In a personal injury case when an attorney gets a percentage who pays the fees associated to the case ?

UPDATED: Apr 24, 2009

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In a personal injury case when an attorney gets a percentage who pays the fees associated to the case ?

Asked on April 24, 2009 under Accident Law, Michigan


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 13 years ago | Contributor

How fees and expenses related to personal injury litigation (including auto accidents, defective products, medical malpractice, etc.) are handled varies by numerous factors including geographic location, lawyer, client, type and attractiveness of case and of course, by how good the parties are at negotiating their deal.

It almost all situations the rates and whether the fees are based on the gross or net is a matter of negotiation between the attorney and prospective client and should be carefully specified in the retainer agreement.

The retainer agreement between the attorney and the client normally sets out what percentage of the recovery the lawyer receives, and whether the percentage applies to the net recovery or the total gross recovery.

The percentage fee to be earned by the lawyer can vary greatly based on such factors as geographic location, the anticipated difficulty to develop the case, who the adversary is, how difficult the adversary is expected to be, what the client is looking for, how demanding the client is expected to be, how much evidence will be needed, how unique the skill and reputation of the lawyer is, how crowded the court docket is, whether the client is in a hurry for a quick settlement or is patient and willing to roll the dice, what the lawyer anticipates will be necessary to get the money for the client, whether and when the case settles, what special effort will be needed to collect any judgment, and any post-judgment issues, such as any needs for a special needs trust, a structured settlement, appeals, bankrupcty issues, negotiation with lien holders (such as health plans and providers), whether there are any court approvals needed, etc.

One common formulation of percentage terms is 30% if the matter is settled before a lawsuit is filed, 35% if settled after a lawsuit is filed, 40% if it goes to trial and a judgment is received, and 45% if it goes up on appeal. Also, a case with an almost certain significant recovery is far more attractive to a lawyer than a case where liability and damages are far from clear and collection is dubious.

The retainer also details how the costs and fees of the litigation are handled. In some areas of the country the expenses are typically all advanced by the lawyer and never have to be reimbursed by the client, even if the case is lost or the recovery is too small or the judgment debtor goes bankrupt. In some areas the client pays some of the fees and expenses upfront. In other areas the lawyer typically lays the expenses out but client is obligated to repay the expenses if the case is lost.

In many areas of the country the fees and expenses are typically deducted from the total recovery and then the lawyer gets his or her fee percentage from the net recovery. In other areas the lawyer typically gets his/her fee percentage from the gross settlement or judgment PLUS the expenses he or she has laid out.

While this has largely become a matter of local custom, and there is no right or wrong, it is up to you to negotiate with the lawyer. One approach, ask several lawyers what their practice is.

Please remember that in any contingency case pure percentages and the issue of gross or net is less significant than how much you as the plaintiff are likely to receive at the end. Negotiating with lawyer 1 for a 10% contingency fee on the net recovery in an auto accident case where you were rear ended by an under-insured driver and missed a week of work and had neck pain may sound many times better than lawyer 2's demand for a fee of 45% of the gross recovery.

However, it's never just the percentages and net or gross.

Consider this. Suppose lawyer 1 takes the easy route and quickly settles all her cases -- the insurance companies soon recognize that she's afraid of going to court and/or unwilling to put in the hard work that is often necessary for success, and/or advance what sometimes becomes major expenses and thus will settle quickly for a small nuisance value. In essence lawyer 1 operates a "mill" with quick turnarounds. Say she gets you a $2,000 settlement and incurs no expenses and convinces you to take it as the driver has no money. You net $1,800.

Contrast that with lawyer 2 who really "works the case" and advances $20,000 in expenses out of his own pocket to be able to get evidence that the brakes were inherently defective. While driver 2 still has no money, now you can sue not only the under-insured driver without assets who hit you but also the auto manufacturer, and thus gets you a $200,000 verdict affirmed on appeal. You net $90,000.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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