What is a Contingent Fee?

Alexis W.

A contingent fee is a type of pay structure for attorneys. When attorneys work on a contingent fee basis, they only get paid if their client wins the case. It is an alternative to the hourly method of charging for legal services.

"On contingency" means that the plaintiff agrees that the attorney's fee will be determined by the amount of the settlement awarded.
"On contingency" means that the plaintiff agrees that the attorney's fee will be determined by the amount of the settlement awarded.

Typically, only plaintiff's attorneys work on a contingency basis. The attorney is paid a percentage of the damages that the plaintiff is awarded either in settlement negotiations or in court; if the plaintiff loses, the attorney gets nothing. The normally fee is 10 percent of the damages, although this is negotiable between a client and an attorney.

A defense attorney or a criminal attorney would not work on a contingency basis, since neither a criminal defendant nor a civil defendant is awarded monetary damages if he wins a case. In fact, Rule 1.5(d) of the Model Rules of Professional Conduct published by the American Bar Association prohibits criminal attorneys from working on a contingency basis. This same rule also prohibits family law attorneys from working on contingency, in part because allowing lawyers to accept percentage payments could make divorces more acrimonious.

Contingent fee payment structures are common in personal injury litigation, medical malpractice cases, social security benefits disputes, and employment law cases. It is possible to find an attorney who will work on a contingent basis for almost any type of tort in which the potential damages are high enough to make the payout worthwhile to the attorney. This means that many clients who bring civil suits are represented by lawyers working on a contingency basis.

Advocates of the contingency fee system believe that this fee structure encourages plaintiffs to seek justice. A plaintiff who has a potential civil action might be deterred from trying to recover damages if he or she knew he had to pay legal fees no matter what. If a lawyer works on a contingency fee, however, the plaintiff theoretically has nothing to lose by filing a lawsuit.

There are also some potential downsides to the contingent fee system. For example, lawyers who settle a case quickly may work very few hours and receive a very large fee. Some believe this creates a conflict of interest because a lawyer may wish to accept a settlement offer that comes early in negotiations, even if it would be in the client's best interests not to accept.

In addition, some believe that a contingent fee system encourages attorneys to pick only those cases they believe have a sure chance of winning. This means that some plaintiffs could be denied justice because a contingent fee attorney is unwilling to take a chance on their case. These plaintiffs, however, could hire an attorney under a pay-by-the-hour fee structure.

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