Contingency Fee Agreement And Retainer Agreement - State Bar Of: Fill & Download for Free

People have overpaid me a few times, generally over my initial objection (which objection, by the way, I do feel ethically obliged to make).After explaining to the clients that the money was not a required payment, when they insisted on making it anyway, I reported the payment as a “gratuity” and paid the appropriate amount of income tax on it (under American tax law, a gratuity is a voluntary payment for services received; a gift has no element of “consideration” at all), and considered it a compliment. An item such as a knick-knack or a bottle of wine (also things I’ve occasionally received from clients) would be considered a gift.A couple of times the clients have declined the refunds due on their unused retainer deposits,¹ which has the same practical effect.Ethical rules don’t apply to clients, so there isn’t really a question as to whether it is ethical for the client to offer a gratuity. If there is an ethical issue it’s on the attorney’s end. I never really thought accepting a gratuity amounted to an ethical violation (though it most certainly would be highly squirrelly to suggest a gratuity). I’d have had no right to demand more money than specified in the fee agreement, and furthermore the lawyer is ethically bound to remind them they didn’t have to pay, and I’ve never been offered an amount of money sufficient to make the total fee “clearly excessive,” which would raise an additional ethical dilemma.The ethical rule relating to fees provides²:(a) A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee. … [A list of factors to consider is appended.](b) When the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, in writing, before or within a reasonable time after commencing the representation.(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, ….(d) A lawyer shall not enter into an arrangement for, charge, or collect: (1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support; or (2) a contingent fee for representing a defendant in a criminal case.Pa. R.P.C. No. 1.5. Subdivision (e) of that rule is not relevant to this question, and I did omit some of the details in subdivisions (a) and (c). The rule does not, in fairness, address gratuities, as above defined; however a different rule brings the concept of conflict of interest into play if the gratuity is disproportionate to the actual value of the work (in which case it must be considered a “gift”, and a substantial one):(c) A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client. For purposes of this paragraph, related persons include a spouse, child, grandchild, parent, grandparent or other relative or individual with whom the lawyer or the client maintains a close familial relationship.Pa. R.P.C. No. 1.8. This doesn’t categorically prohibit receiving gifts, but large gifts would make me uncomfortable even if I had no part in their arrangements. We have a fiduciary duty to the client, which makes the solicitation (or appearance of solicitation) of gifts unseemly; undue financial entanglement with a client is also bad because there are duties of objectivity to the client and candor toward third parties and the court itself.I don’t see “moral” significance to it over the ethical concerns above; again soliciting the “gift” instead of being up-front about the fees would be bad but assuming the client is freely offering it (and can afford it!) it isn’t a big deal.¹ R.P.C. 1.16(d) provides:(d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred. The lawyer may retain papers relating to the client to the extent permitted by other law.See also John Gragson's answer to Is it odd for an attorney to ask for $1500 upfront? Sometimes the total bill comes out to less than the advance deposit, and I refund the client the difference.² Quotations are from Pennsylvania’s Rule, but most states have something substantially similar, as the Rules of Professional Conduct in all of the United States are adapted from a set of “Model Rules” published by the American Bar Association.

This is an important question and I consider it my public duty to answer the question to the best of my ability.Personal injury lawyers, as a general rule, don’t have a lot of repeat business so it’s difficult to develop a way for non-lawyers to evaluate personal injury lawyers.There are a wide range of skills and motivations for personal injury lawyers. Some are only in it for the money and some are not very good and will resolve a case to the detriment of the client. These are real concerns by members of the public searching for a personal injury lawyer to handle their matters.Her are my general opinions as a defense counsel who opposed personal injury lawyers in settlements, at trial and on appeal for many years and also having to go through the process of hiring a personal injury lawyer for my own wrongful death matter.Personal injury lawyers’ ads are not a very good way to retain a personal injury lawyer. Billboard and TV ads are somewhat ubiquitous. In my geographic area, where I know the reputations of the advertising lawyers on TV and on billboards, none of the advertising lawyers are very good.Here is one type of a personal injury lawyers business model. The law firm advertises heavily on TVs and billboards. The firm gets a large volume of inquiries. The firm then sifts these cases to determine which ones can be cost effectively settled very quickly. Those are settled and the firm retains the agreed contingency fee. Those that look “difficult” are either referred out to other firms, usually more desperate for cases, or which require effort such as trial. Those that require effort, such as retention of experts or potential trial, will be referred to trial firms and the contingency fee will be split between the referring firm and the trial firm.I don’t recommend that you select one of these firms becasue your individual case will be handled like a fungible commodity. The firm will settle as soon as possible for the contingency fee, not to maximize the recovery of the case for the plaintiff. As a defense attorney, I knew who these firms were. I’d review their initial settlement proposal. If my client had liability, I’d offer to settle for an amount that would be lucrative to the law firm but not necessarily what the plaintiff could win. Many times these firms immediately settled at a very low value, a good result for our client. Other times, I would not even respond to any prelawsuit offers from these types of firms. After much heated conversations, the law firm would transfer the case to the firm that would be the trial firm. At that point, I’d deal with the trial firm but that firm was not selected by the plaintiff and part of the plaintiff’s coningency fee payments went to a firm that added no real value to the case. It would have been better for the plaintiff to have directly hired the firm that would actually try the case.There are other personal injury firms that accept cases and aggressively pursue each case as if that particular client is their only client. These firms usually have a ready stable of experts at their disposal. They also have members who try cases and who are members of the local, state or national Trial Lawyer's Association and may have certifications from NITA, The National Institute For Trial Advocacy. List of American Trial Lawyer Associations - Wikipedia Trial Lawyer’s associations are organizations of plaintiff’s personal injury lawyers. Well regarded plaintiff’s lawyers are often active in the state bar and the trial lawyer’s associations as officers.In my capacity as a defense counsel, I also knew who these firms were. When they presented a case for settlement, I knew they were fully prepared to try the case. Those cases should be settled as soon as we evaluated out client’s exposure. We often factored in the law firm’s expertise and agressiveness in making offers to settle the case. The personal injury firm’s known willingness to try cases and their trial track record increased the amount of recovery to their clients. These firms generally do not advertise on billboards or TV. Many fof their referrals came from other lawyers.What can you do with this information? First, you want to hire a plaintiff's firm that will try cases. Your case will most likely be settled, but if the firm doesn’t take cases to trial, then you can expect the defense counsel like me to not offer very much to settle the case. You also want to observe the paralegal to attorney ratio. The more paralegals there are in relation to attorneys, the more likely that the firm is an advertising mill. You should know who is on your team before you sign the retainer agreement. You should meet with the paralegal handling your case. You should meet with the lawyer handling your case on a day to day basis. You should also meet with the trial attorney handling your case. If there is some resistance to this I’d look for another firm. You also have to decide if you can work with the team on a long term basis. Do you get the impression that the attorneys and staff really care about you and your case personally? A good working relationship is important but difficult to quantify. You should review the attorney’s List of publications and speaking engagements and review the subject matters. The more they are focused on legal theories and less on business generation and advertising, the better.If you know any civil defense attorneys you can ask those attorneys for references. We know or can verify those attorneys who care about the case and will work hard for their clients. I’ve written as if the plaintiff’s firms are larger firms and not solo practice firms. This is sometimes, but not always important. A good solo practice attoney can handle traffic accident, slip and fall and dogbite cases. Ther are some solo and very small firms that do criminal defense and personal injury. These firms are in trial a lot on the criminal defense side and tend, more often than not, to aggressively pursue the personal injury cases that they handle. Nevertheless, some cases are too complex for solo or small firms More complex cases will take larger firms.Finally, I put little weight in claimed settlement figures on billboard and TV advertising. I do put weight in reported verdicts identifying the law firm, becasue those are contested trial results.

