Before we dive into the answer to how much of your settlement a lawyer can get, let’s first examine the terms surrounding fees and payments lawyers charge. Understanding these will help you see that while the answer to the question can at first appear simple (“the lawyer may take at the most up to 33.33 percent of the total of any settlement for a personal injury claim”) but can be layered in fine print and other fees and stipulations.
Alternative Fee Arrangements (AFAs)
AFAs are a method of allocating the risks and rewards of litigation between clients and attorneys. These arrangements allow the clients to pay for legal services other than by the traditional billable hour. AFAs include contingent fee agreements, hybrid fee agreements, flat or fixed fees agreements, do-not-exceed agreements, reverse contingent fee agreements, success fees, and variations on these. AFAs can benefit both clients and law firms by aligning their interests and allowing for better budget management and financial risk sharing. They also allow for greater flexibility and creativity in legal strategies.
Some attorneys charge a flat fee for an initial consultation to discuss your legal issues and determine if they can help you. Many attorneys do not charge for an initial consultation, so it’s best to check in advance. On average, consultation fees range from $250 to $350 per hour. A legal consultation is an opportunity for potential clients to meet with an attorney and discuss their legal needs. This is where you provide the attorney with information about the type of legal assistance you need.
These are a popular payment arrangement in personal injury and medical malpractice cases. Under this arrangement, there is a contract between a client and a lawyer in which the client’s obligation to pay the lawyer’s fee is contingent upon the lawyer successfully recovering a settlement or judgment on the client’s behalf. In such an arrangement, the lawyer agrees to accept a fixed percentage of the amount recovered as payment for their legal services. If the case is successful and the client recovers money, the lawyer’s fee will be paid from the award. If you lose the case, the lawyer does not receive a fee, but be aware that you may still be responsible for paying expenses. In most cases, the client will still be responsible for paying court filing fees and other litigation costs, even if the case is not successful.
This payment arrangement enables individuals to have legal representation, even if they cannot afford to pay a lawyer out of pocket since the client doesn’t have to pay until the case is resolved.
Contingency fees are most frequently offered in cases such as debt collection, automobile accidents, and medical malpractice. These fees typically range from 25% to 40%, but they may be negotiable and courts may limit the percentage. However, contingency fees are not always available, and they may not be a good option for small cases or certain types of legal matters. It’s important to discuss your options with your lawyer and carefully read your representation agreement before agreeing to a contingency fee arrangement. and the client will typically only be responsible for covering the costs of litigation.
Contingent fee arrangements can be beneficial for both clients and lawyers in certain cases. For the client, this billing method can provide access to legal representation without requiring them to pay upfront for legal services. It also allows them to better manage their budgets and risks associated with litigation. For the lawyer, contingent fee arrangements provide the potential for higher payouts if the case is successful. In general, law firms evaluate the potential of a case to recover damages and the risks associated with the case in deciding whether to accept it on a contingent fee basis. They may also consider the client’s ability to pay, the potential time and resources required to litigate the case, and the likelihood of success. Ultimately, the decision to accept a case on a contingent fee basis is up to the discretion of the law firm.
Reverse Contingent Fee:
A reverse contingent fee agreement is a type of contract between a lawyer and a client in which the client agrees to pay the lawyer a contingent fee that is a percentage of the difference between the client’s predetermined financial exposure and the final amount of any judgment or settlement that the client pays. This type of agreement is typically used when the client is a defendant in a lawsuit and has a clearly defined financial exposure. For example, if the client’s pre-determined financial exposure is $10 million, and the lawyer negotiates a settlement for $4 million, the client would pay a percentage of the $6 million savings as the reverse contingent fee. If the case is lost and the client pays the full $10 million, the client would pay nothing to the lawyer.
Reverse contingent fee agreements can be useful for clients who want to manage their risks and costs in a lawsuit. However, they only work if the client has the financial resources to reserve and pay the reverse contingent fee. These agreements can also be combined with other fee arrangements, such as a lower hourly rate or a monthly flat fee.
This pay structure is a type of contract between a client and a law firm in which the law firm agrees to cap its legal fees at a predetermined amount. This type of agreement is often used for specific projects, such as conducting an early investigation and analysis of a legal claim before deciding whether to proceed with a lawsuit. The law firm bills for its services on an hourly basis, but agrees that the charges will not exceed the pre-set cap without the client’s written permission. If the charges approach the cap, the law firm will notify the client and stop further work, unless the project is close to completion.
