Most clients in personal injury and wrongful death cases prefer to hire lawyers on a contingent fee basis. This means fees are calculated as a predetermined percentage of the amount we recover for the client through settlement or trial. Most lawyers handle personal injury cases for 33 1/3% to 45% of the recovery, and sometimes more.Our "early resolution" track for a significantly reduced 20% fee percentage is unusual.
Efficiency should benefit our clients. An “early resolution” fee option focuses attention on efficiently obtaining optimal resolution of cases that can and should be settled early, and provides the client an incentive to get to closure without great delay. If we can get there with more efficiently, with less work and expense, the lower fee percentage is good deal for both the client and the firm.
Therefore, on new cases of wrongful death or catastrophic injury coming into our office, we offer an option of reduced fees for early resolution on these conditions:
- If we find a serious injury or wrongful death case is appropriate for an early resolution track (a subjective judgment based on experience, and generally will not apply when the extent of injury remains in doubt);
- If the client assists by gathering medical, insurance and police documents; and
- If there is a settlement within 60 days after delivery of a demand package to the insurer for the party at fault;
- Then our fee will be limited to 20% of the gross recovery, plus reimbursement of our out of pocket expenses.
This does not apply to cases that come into our office less than six months before expiration of the statute of limitations period, or to referral cases where we must share the fee with another attorney or law firm.
Of course, many insurance companies are slow to make any sort of reasonable offer and stubbornly resist doing the right thing, so most cases will not be resolved within that sixty day "early resolution" window. However, we will give it our best shot.
If there is not a settlement within sixty days from delivery of our demand package, then our fee percentage will reflect the increased time and work involved, typically in graduated steps such as 33 1/3% before suit, 40% if we go to suit and 45% if we go to trial, plus reimbursement of out of pocket expenses.
If the client is willing and able to pay a substantial portion the litigation expenses as the case progresses, perhaps in monthly installments, we may adjust the fee percentage accordingly. Occasionally we have handled a tort or insurance case on a purely hourly fee basis, with the client paying an adequate retainer for fees and expenses and replenishing it as the case progresses. However, few injury victims find that attractive or feasible.What are typical expenses in personal injury and wrongful death cases?
Attorneys working on a contingent fee basis typically advance the expenses of litigation, and are reimbursed upon settlement. Rather than playing banker ourselves, we use a special line of credit for these expenses and pass through the interest expense at settlement. But if the case is lost, we still have to pay off the line of credit.
Every case is different, the expense budget varies widely among cases, and we try to scale the investment to the potential recovery. Since we usually advance expenses, we are generally conservative about spending. But if something has to be done to properly prepare a case, we do it.
However, some of the typical expenses include:
- Medical records. Cost may range from under $100 to thousands. If we can get electronic copies rather than paper, the cost is less.
- Radiology images. Costs vary tremendously, but are less if we can obtain all records in electronic format on CD.
- Filing fees and service. We generally budget about $400, more or less, but service by sheriffs in most counties is slow and unreliable. Service of lawsuits can be more expensive when we have to use a private process server to deliver papers to an elusive defendant.
- Photographs of scene. This varies from zero to hundreds of dollars.
- Accident reconstruction expert. While not always required, in complex crashes reconstruction expense can range from $5,000 to $20,000, more or less.
- Video depositions of opposing parties. About $750 to $1,500 per deposition.
- Transcripts of client depositions. About $300 to $500 each.
- Depositions of treating physicians, including doctors’ fees, court reporter and videographer - about $2,000 each.
- Custom medical illustrations - about $800 to $1,000 each.
- Travel. In interstate trucking and products liability cases, we often have to fly to distant states, incurring air fare, hotel, rental car and related expenses. We always fly coach rather than first class. For most anything within 4 or 5 hours’ drive from Atlanta, travel expenses are generally limited to mileage and budget priced lodging if an overnight stay is required.
- Expert witnesses on the subject matter of the lawsuit. While not always required, this can run into tens of thousands of dollars.
- Other expenses may include investigators, skip tracers, nurses, consulting experts, mileage, postage, couriers, Fedex and UPS, etc.
