September 25, 2013

Many people are reluctant to hire (or “retain,” in lawyer’s parlance) an attorney because of the popular perception that it’s just too expensive.  The public has read stories about lawyers charging high hourly rates.  And while legal services are not an expense anyone should pay without serious consideration, it’s also true that many lawyers don’t require any money upfront to take your case.  This is where contingency fees come in.

A contingency fee agreement allows an individual to retain a lawyer with no money upfront.  Instead of paying a large upfront retainer and compensating a lawyer for hourly bills, the client pays a share of any recovery.  The lawyer’s compensation is contingent, or depends, on success in the representation.  If there is no recovery, the client is not left with a hefty bill for the attorney’s services.  For the everyday person, it’s a win-win proposition.  The financial risk of bringing a lawsuit is essentially eliminated, but the consumer still benefits from any legal award.

Common contingency fee agreements provide that the attorney will advance costs for investigating the facts of the case, retaining experts, and the attorney’s legal work but the client will pay filing fees, court costs, deposition fees, which are minimal in comparison to legal service fees.  Contingency fee agreements are a societal equalizer and allow average citizens to battle on equal footing with multi-billion dollar corporations, insurance companies, and healthcare firms.  Without contingency fees, it would be nearly impossible for many people to obtain justice for injuries and medical malpractice.

In most jurisdictions, contingency fees are only valid in civil cases and are not permitted in criminal and family law matters.  The typical contingency fee charged by law firms range from 33% to 50% depending on state rules and the facts of the client’s case.  Some law firms advertise these fees as “no win no fee.”

Almost no one expects to suffer a personal injury or to be the victim of medical malpractice.  The very nature of these incidents implies something unexpected happened due to another’s negligence or carelessness.  Because accidents and injuries are unexpected, consumers are often unprepared to pay legal expenses.  The average DC, Maryland, or Virginia client is not financially ready to pay a large retainer to a law firm and make outlays for legal fees.

A brief history of the contingency fee

Although it is by no means uniquely American (Canada, Scotland, Northern Ireland, New Zealand, France, Greece, the Dominican Republic, and Australia all permit some form of contingency fees), the contingency fee has a long American history.  Some scholars have found evidence of contingency fee agreements in the early 19th century.  Daniel Webster, the early American statesman and senator from Massachusetts, provided legal services on a contingency fee agreement.  Randolph Bergstrom, a history professor at UC-Santa Barbara, found the use of contingency fees by lawyers pervasive in 1910.

From its inception, the contingency fee faced opposition from big corporations and insurance companies.  Large railroads and businesses in early America did not want injured people who didn’t have the means to afford a lawyer suing them.  Their opposition was based on eliminating access to the legal system and cutting down their costs.  Even today, the tort reform lobby would enjoy seeing contingency fees curtailed or completely banned.  Unlike many injured victims, large corporations, medical companies, and the insurance industry that are responsible for injuries and accidents have the money to hire teams of top-notch attorneys to protect their financial interests.