In Maryland, personal injury attorneys typically charge a two-tier contingency fee: (a) one-third (33.33%) if the case settles prior to litigation; and (b) 40% of any recovery obtained after a lawsuit is filed.
The fact that the client agreed to pay the attorney a one-third or 40% contingency fee does not mean that the attorney is entitled to receive the specified contingency fee from the client’s recovery.
Maryland Rule 19-301.5(a) states that a lawyer “shall not make an agreement for, charge, or collect an unreasonable fee” and sets forth the eight factors in determining whether a fee is reasonable. Under Maryland law, “the question of reasonableness of a contingency fee agreement . . . must be revisited after the fee is quantified or quantifiable and tested by the factors enumerated in Rule 1.5(a) [now Maryland Rule 19-301.5(a)]”. Attorney Grievance Commission v. Pennington 355 Md. 61, 74 (1999). If the lawyer’s fee that appeared reasonable at the onset becomes excessive, the fee must be reduced. Attorney Grievance Commission v. Korotki 318 Md. 646, 664-665 (1990). An attorney’s “fee that is clearly excessive will not be enforced, and the court will reduce such a fee to what is fair and reasonable under the circumstances”. Somuah v. Flachs 352 Md. 241 (1998).
The following is an example of where a one-third contingency fee may be excessive. The client is seriously injured when his or her vehicle is rear ended at a stop light. The client immediately retains a Maryland personal injury attorney on a one-third contingency fee. Within several months of the automobile accident, the insurer for the other driver concedes liability and tenders its insured’s policy limits of $100,000. The client then enters into a $100,000 settlement.
Is the attorney entitled to a one-third contingency fee of $33,333.33?
A credible argument can be made that the attorney is not entitled to a one-third contingency fee, because the attorney presumably performed hardly any legal services beyond compiling the client’s medical records and medical bills in obtaining a $100,000 policy limits settlement. Maryland Rule 19-301.5(a) sets forth eight factors in determining the reasonableness of an attorney’s fee. The first and most important factor is “the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal services properly”.
Practice pointer for clients: If you believe that your attorney’s contingency fee is excessive when your case settles, you should notify your attorney in writing that his or her fee is excessive and request that the attorney maintain the disputed contingency fee in the law firm’s Attorney Trust Account until the fee dispute is resolved. See Maryland Rule 19-301.15(e).
Most attorneys will voluntarily agree to reduce their excessive contingency when confronted. If the fee dispute cannot be resolved through negotiation, then either the client or the attorney can initiate litigation.