Types of Legal Fees

Broadly speaking, there are also two types of contingency fees:

• Flat Percentage Rate or Flat Contingency Fee: Stays the same regardless of whether the case settles without filing suit or going to trial.
• Escalating Contingency Fee: The fee may increase if it is neccesary to file suite and may increase again if it is tried. For example, the fee might be 33.33% if settled w/o filing suit and 40% if it is necessary to file suit and 45% if it is tried and 50% if there is an appeal.

At Reed & Mansfield, in motor vehicle cases where liability is NOT disputed, we use a flat 25% contingency fee and in all other personal injury cases we charge 1/3 (33.33%) if we settle the case without filing suit and 40% if we have to file suit or try the case. 

Typically, the contingency fee is calculated on the total settlement or verdict. For example, a 25% on a $100,000 case would be $25,000. Of the remaining $75,000, some money might go to pay back costs and medical liens.

Reed & Mansfield Case Example:
To give an example from a recent case we handled, of a $1,900,000 settlement, $475,000 was the 25% fee, $30,007 was repaid to us for costs, $61,667 was paid to lien holders and the rest went to the client. Most of the costs in this case were for high-priced experts to give us reports on such things as:

• How would the client's injuries affect him over his life? (Orthopedic surgeon)
• How would the client's injuries affect his earning capacity for the rest of his life? (Vocational Expert)
• How much would future care cost? (Care Costs Expert) 
• How should future care costs be adjusted for things such as future inflation? (Economist)

In this case we paid an orthopedic surgeon over $9,000 to examine the client and offer his opinion as to how much bone damage was permanent.

Large Cases
In the majority of large cases such as the one above it requires that a suit be filed and prepared for trial even if they settle. It's just too hard to get a decision maker at an insurance company to agree to big payout unless they are convinced that the Plaintiff's lawyer has spent the time and money to prep the case well for trial. Smaller cases, from the low six figures and down, especially motor vehicle accident cases, usually settle without filing suit and in such cases the costs are often trivial, sometimes just a few dollars for medical records.

Controversial Area:
What happens if the costs and medical liens are so large that they really eat into the Plaintiff's recovery? This can be a controversial area with contingency fees.

Some cases are "poisoned" at the outset by large medical liens. For example, in a car accident case if there is only $15,000 in insurance available and the adverse driver has no assets and there is a hospital lien for $60,000 and the victim has no health insurance we are just going to tell the prospective client at the outset that we see no way to put any dollars in their pocket. We are not going to take the case just so we can pocket a fee. However, what if there is $100,000 in insurance available and the most we can get the liens down to are $60,000? In that case rather than take a 25% fee of $25,000 and leave the client with only $15,000 we would reduce our fee so that we would split the remaining $40,000, fifty-fifty with the client, thereby taking a $20,000 fee.

Personal injury clients should ask attorneys what they would do in such a situation before signing a retainer agreement.