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How Do Lawyers Get Paid if They Lose a Case?

By May 19, 2022May 26th, 2022No Comments

Personal injuries happen every day. They may result from a motor vehicle accident, slip and fall, a construction accident, and more. Being involved in an accident can be a painful and traumatic experience. In some cases, accidents cause severe or even fatal injuries. According to the National Center for Health Statistics, approximately 31 million people in the U.S. suffer injuries that require medical treatment each year. About 2 million require hospitalization, and 162,000 of these injuries are fatal.

How Do Lawyers Get Paid if They Lose a Case?Therefore, it is no surprise that most civil litigation involves personal injury lawsuits. The U.S. Department of Justice, Bureau of Justice Statistics reports that about 60 percent of civil trials arise from personal injury. Only 5 percent of personal injury cases go to trial, meaning 95 percent of claims settle. Even when the victim has a strong case and a skilled litigator, there is always the possibility of losing a lawsuit. Losing a case can be a financial hardship for both the client and the attorney.

Many personal injury attorneys charge a contingency fee. A contingency fee agreement allows payment of a percentage of the damages awarded at the end of the case instead of an hourly rate, flat fee, or other methods.

Legal matters cost a lot of money. The contingency fee system gives those with low incomes access to the legal system. If the case fails, the lawyers get paid nothing.

How do lawyers get paid?

In general, lawyers receive compensation according to the fee agreement they have entered into with the client. Attorney fee arrangements vary widely. Lawyers charge for their legal advice, skills, and time. Many factors affect the cost of a lawyer, including location. The fee can also vary based on the type of law involved and the lawyer’s experience.

Generally, there are several types of compensation.

1. Flat Fee Payment Arrangements

An attorney may charge a flat fee for standard, routine tasks.

They may charge a flat fee for services such as:

  • A will or power of attorney in an uncomplicated estate
  • Uncontested divorces
  • Real Estate Closings
  • Name changes

The fee may be similar to other fees charged in the area but reflects the complexity of the legal work required.

2. Hourly Fee Payment Arrangements

In this arrangement, the lawyer charges based on a fixed hourly rate, whether or not the case is successful. The rate is charged in fractions of an hour, such as one-tenth of an hour (i.e., every six minutes) to every quarter-hour (15 minutes) or half-hour (30 minutes). The rate may vary according to the type of work.

For example, the attorney may charge more for time spent in court than for office work. Some firms charge differently for tasks performed by paralegals or other staff. Currently, the average hourly rate for a lawyer in California is between $164 and $422 per hour, based on the location, type of law firm, and the attorney’s skill and experience. If the case loses, these lawyers keep the fee.

3. Retainer Fee Payment Arrangements

In a retainer agreement, the client pays the lawyer in advance for representation in a legal matter. These are commonly used either when an attorney expects to spend a certain amount of time on a case and wants to ensure payment or when the client wants to use an attorney for various ongoing legal services.

The agreement is that the attorney will be on call to the client for a set fee. Retainer agreements are generally used in conjunction with hourly fee agreements. The lawyer keeps track of their time and deducts their hourly rate for the work from the retainer fee. The fee is paid either upfront or in installments. The agreement should clearly state whether the fee is refundable if not fully used or whether the lawyer may charge an additional retainer under certain circumstances.

4. Retainer Plus Contingency

This fee is a hybrid of two arrangements. To begin, the client pays the attorney a retainer upfront. The retainer may be hundreds or several thousand dollars. If the attorney wins the case, in addition to the retainer, they receive a percentage, agreed upon in advance, as a contingency fee. Sometimes the attorney receives the contingency fee less the amount of the retainer.

5. Referral Fees

If the subject matter of the injury is unfamiliar or something the attorney prefers not to take on, they may refer the client to another attorney. When that occurs, the attorney who receives the case may pay a fee, called a referral fee, to the referring attorney. Such arrangements are legal, provided the client must consent to the referral fee in writing and both attorneys sign the contract.

In California, the rule for referral fees permits referral compensation without requiring the referring lawyer’s continued involvement in the matter.

6. Contingent Fee Payment Arrangements

With this fee arrangement, an attorney only gets paid if they win the case. The payment is a percentage of any monetary judgment or settlement.

Why do some lawyers use contingency fee arrangements?

It can be expensive to pursue a personal injury case. Personal injury cases can be very complicated and may involve more than one defendant. Without contingency fees, most people would find it difficult to pay the legal fees and expenses out-of-pocket.

These arrangements are common in California, particularly for personal injury and related cases. Most states restrict the cases for which payment is handled on a contingent basis and limit the attorney’s fee to a “reasonable” percentage of the total amount recovered.

