Personal injury lawyers hate talking about their contingency fee agreements with their clients. Me too. But, it is an interesting and important topic and one that is of great importance to people who are seriously injured and will be hiring an attorney. This post explains how our law firm operates and gives a few thoughts on contingency fee agreements in personal injury cases.
Our contingency fee agreement with our clients in every personal injury case is exactly the same. Our firm gets one-third of the recovery if the case settles before a lawsuit is filed. If a lawsuit is filed, or there is an agreement to arbitrate the case, our fee increases to 40%. We have fronted all client expenses in every case we have handled in the last 10 years. If we are not willing to put up our own money, we would not be willing to take the case.
This is our agreement for every single personal injury case in our office. We have turned down at least two cases (that I know of; I’m sure there have been more) that have culminated in a seven-figure recovery because we did not agree to reduce our contingency fee.
Before I explain why we do it this way, let me go the other way and set forth the argument why we shouldn’t have a set fee for all of our clients. Contingency fees in personal injury cases are designed to a large measure to compensate attorneys for the risk in time and money they must incur. So, theoretically, in a world of perfect information, you should calibrate the contingency fee with the risk/reward and set the attorneys’ fees accordingly. [This is the short version; you can find the long version here.]
There are a lot of problems with this. First, I don’t really know the value or the risks that are going to come with a case when it comes in. Our best cases often don’t appear to be cases when they walk through the door. My partner once gave me a lecture – a long “you need to change your approach” lecture – about a case I accepted and stuck her with that we never should have taken. The jury awarded our client over one million dollars. Conversely, we get so many cases – particularly medical malpractice cases – that are slam dunk winners until you start spending the time and money to peel the onion to find out what really happened. We have spent hundreds of thousands of dollars on easy pickings cases that – lo and behold – were only easy picking for the defense lawyers (if it even got that far).
Moreover, I don’t like sitting on an airplane next to a guy who paid half for his ticket what I paid. I like the fairness of being able to say, I’m charging you the same fee that we are charging every single other client.
I like that we are not negotiating with our clients about our attorneys’ fees. If I am negotiating a fee with a client, it seems adversarial. That’s not how I want to start off our relationship. Remember, they don’t have to come to our firm. I tell clients there are always law firms out there that are going to cut fees to get cases. The client needs to compare the attorneys and decide whether the lawyer with the lower contingency fee is going to put more money in their pocket at the end of the proverbial day. That is the ultimate issue for seriously injured clients: what is the best path to get as much money as possible for what they have gone through?
There are a few caveats here. First, I’ve been writing for years that there are many accident cases – most notably, soft tissue injury cases – where clients are often better served (or at least close to equally served) statistically without hiring a lawyer. Second, there are some cases that so clearly on their face are going to be “insurance company is going to pay the policy limits on this case” and there is really not much of value that we are going to add. This is not true in every case where you think the policy limits will certainly be offered. In these cases, the clients just don’t need a contingency fee lawyer and should hire someone hourly. We have turned down scores and scores of great personal injury cases where we could have weaseled in and scored a nice payday but didn’t because we would not be able to truly justify our attorneys’ fees.
If you have an opinion on this, or thoughts on how your firm handles contingency fee agreements, leave a comment.