Tuesday, February 23, 2010

What Are Contingent Fees and Why are They Good for Consumers?

A contingent fee is a fee for services provided where the fee is only payable if there is a favorable result. The law defines a contingent fee as "a fee charged for a lawyer's services only if the lawsuit is successful or is favorably settled out of court...contingent fees are usually calculated as a percentage of the client's net recovery." (Bloggers Note- by "net recovery", that means that a client will still usually be required to pay costs incurred on his or her behalf.)
For many injured consumers, the contingent fee is their key to the courthouse. It makes it easier for people who do not have the "up front" financial means to protect and pursue their civil rights—especially in personal injury and wrongful death cases. (This is especially true where the injured party is unable to work, or the grieving family faces financial hardships because of the loss of their loved one.) If the right attorney is selected, a contingent fee is an excellent way to hire one of the best lawyers in your state without having to pay his or her up front retainer or hourly fee. Truly a win-win for the consumer. Because of the high risk involved, few attorneys will take cases on a contingency basis unless they feel the case has good merit. And when you think about it, that makes perfectly good sense.

The Contingent Fee Structure- A client is not charged attorney fees if he or she loses the case. (See Bloggers Note above for an important limitation there though.) Thus, only if the client recovers damages from settlement, or a favorable verdict, will the attorney receive the previously agreed to fee from the recovery. The attorney's permitted fee varies depending on the country, state and even local jurisdictions. The percentage allowed is subject to the ethical rules of professional conduct and, in many circumstances, statutory limitations. Depending on the age of the client and type of case, this range is normally someplace between 25% to 40% in the State of California.
The Advantages of a Contingent Fee Structure- A contingency fee arrangement provides access to the courts for those who cannot afford to pay the attorneys fees and costs of civil litigation. Contingency fees also provide a powerful motivation to the attorney to work diligently on the client's case. In other types of litigation where clients pay the attorney by the hour for their time, it makes little economic difference to the attorney whether the client has a successful outcome to the litigation. Finally, because lawyers assume the financial risk of litigation, the number of speculative or unmeritorious cases may be reduced.
In the United States, contingency fees are the standard in personal injury cases and are less common in other types of litigation. Most jurisdictions in the United States prohibit working for a contingent fee in family law or criminal cases, as made clear in Rule 1.5(d) of the Model Rules of Professional Conduct of the American Bar Association.
It’s interesting to note that in addition to the United States, contingent fees are also allowed in many other countries such as Australia, Brazil, Canada, the Dominican Republic, France, Greece, Ireland,Japan, New Zealand, the United Kingdom and the United States.

[Much of the foregoing content is used with permission from our friends at Jackson & Wilson in Laguna Hills, http://www.jacksonwilson.com/ and http://www.jwlawblog.com/. ]

1 comment:

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