In personal injury cases, attorneys usually agree to represent the client in exchange for a percentage of the gross recovery. This is known as a contingency fee. Most attorneys charge a 40% flat contingency fee. This means that the attorney will receive 40% of the client’s recovery, regardless of whether the case is settled prior to filing a lawsuit, a settlement is reached before trial, or the client is awarded a monetary judgment at trial.
I do not believe that a 40% flat contingency fee is fair to the client. The attorney’s compensation should be based upon the amount of work that he or she performs. That is why I have a tiered contingency fee, ranging from 33.33% for a settlement reached without litigation to 40% for a judgment awarded by a jury.
For the attorney’s contingency fee agreement to be enforceable, it must reasonable at the time the attorney was retained in relationship to the expected difficulty of the case. In other words, it would be unreasonable for an attorney to charge a client in excess of 40% from the onset, unless there are extraordinary circumstances. An excessive contingency fee agreement is not enforceable. One Court explained why: “[A] fee agreement between lawyer and client is not an ordinary business contract. The profession has both an obligation of public service and duties to clients which transcend ordinary business relationships and prohibit the lawyer from taking advantage of the client. Thus, in fixing and collecting fees the profession must remember that it is a branch of the administration of justice and not a mere money getting trade”. Matter of Swartz 686 P.2d 1236, 1243 (Ariz. 1984)
The reasonableness of the contingency fee must also be determined after the case is resolved. For example, a flat 40% contingency fee may become unreasonable if the attorney spent only a few hours in obtaining a settlement. In such situations, the attorney should voluntarily agree to reduce his or her fees so that the attorney does not receive an unwarranted windfall. If the attorney refuses to reduce the amount of the contingency fee, the client should then terminate the attorney and retain new counsel to litigate the reasonableness of the contingency fee.
In Maryland, a contingency fee agreement of 50% or more is both unethical and unenforceable, because an attorney is not allowed to have too great an interest in the client’s case. If the attorney’s fee agreement is unenforceable due to excessiveness, the attorney is only allowed to recover the reasonable value of the legal services rendered. The reasonable value of the attorney’s services is usually substantially less than the contingency fee.