There won’t be a lot of negotiation unless you are likely to have a volume of business. I was asked about price breaks for “big” matters. My reply was always the same. I budget 2000 billable hours per attorney. If you send 2000 hours a year worth of work To our firm so I can hire another attorney to handle the increased volume, then you’ll get a bulk rate discount. In one case, the client had so much work they wanted us to open a new office next to their corporate headquarters. We gave them a cost estimate and it made economic sense for the law firm to open a satellite office next to the client based on the client’s volume of legal work we would be handling.If you don’t have that kind of bulk business then there isn’t going to be much negotiation. One term that is often negotiable is a prompt payment discount. Several firms I worked at were willing to offer a prompt payment discount If the payment was made within 10 days of the receipt of the invoice. This worked especially well with Soem insurance companies because the internal auditors would look to see if the fees had been promptly paid to earn the discount. Soem insurance companies went from 90 turnaround times to 5 day express mail turnaround times to get the discount.That said, it’s important for a client to have a good understanding of the hourly rate and how it’s calculated. Most law firms bill in 1/10 hour increments but some bill in 1/4 hour increments and the difference can be substantial. Some firms bill for actual copying, fax and postage costs, others “average” those costs over several clients. All firms have provisions for paymentS of outside vendors such as court reporters, process servers, outside bulk copying services and attorney services. These are actual out of pocket costs paid by the law firm on your behalf. You should be aware that these costs can be enormous. Check to see if the law firm adds a handling fee for these costs.Understand that a budget can be a very useful document but is always tentative and also very expensive for the lawyer to prepare. Neverhteless, many clients have no idea how expensive litigation will be. The lawyer should be able to provide a “ballpark” estimate at teh outset that can be refined later. One thing clients don’t understand is that a lawsuit is a contest against sentinel beings who definitely do not have the client’s interests at heart and may not be concerned with cost control or exercise common sense. My rule of thumb was that each side’s attoenys fees amount to about 25% of the amounts at stake. In a $1,000,000 dispute, the attoenys fees woudl be $250,000, paid on a monthly basis through the course of the litigation —all before any money is realized. $20,000 a month for a year is well beyond many people’s budgets. Give careful thought as to the cost effectiveness of the lawsuit.Check to see how telephone calls are billed. Clients often complain about telephone charges. Six phone calls a month for a total of 1 hour can amount to $350 that usually didn’t need to be spent — a self inflicted client wound. Usually emails are more efficient, but recognize that every interaction will have a cost.If you are the plaintiff and the retainer is a contingency agreement, then inspect the clause relating to the attorney’s discharge before the conclusion of the case. It has crossed the mind of many a plaintiff to discharge the attorney working on a contingency fee basis just prior to settlement of the case for a large sum of money in an effort to avoid paying the attorney’s percentage. That event is addressed in the retainer agreement. There are two main approaches taken. First, the attorney may convert the percentage to an hourly rate due upon termination. That hourly rate is often very high, maybe $500/hour. Second, the attoeny may place a lien on any recovery so the attorney is paid the percentage owed prior to payment ot the client. If the client has retained a second attorney, this may mean payment is now due to two attorneys upon settlement. After the court costs, court reporter costs, expert costs and all other costs are deducted, the plaintiff may receive no money at all. I have been both the first and the second attorney in this unpleasant scenario.Finally, review the retainer agreement provisions on fee disputes. Often state bar rules require a mediation process before lawsuits and oftne there is a voluntary and free-to-the-client fee dispute process set up by the bar associations. Retainer agreements may have a clause invoking these procedures. Make sure you understand how that clause works.