The Contingency Fee Explained
Most if not all Massachusetts personal injury, medical malpractice and products liability cases are taken on a contingency fee basis. What does this mean? I found the following informative and articulate post over at injuryboard.com authored by attorney Scott E. Smith. Here is the post:
Abraham Lincoln once said, "A lawyer’s time and advice is his stock in trade." In essence, asking an attorney for his advice is no different than asking an accountant to set up a business plan or do your taxes, a doctor to examine you, render a diagnosis and prescribe treatment or hiring an electrician to fix the wiring of your home. Nonetheless, many people are under the impression that calling a lawyer and asking a question is free. Although most lawyers will gladly answer preliminary questions regarding a legal matter, when it is determined a lawyer is needed, a fee contract is required.
Most lawyers charge by the hour, as do most professions. Depending upon the lawyer’s qualifications, experience and expertise, the hourly rate will vary. However, there are situations attorneys will work for a client on a contingent basis or on a reduced hourly rate and negotiated lower percentage. A contingency fee allows a lawyer to charge a client a percentage of money recovered in behalf of the client in a given case. A contingent fee contract has been referred to as the "poor man’s key to the courthouse" because many individuals who are in need or require the assistance of an attorney cannot afford an hourly rate.
Moreover, many legal matters not only require an attorney’s time and advice but also money to advance expenses for police and accident reports, photographs, medical records, court filings and subpoenas, depositions and payment for expert witness fees, common to personal injury and medical malpractice cases. The advancement of these expenses can be substantial and in medical negligence matters can often reach $30,000 to $50,000.00. A client who cannot afford the hourly rate of an attorney most likely will not be able to afford the expenses needed to adequately prepare the case. In personal injury cases the cost are usually much less and can be anywhere from a few hundred dollars to thousands of dollars.
If an attorney agrees to take your personal injury, product defect, medical negligence, class action, drug defect, premise liability, or other related incident that causes serious personal injury or death a contingency fee contract may be the only way of retaining a lawyer. Added to this scenario is the realization that many injured people are unable to work and suffer financial stress as a result of their physical injuries. Those injured individuals or their families are unable to pay expenses to retain experts and pursue their case. For those reasons contingency fee lawyers must advance the case expenses from their own accounts often times expecting those expense to be reimbursed at the time a settlement or judgment is procured in behalf of the client.
A contingency fee contract based upon a percentage of the amount recovered must not be entered into by the attorney or client without careful consideration because if the case is not successful and a settlement or judgment is not procured in behalf of the client, the attorney will have nothing to collect as a fee. This risk is borne by the attorney and adds to the basis of the percentage charged. The more difficult the case, the less likely the case will be successful and therefore, the higher the percentage charged. Nonetheless, each case must be examined on its own merits to determine the appropriate fee charged.
Most personal injury and medical negligence contingency fee attorneys charge from 25-40%. When entering into a contingency fee contract, the attorney and the client must determine the likelihood of success of the case, the amount of recovery if the case succeeds, the prior practices and attitude of the insurance representative or other side with respect to settlement or need for trial, the likelihood of collecting a judgment, the availability of alternative dispute resolution, the amount of time a lawyer is likely to spend on the case, the difficulty of the issues involved in the case, and the expenses of the litigation, whether they be shared or advanced by either the attorney or client. If an attorney is successful on a contingency fee contract the risk of taking the case on a percentage is realized. However, if an attorney is not successful the attorney not only fails to recover a fee but will have cost considerable time that could have been realized if the client had paid by the hour.
A common myth propagated by big business, big media and insurance companies is that contingency fees encourage lawyers to file frivolous lawsuits. However, the opposite is true. A competent and qualified lawyer is not about to take a case on a contingent basis unless the case has merit. Filing a frivolous lawsuit undoubtedly results in wasted time and effort by the attorney with the chance sanctions or attorney fees awarded against the filing attorney if the suit is deemed frivolous.