There is a chance that the lawyer will not get paid anything under this arrangement. However, there is also a chance that if there is a large settlement or verdict, the lawyer may end up earning more than under another fee arrangement. Therefore, lawyers work zealously to prevail in the cases with the most merit.

What do you need to know about contingency fees?

How much is a contingency fee?

Contingency fees typically range widely depending on the state and lawyer.

Whether the attorney takes the fee before or after subtracting expenses can significantly affect the final amount the client receives. Some attorneys use a sliding scale, with a lower rate for cases that settle early and a higher fee as the case progresses.

California law restricts the amount of a contingency fee in medical malpractice cases.

Contingency fee agreement requirements

Business and Professions Code Section 6147 states that a contingency-fee contract must be in writing.

The agreement must include the agreed-upon contingency fee rate. In addition, it must provide a statement as to how expenses incurred in connection with the lawsuit will affect the contingency fee and the client’s recovery. It must also set forth to what extent, if any, the client could be required to pay the attorney for related matters that arise out of their relationship not covered by their contingency fee contract.

Finally, both attorney and client must sign the agreement, and the attorney must provide the client with a copy of the signed fee agreement.

The law does not set the fee. The attorney and client negotiate it, but the California Rules of Professional Conduct state that, “A member shall not enter into an agreement for, charge, or collect an illegal or unconscionable fee.” The facts and circumstances of the case at the time of the agreement determine whether it is unconscionable.

Who pays the court costs and other expenses in a personal injury case?

The cost of pursuing a lawsuit can amount to thousands of dollars.

Personal injury cases involve substantial court costs and other expenses, such as:

  • Fees for copies of documents, such as police reports and medical records
  • Filing fees and additional court fees for filing documents in court
  • Costs connected with investigations
  • Expert witness fees
  • Fees for depositions and court reporters
  • Transcripts of testimony
  • Preparing trial exhibits
  • Postage

Win or lose, both the attorney and client must understand and agree on how these expenses are handled. The written contingent fee contract should specify this detail. Typically, after the attorney and client reach an agreement, the attorney will pay the expenses of the lawsuit. If they win a judgment or settlement, the written contingency fee agreement controls the disbursement of the funds.

Personal injury lawyers can deduct costs before or after taking their legal fees, which affects the amount of the legal fees. Some contingency fee contracts provide for expenses plus a percentage. If the personal injury case does not succeed, the attorney may absorb the costs according to the agreement.

Does the method of settling the case affect the contingency fee arrangement?

Again, it all depends on the terms contained in the fee agreement. In some cases, the agreement provides that the lawyer accepts a lower percentage of the money if they settle the case quickly or before filing a lawsuit. However, many lawyers will not agree to such a provision.

If the lawyer settles the case before trial, it may seem that they have to do less work. However, in most cases, the lawyer invests time and effort in trial preparation before the parties negotiate a settlement.

The Initial Consultation

A personal injury case always begins with an initial consultation. Most personal injury lawyers offer a free consultation, although it is best to confirm this before the appointment. During this consultation, the client briefly reviews the circumstances of the case, which helps the lawyer assess the chances of recovery.

The lawyer can also explain your legal options. This consultation helps both the client and lawyer decide if they will enter into an attorney-client relationship. One of the key questions is what the attorney charges.

You may wish to bring important documents with you, such as:

  • Pictures or videos of the accident scene
  • Pictures or videos of your injury
  • Accident reports and any citations or tickets
  • Witness statements and contact information
  • Your insurance policy information
  • Relevant medical records
  • The contact information for your doctors
  • Any correspondence sent to you by the other party, including settlement offers

Once you have agreed to enter into an attorney and client relationship, the next important step is the fee agreement. The fee agreement controls your rights and responsibilities in your relationship with the lawyer. In the event the case is unsuccessful, the responsibility for the costs should be outlined in the fee agreement.

Those seeking a personal injury lawyer should read and fully understand the proposed fee structure before signing. It is one of the most important parts of the representation agreement they will sign with their lawyer. Therefore, it is essential to take all the time necessary to ask questions. The fee agreement will determine what happens if there is no compensation recovered.

Legal fees are essentially the cost of pursuing a lawsuit with the aid of a lawyer. You may be concerned about the cost of hiring a lawyer, but you can avoid any surprises by talking to your lawyer from the beginning. Do not make any assumptions. Talk to your lawyer about fees and expenses, and make sure that you understand all the information on fees and costs that your lawyer gives you. It’s best to ask for it in writing before legal work starts.

Anytime a person contemplates a lawsuit, they should consider attorneys’ fees. What, if anything, your lawyer receives if you lose your case depends mainly on the fee agreement.

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