Clients may choose do-not-exceed fee agreements when they want to limit their investment in a specific legal matter, such as analyzing potential legal malpractice claims or complex commercial transactions. This type of agreement allows the client to make an informed decision about whether to proceed with a lawsuit while controlling their costs. It also allows the law firm to provide predictable pricing for a limited engagement. However, it is important to note that the fees for outside consultants or expert witnesses may be outside the negotiated cap.
Flat (or Fixed) Fees
A flat fee is when a lawyer charges a specific, total fee. Lawyers typically offer flat fees for cases that are relatively simple or routine, such as creating a will, getting an uncontested divorce, or resolving a traffic ticket. For firms using a flat fee arrangement (also known as “fixed pricing”), clients pay an agreed-upon amount upfront. This payment covers all the work that is to be performed. Flat fee agreements are common in practice areas like criminal law. A fixed fee agreement is an agreement where the client pays a fixed fee for the legal representation, regardless of the time the attorneys and staff put into the case. Fixed fee agreements are often used in criminal defense representations, but can also be used in many different types of litigation, such as a simple breach of contract case or foreclosure proceeding. The client often is required to pay litigation costs in addition to the fixed fee.
A flat fee agreement is an agreement where the client pays a monthly flat fee for the legal representation regardless of the time the law firm puts into the case during the month. Flat fee agreements can work well in a major case in which a team of attorneys and paralegals will be spending substantial time on the case each month or where there are a series of similar major cases.
Flat fee agreements can be combined with other hybrid fee agreements, such as contingent fee agreements or reverse contingent fee agreements. Again, the client usually is required to pay litigation costs in addition to the flat fee.
Unless your lawyer is working on a flat or fixed rate project, you will want to know their hourly rate. They will record every hour (or fraction of hour) spent on your case to send to billing.
Typically, attorney hourly rates range from $100 to $400, depending on the lawyer’s experience and the type of case. Attorneys in small towns or those who are just starting out may charge $100 to $200 per hour, while experienced lawyers in larger cities may charge $200 to $400 per hour. These rates may vary based on the specific type of work being performed, with court appearances typically costing more than other tasks. Be aware that hourly rates, for attorney’s with extremely specialized expertise, such as in patent or intellectual property law, may charge hourly rates of $500 to $1,000.
You can ask if there are paralegals on the team and if your lawyer can hand off as much work as possible to them, since their hourly rate it typically lower than the lawyer’s. This can save you a lot of money in the end.
Hybrid fee agreements can include any combination of the other fee types described here. It is a type of contract between a lawyer or law firm and a client that combines two or more billing methods. There are many different types of hybrid fee agreements, and the specific terms of the agreement will depend on the needs of the client and the nature of the legal matter.
One common type of hybrid fee agreement is a blended hourly rate agreement, in which all attorneys and paralegals involved in the case bill their time at the same hourly rate. Another type of hybrid fee agreement is a fee collar agreement, in which the attorneys and paralegals bill their normal hourly rates, but the client and the law firm agree to a minimum and maximum fee for the matter.
A fixed fee plus hourly agreement is a hybrid fee arrangement in which the law firm charges a fixed fee for certain tasks or projects within the scope of work, and charges by the hour for other tasks. An hourly rate plus contingent fee agreement is another type of hybrid fee agreement, in which the law firm agrees to accept a lower hourly rate than normal, but also takes a percentage of any recovery as a contingent fee if the case is successful.
Overall, hybrid fee agreements can provide flexibility and predictability for clients, and can allow law firms to adapt their billing methods to the specific needs of each case.
A retainer fee is a payment made by a client to a lawyer or other professional for future services. Before signing a fee agreement with a law firm, it is important to carefully read the agreement and understand how the term “retainer” is being used.
The retainer fee is typically requested at the beginning of legal representation, and may be any amount the attorney requests, typically ranging from $500 to $5,000 or more. Some attorneys base the retainer fee on their hourly rate multiplied by the number of hours they expect the case to take. Retainer fees are not intended to cover the entire cost of a case, and if the case does not require the entire retainer, the remaining portion may be returned to the client. Retainer fees may be used to guarantee that the attorney will be compensated for their services, and to provide leverage in negotiations. Retainer agreements should be in writing and include details about the services to be performed and the allocation of legal fees and costs.
