Jennifer Anderson is the founder of Attorney To Author, where she helps legal professionals bring their book projects to life. She was a California attorney for nearly two decades before becoming a freelance writer, marketing/branding consultant, ghostwriter, and writing coach.
How does the contingency fee model work and what should lawyers and clients bear in mind when using it for cases?
Contingency lawyers should understand exactly where they stand when it comes to their business, and clients should understand exactly what to expect when using their services.
As a model for lawyers and clients, there are very few, if any, comparisons in other sectors, and so it’s important to understand its intricacies in the legal system
In this article, we’ll dive into the intricacies of contingency fee arrangements for California lawyers and their clients. Then, we’ll explore some of the advantages and drawbacks to this kind of fee structure; from both the client’s and the attorney’s perspective.
Contingency fees are a long-standing yet unique billing arrangement in the legal world. Instead of paying their lawyer upfront or by the hour, clients agree to pay their lawyer a percentage of the monetary award they receive, should they win their case.
If the case is lost, the client typically owes nothing to the lawyer for their legal services. This system makes legal representation accessible for many individuals who might not have the funds to pay attorneys’ fees upfront.
Admittedly, contingency fee attorneys often elicit mixed perceptions from the public. On one hand, they are seen as champions of justice, providing access to legal representation for individuals who might not otherwise afford it, thereby leveling the playing field against powerful entities.
On the other hand, some view these attorneys as opportunistic, driven more by the prospect of a significant payout than by the intricacies of justice.
Popular media occasionally portrays them as “ambulance chasers,” seeking out high-reward cases at the expense of genuine client advocacy. Regardless of the perspective, it’s undeniable that contingency fee attorneys play a pivotal role in the legal landscape, offering an avenue for many to seek justice in situations that might otherwise be out of reach.
California, being one of the most populous states and a hub of legal activity, has strict guidelines and rules regulating legal contingency fees.
This ensures both the protection of clients and the ethical conduct of lawyers. Here are some of the main rules that govern the use of contingency fees in this State:
California Business and Professions Code section 6147 requires that all contingency fee agreements be in written form. This written agreement must detail how the fee will be determined, including the percentage of recovery that will be owed to the attorney at the end of the case. It must also state what happens if the case is settled, goes to trial, or is appealed, and must indicate other expenses to be deducted from the recovery. After any win or settlement, attorneys are required to provide a written statement showing the recovery and the method of its determination.
According to California Rule of Professional Conduct 1.5, all fees charged by attorneys must be reasonable – and this includes contingency fees. An unconscionable or overly excessive fee could be deemed unethical. The reasonability of a fee depends on factors such as the complexity of the case, the attorney’s skill, and the risk undertaken by the attorney.
In certain types of cases, California has set statutory caps on contingency fees (see California Business and Professions Code section 6146). For instance, in medical malpractice cases, there’s a sliding scale that limits attorney fees as follows: 40% of the first $50,000 recovered, 33.3% of the next $50,000, 25% of the next $500,000, and 15% of any amount exceeding $600,000.
California law ensures clients are protected in the event of disputes over any kind of fees, including contingency fees. If there’s disagreement over the contingency fee, clients have the right to request an arbitration (and the attorney generally must arbitrate the fee dispute once the client requests it). This can be a more streamlined and less confrontational approach than litigation.
