements?
What is a Contingency Fee?
A contingency fee is a payment arrangement in which payment is contingent on the successful resolution of a case. In other words, if you, the plaintiff, win your case or negotiate a settlement, then your attorney gets paid. If you, the plaintiff, lose, and are not awarded any damages, then your attorney gets nothing for the work he or she put into representing you. Typically, contingency fees range around one-third of compensation packages. Presumably, the bigger the compensation package, the more complex the legal work involved, and so the set percentage – agreed to in advance – aims to compensate the attorney for the level of work performed for the client.
What is the highest percentage an attorney can charge as a contingency fee?
There is no specific cap on the percentage an attorney can charge as a contingency fee, however, an exorbitantly high fee can land the attorney in trouble with the bar association. For example, Kentucky’s Rules of Professional Conduct for attorneys states the fee must be “reasonable.” Further, when considering whether a fee is reasonable, one factor is what the customary fee for similar legal services is in the community. This means, for example, if the typical contingency fee in a community is 30%, then a lawyer aiming to charge his clients 50% will likely have that fee arrangement invalidated by the court.
What is the benefit of a contingency fee arrangement?
A contingency fee arrangement means a client pays nothing to retain the services of an attorney. Individuals who are injured may decline to seek compensation because they cannot afford or choose not to pay to hire an attorney. Attorneys who offer contingency fee payment arrangements take on the case at no initial cost to the client. If the client receives compensation from trial or a settlement, the attorney receives a percentage of that compensation – which means a client never has to pay out of pocket for representation. If no compensation is awarded, the client still does not have to pay anything out of pocket.
What else should I know about contingency fees?
- First, you should always get payment terms in writing at the outset of representation. A knowledgeable attorney will always ensure you understand the terms of the payment arrangement, and will provide it to you in writing.
- Second, there are certain cases in which contingency fees are not allowed. These are domestic relations matters, including divorce proceedings; and representation in a criminal case.
Contact a reputable Kentucky personal injury lawyer
If you are seeking compensation for an injury, contact an experienced and knowledgeable Kentucky personal injury lawyer. Our office will ensure you understand all payment terms up front. Call (859) 231-0202 or fill out our online form for a free consultation.