There are several reasons why an attorney may charge a retainer fee. One reason is that having a retainer fee in place can make a case more likely to settle, as the attorney’s reputation and expertise can be leveraged. Additionally, the retainer fee provides a guarantee of compensation for the attorney’s services, as the attorney can subtract their time from the retainer fee. This fee also compensates the attorney for making themselves available and forgoing other opportunities in order to represent the client.
A retainer fee may be requested at the beginning of legal representation. In some cases, a second or multiple retainer fees may be charged. Once the retainer fee is exhausted, the attorney may charge for additional legal services through periodic billing or by requesting an additional retainer.
Be sure to ask if the firm’s retainer fees can be refunded if the services end up costing less than originally planned and how that process works.
An evergreen retainer is a type of deposit in which the client is required to replenish the deposit to a pre-set amount each month as fees and expenses are charged against it.
These are fees that are set and approved by a court or a statue. These kinds of fees are commonly associated with bankruptcy and probate cases. In some cases, state or federal law may restrict the maximum amount that can be charged for certain matters, such as probating a will or medical malpractice actions. In the past, the American Bar Association supported the use of statutory fees to standardize minimum fees and protect the integrity of the legal profession, but this was deemed to violate antitrust laws. State laws regarding statutory fees may vary.
So, How Much of Your Settlement Can Lawyers Get?
You will need to do your research up front before committing to any particular lawyer or firm. Before your first meeting, ask them to send you a breakdown of costs for the type of services you are requesting. For example, some firms may have set rates for certain services that they have broken down in itemized lists, or while some may structure it that way they won’t tell you the cost until learning more about the particulars of your situation.
“In most cases that progress through the civil courts, the lawyer may take at the most up to 33.33 percent of the total of any settlement for a personal injury claim” (Source). However, notice that it is 33.33% of your settlement. There are other costs associated with your case, so depending on the contract you signed with your legal team, you could owe them much more than the 33.33% of the settlement. They win thought outright if you win your case, and then you may owe them more other aspects of their legal services or the steps it took to win your case. For example, the client may be responsible for paying additional expenses such as fees for expert witnesses, investigators, paralegals, and travel, as well as photocopying fees and court and criminal fees. If the client is found guilty, they may be required to pay criminal fees, which could include costs for time spent in jail and criminal records checks. It is important to ask about and understand all of the potential costs associated with your legal matter prior to signing a contract and officially hiring your legal team.
So even when you select a firm using a contingency fee structure and you feel secure thinking you’ll only have to pay if you win and that there is a cap to what you’ll have to pay out to your lawyer, always be sure to ask before signing the contract what all of the possible fees could be.
What does this look like in practice?
The American Bar Association maps out helpful examples so you can see some contingency examples in action and that not all contingency fees are set up the same:
The American Bar Association cautions, “If you agree to pay a contingent fee, your lawyer should provide a written explanation of the agreement, clearly stating how he or she will deduct costs…An important consideration is whether the lawyer deducts the costs and expenses from the amount won before or after you pay the lawyer’s percentage.”
Example: Joe hires Ernie Attorney to represent him, agreeing that Ernie will receive one-third of the final amount—in this case, $12,000. If Joe pays Ernie his fee before expenses, the fee will be calculated as follows. The below will show that Joe collects an additional $700 if the agreement provides that Ernie Attorney collects his share after Joe pays the other legal expenses.
SCENARIO A: $12,000 (Total amount recovered in case) – $4,000 (One-third for Ernie Attorney) Balance: $8,000
$8,000 – $2,100 (Payment for expenses and costs)
Amount that Joe recovers: $5,900
SCENARIO B: If Joe pays Ernie after other legal expenses and costs, the fee will be calculated as follows:
$12,000 (Total amount recovered in case) – $2,100 (Payment for expenses and costs) Balance: $9,900
$9,000 – $3,300 (One-third for Ernie Attorney)
Amount that Joe recovers: $6,600
Ask if they can set up a free introductory consultation via phone that is free so both parties can learn more before committing to work together. If they won’t give you solid quotes, ask them to ballpark your likely fees or ask for a range. It could be helpful to know what the minimum might be and what the most costly scenario could be. Also inquire about what exactly would factor into making the total cost less or more, as you can then try to work to keep those factors in check as much as possible.
Overall, know that 99% of the time the biggest factor is time. The more time a lawyer needs to spend uniquely on your case, the more it is likely to cost you. Anything you can do to minimize the time they spend working on your case (preparing documents in an organized fashion, labeling emails clearly with what is attached, making phone calls or acquiring any additional information needed yourself) will all contribute to saving you time and money.