- Upon settlement, we are reimbursed for our out of pocket case expenses, and pass through the interest charged on our line of credit associated with those expenses.
Over the years, we have given many clients the option of a contingent (percentage of recovery) fee or paying us by the hour like insurance companies pay the lawyers on the other side.
Only once in our experience has a client chosen to pay by the hour. They just always choose the contingent fee, meaning that our fee is calculated as a percentage of the amount we recover for the client through settlement or trial.
Usually, we have to advance the expenses of litigation because people who have had a devastating loss cannot afford to lay out thousands of dollars for this. But if the client is willing and able to pay all litigation expenses as the case progresses, reducing our financial risk, we can adjust the fee percentage accordingly.Why do some people criticize contingent fees?
Imagine the government taking the slingshot away from David and giving it to Goliath. Now you understand "tort reform."
The contingent fee is a great equalizer that gives injured people, no matter what their financial circumstances, access to lawyers capable of taking on giant corporations and insurance companies. That is why corporations and insurance companies sometimes seek to limit contingent fees, thereby limiting average citizens’ access to the courts.
The contingent fee puts the middle class working people on a more equal footing with the wealthy. Eliminating the contingent fee would price the middle class out of the market for justice and would especially disadvantage anyone who is already suffering economically due to injury, disability, or loss of a family breadwinner.
Without the contingent fee system, none but the wealthy and powerful would be able to bear the costs associated with pursuing a claim and receiving just compensation. Worse still, often only those whose negligent conduct causes injury would be able to afford quality legal representation.
Contingent fees have been recognized for making it possible for injury victims with strong cases but little economic resources to proceed to trial in situations where the far more financially well-heeled defendant has refused to settle. Refusal to negotiate is a tactic of wealthy corporate defendants and is a risk that corporate defendants involved in numerous lawsuits are sometimes willing to take, but one which a personal injury plaintiff with a single case can hardly ever afford.
The position of the plaintiffs' attorneys limits the strategic bargaining power of the defendants in personal injury cases, and restores some balance to pretrial negotiations.
Ironically, there has been a growing trend for law firms handling major business litigation for large corporations to do so on some form of contingent fee contract.
Powerful interests seek to limit access to contingent fee lawyers only when it comes to representing individuals and families. Insurance companies and large corporations can always hire top legal talent, with no limitations. But without the contingent fee, people of the middle class or of low economic means would not have access to adequate representation.Do contingency fees increase litigation?
According to the National Center for State Courts, all tort (personal injury and wrongful death) cases comprise only about 4 to 6 percent of all civil caseloads in state courts. In one recent year, tort caseloads fell by 6 percent in 13 states, while contract litigation (often businesses suing businesses) increased by 27 percent. Most of civil dockets involve domestic relations (divorce, child custody child support) and suits filed by businesses comprise the majority of civil cases filed in court. Any real increase in litigation has been from business suing consumers and other businesses, not consumers seeking compensation through personal injury litigation.
Rather than stirring up frivolous lawsuits, lawyers who work on contingent fees have to become skilled in assessing the merits and likely outcomes of cases brought to them by potential clients. If a case does not have substantial merit, most seasoned lawyers will not touch it.Would fees be more reasonable to plaintiffs under an hourly agreement?
No. On average, hourly fees and contingent fees work out roughly the same, especially when adjusted for the risk incurred by the lawyer who works on a contingent fee and advances the expenses of litigation.
An hourly fee arrangement can encourage delay, inefficiency, and unnecessary action. We see that every day as insurance defense firms paid by the hour, engage in endless delay tactics while churning their billable hours. A contingent fee, by contrast, provides incentive for a lawyer to be efficient and expeditious.
Large corporations have begun to recognize that hourly billing pushes economic incentives in the wrong direction -- weakening rather than strengthening the bonds between performance and pay. Hourly billing pushes many law firms to an obsession with billable hours. This in turn pushes big firm lawyers to increase billable hours rather than seeking expeditious resolution of cases for their clients.
That is bad economics. The number of hours spent on a matter is no measure of productivity. Productivity is better measured by results, including both outcome and time-frame. Linking the economic incentives to productivity and value is just good business sense.