Feb 11, 2023


A continuous source of attorney-client frustration is the matter of attorneys’ fees. The purpose of this article is to provide the business person, or for that matter any person, fundamental knowledge based on the authors’ experiences regarding the types of basic arrangements for legal billing and costs, as well as some thoughts about how to select an attorney.

Before entering into any legal representation or fee arrangement, one should have a basic understanding of the types of attorney compensation arrangements. The first step in the process is to select an attorney, but keep in mind that part of the selection process relates to fees and costs. From the perspective of the client, it is imperative that one recognize that all forms of attorney compensation are negotiable.

There are three basic types of attorney compensation arrangements–contingency fee, hourly fee, and flat fee– but there are variations of each arrangement.

A contingency fee provides for compensation to the attorney for his or her legal services based on a percentage of the recovery. This type of arrangement is typically used for personal injury matters (negligence actions, such as car or slip-and-fall accidents), but it can be used for other types of matters as well. The fee range can be from 25 percent to 40 percent and may even differ from those figures. The typical fee is 33 1/3 percent of the gross amounts recovered.

The actual contingency fee is a matter of negotiation between the attorney and client. Usually, the fee is related to the likelihood of recovery and the amount of that recovery. Thus, if obtaining a favorable result will be difficult, the fee percentage will usually be higher. Likewise, if the recovery amount is going to be small, the fee percentage will also be higher. If the matter will require significant time and effort and the likely amount recoverable is small, the attorney will probably not undertake the representation.

Other important considerations in the contingency fee arrangement include the amount against which the percentage is determined. “Gross amounts” refers to all amounts that are received. If you have expenses that you want offset from the percentage of the recovery, you should spell those out in the agreement, or the agreement should include terms such as “after expenses are deducted.” Examples of such types of expenses that can be listed are such things as court costs, expert witness fees, copying costs, and investigation costs.

There are three basic types of attorney compensation arrangements–contingency fee, hourly fee, and flat fee– but there are variations of each arrangement.

Another way of using the contingency fee arrangement is called the modified contingency. In this situation, an hourly rate is used as well as a contingency fee. The hourly rate is greatly reduced and the percentage is also less, although there can be variations as well as offsets. The modified contingency provides the attorney and the client the opportunity to go forward with a case in which the probability of recovery is not great or the likely amount of recovery is limited. It can also be used when the case may take a substantial period of time to resolve. The attorney may favor this approach because of his or her particular situation. For example, it could be difficult for the attorney to carry the case for a long period of time without receiving compensation. A modified contingency arrangement can also be used as an incentive for the attorney to take a case that he or she might not otherwise take for any of a number of reasons.

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