Contingent Fee

A contingent fee is a lawyer’s fee that is based upon a percentage of the money awarded to the client. Generally, contingent fees are on-third of the total recovery. The widespread use of the contingent fee is unique to the American civil justice system. Contingent fees allow plaintiffs with little money to seek redress in the courts because the attorney bears the financial risk of bringing a lawsuit in exchange for a percentage of the recovery, if any. In recent years, the current system has benefited lawyers at the expense of their clients.

The contingent fee system invites abuse because it encourages lawyers with a financial interest in the outcome of a case to try meritless claims or ask for unreasonably high awards. Contingent fees are generally one-third of a total award, even when, as is often the case, attorneys bear no risk in taking a case. Attorneys today seek out cases that can be settled easily, with little work, or can be decided under no-fault laws. The one-third contingent fee pay-off for seeking such cases is disproportionate and discourages lawyers from taking more difficult, work-intensive, cases.

ATRA supports legislation that limits the use of contingent fees in cases where a legitimate risk of non-recovery exists, and requires an hourly fee in cases where no legitimate risk of non-recovery exists, such as cases involving automobile accidents and other incidents where the parties are likely to settle, and cases where strict liability is imposed, such that no liability question exists to be resolved at trial.

ATRA also supports legislation that provides a sliding scale for the award of contingent fees. A sliding scale removes some of the incentive for lawyers to seek excessive jury awards, while preserving for plaintiffs the access to the civil justice system that the contingent fee system provides.

ATRA also supports legislation requiring an attorney to provide clients up front with an estimate of what the hourly rate for a case would be versus the applicable contingent fee charge. The client would be free to choose the payment method under which they would like to proceed. After disposal of a case, an attorney would disclose the number of hours actually spent resolving the case and the amount of the hourly fee or the contingent fees due. Fully informed clients would be able to compare attorneys’ fees and go in to fee arrangements with realistic expectations.