I can’t tell you how many times I’ve heard a person complain that their attorney collected a huge fee as compared to their in-pocket net recovery. Is this possible? Is this normal? The answer to these questions is yes, it is possible, but no, it’s not normal.
Personal injury attorneys take cases on a “contingency fee” basis. This is very different than the attorney who charges by the hour and who bills their client (and expects payment) every month. A “contingent fee” means that the injured party does not pay the attorney out of their own pocket.
The attorney only gets paid from any recovery, settlement or judgment. Should the attorney lose the case, they collect no fee. Should the attorney decide to drop the case, they collect no fee. So as you can see, the attorney assumes a significant risk in accepting a case on a contingency fee basis.
Likewise, most (but not all) contingent fee attorneys advance the costs necessary to work up one’s case. These costs can range from photocopies, faxes and medical records to paying for multiple experts’ time and opinions. Costs can range from a few hundred dollars to many thousands of dollars. So not only is the contingent fee attorney waiting to get paid their fee, but in the interim, they’re also likely advancing costs, which can be significant in certain cases. Because these are costs that the attorney has actually advanced on a given case, they are certainly entitled to be reimbursed from any eventual recovery, separate from their fee. However, remember, if the attorney loses, or drops, your case, the attorney usually eats their costs in addition to collecting no fee.
So, on one level, the attorney is arguably entitled to collect their full fee even if it means collecting more than the client nets. However, every case is different and the attorney should weigh many other factors in deciding how much of their contractual fee they should collect at the end of the case.
Attorneys have an ethical obligation to collect a contingent fee commensurate with the value of the effort they invested to procure the resolution of the case at issue. This means that in certain circumstances, the attorney is ethically obligated to reduce their fee, such as when a single letter results in a tender of the adverse party’s policy limits. On the other hand, the attorney might have conducted extensive investigation and legal research to put forth a theory that resulted in the eventual recovery procured.
However, besides their ethical obligation, an attorney arguably also has a moral obligation to do right by their client. We are really in the “service” business. Believe it or not, many successful attorneys and firms do not advertise on TV, billboards, or at Bus Stops. How then do they get their clients? By word of mouth, by which I mean recommendations from past and present clients, as well as from professional colleagues. Don’t you ask a friend for recommendations when you need a mechanic, plumber, or even a babysitter? The same thing applies to shopping for a good attorney.
So what makes a good attorney? I think if you ask those what they liked about their attorneys, you’ll find several key traits common amongst their opinions. They want an attorney that communicates with them and returns their phone calls. They want an attorney that is accessible and explains things to them. They want an attorney that talks with them instead of talking to them. They want an attorney that advocates for them.
Most of all, they want an attorney that doesn’t make money at their expense. After all, how often would you recommend an attorney if their fee significantly exceeded your in-pocket recovery? Granted, sometimes an attorney has put so much work into a case that they cannot be expected to reduce their fee. But more often than not, the amount of work they’ve put in can absorb a small fee reduction so as to ensure a fair outcome to the client. This is especially true when the client’s recovery is limited by inadequate insurance coverage. This is often a key factor in a repeat and referral business.
I know of large advertising law firms where some attorneys routinely reduced their fee so as to not make more than their clients, while other attorneys within the same firm did not. Personally, if I can resolve my clients’ cases without litigation, I try to reduce my fee if necessary so it does not exceed their in-pocket recovery after paying all fees, costs, and bills.
I believe that having a client return and/or refer other clients to me in the future generates sufficient additional fees for me to more than compensate for the amount I might have reduced my fee(s) in the past. Let’s face it; a small fee reduction is also far less costly than buying TV time.
- Barry Shalen, Esq.