A contingency fee agreement is a contract between an attorney and client in which the attorney’s compensation depends on the outcome of the case — typically a percentage of the amount recovered. If the client does not recover anything, the attorney receives no fee (though the client may still owe litigation costs).
How Contingency Fee Agreements Work
In a contingency arrangement, the attorney agrees to handle the case in exchange for a share of the recovery. Standard contingency fees in personal injury cases are typically 33 percent (one-third) if the case settles before trial, with higher percentages — often 40 percent — if the case goes to trial or appeals. These percentages vary by case type, jurisdiction, and the specific terms of the engagement letter.
The contingency fee is calculated on the gross recovery (before deducting costs) or on the net recovery (after deducting costs), depending on the agreement. The distinction significantly affects how much the client receives. A properly drafted contingency fee agreement specifies which method applies.
Case Types Where Contingency Fees Are Common
- Personal injury: Auto accidents, slip and fall, premises liability, medical malpractice
- Employment law: Wrongful termination, discrimination, wage theft, FLSA violations
- Class actions: Consumer fraud, securities fraud, antitrust
- Insurance bad faith: Claims against insurers who wrongfully deny or delay payment
- Collection matters: Some debt collection cases on behalf of creditors
What Contingency Fees Do Not Cover
The contingency fee covers the attorney’s time and skill. It does not cover out-of-pocket litigation costs — court filing fees, expert witness fees, deposition transcript costs, medical record retrieval fees, and similar expenses. In most contingency arrangements, the attorney advances these costs and deducts them from the recovery at the end of the case. The client should understand, before signing, how costs will be handled if the case is lost.
When Contingency Fees Are Prohibited
Professional conduct rules in all U.S. jurisdictions prohibit contingency fees in certain types of matters. Criminal defense cases — an attorney cannot agree to receive a larger fee if the client is acquitted. Domestic relations cases — contingency fees for divorce or custody matters based on the outcome are generally prohibited, though contingency arrangements for collecting past-due support may be permitted in some states. An attorney who charges a contingency fee in a prohibited matter may face disciplinary consequences.
Reading and Negotiating a Contingency Fee Agreement
Before signing a contingency fee agreement, clients should understand: the fee percentage, how it changes at different stages of litigation, whether the percentage is calculated on gross or net recovery, who pays costs if the case is lost, what happens if the client terminates the representation before the case resolves, and what authority the attorney has to settle without client approval. All of these terms should be specified in writing. Most state ethics rules require contingency fee agreements to be in writing and signed by the client.
Frequently Asked Questions
Is a 40 percent contingency fee too high?
Whether a contingency fee percentage is reasonable depends on the case’s complexity, likelihood of success, and the market rate for similar representation. A 40 percent fee for a case that goes through trial is within the range of common practice for complex personal injury or commercial litigation. The reasonableness of any fee can be evaluated through fee arbitration if a dispute arises.
Can I negotiate the contingency fee percentage?
Yes. Contingency fee percentages are not set by law (with narrow exceptions in specific case types). The percentage in the engagement letter is the starting point of a negotiation, not a fixed rule. Clients with strong cases, clear liability, and significant damages may have more negotiating leverage. It is reasonable to ask whether the percentage can be reduced if the case settles quickly.
What happens if I fire my attorney before the case is resolved?
If you terminate a contingency fee attorney before the case concludes, the attorney may be entitled to recover in quantum meruit — the reasonable value of the services provided — from any subsequent recovery. The precise result depends on your engagement agreement, the jurisdiction’s rules, and whether the termination was for cause. This is a common source of fee disputes.