CONTINGENT FEE
Payment to an attorney for legal services that
depends, or is contingent, upon there being some
recovery or award in the case. The payment is then
a percentage of the amount recovered—such as 25
percent if the matter is settled, or 30 percent if it
proceeds to trial.
Contingent-fee agreements are valid only in
civil cases and are frequently used in personal
injury cases. Court rules and statutes often regulate
these fees in relation to the type of action
and amount of recovery. Such an arrangement is
generally used when the party seeking recovery
cannot afford to retain an attorney and therefore
would not have any effective means of prosecuting
a claim.
An attorney is not entitled to a contingent
fee in the absence of an express contract. Contingent-
fee agreements, although intensively
scrutinized by the courts, are valid if equitable
and reasonable to the client. The purpose of a
contingent fee is to reward attorneys for proficiency
and diligence in prosecuting disputed
and litigated claims, as opposed to rendering
minor services that any inexperienced attorney
might perform.
Contingent fees are never permitted in criminal
cases, as there is no possibility of a financial
recovery that would be the source of the contingent
fee. These arrangements are emphatically
discouraged in DIVORCE proceedings due to
public policy considerations. An attorney may
discourage a reconciliation if a fee depends
upon the granting of a divorce. Public policy
favors the continuation of marriage, which is
traditionally viewed as a stabilizing force in society.
A contingent-fee contract that prohibits a
client from settling a case is also void as against
public policy because society views the avoidance
of unnecessary litigation as desirable.
When an attorney who was retained on a
contingent-fee basis dies, his or her estate will
not be entitled to any fee unless the attorney had
completely performed the contract prior to
death. In some states, the estate cannot recover
unless the jury had returned a monetary award
in favor of the client before the attorney’s death.
However, the attorney’s personal representatives
may collect payment for the reasonable services
that were rendered.
An attorney might be entitled to recover his
or her share of the proceeds of an action if the
contingent-fee contract was substantially performed
prior to the death of the client. If the case
had been submitted to the jury before the client
died, and the jury found in favor of the client, the
attorney is entitled to his or her fee from the
proceeds. If the suit is dismissed or settled by
the client’s personal representatives, the attorney
might have no right to a fee unless the contract so
provided. However, the death of a client does not
deprive an attorney of the right to recover the reasonable
value of his or her services rendered until
the time of the client’s death.
Jurisdictions are not unanimous as to the
question of whether an attorney’s contingent fee
should be calculated based on the net amount of
the recovery that a client actually receives or the
gross amount of recovery before any successful
counterclaims are factored in. For example, suppose
that a personal-injury lawyer agrees to represent
the plaintiff for a one-third contingent fee
and recovers a $100,000 jury verdict. However,
the jury also returned a verdict on the defendant’s
counterclaim for $10,000. Should the
plaintiff ’s lawyer receive a $33,000 contingent
fee or a $30,000 contingent fee?
Section 35 of the Restatement (Third) of the
Law Governing Lawyers provides that “when a
lawyer has contracted for a contingent fee, the
lawyer is entitled to receive the specified fee only
when and to the extent the client receives payment.”
Comment d to section 35 provides that
“[i]n the absence of [a] prior agreement to the
contrary, the amount of the client’s recovery is
computed net of any offset, such as a recovery by
an opposing party on a counterclaim.” To date,
Section 35 has been adopted only in Texas.
Other states calculate the fee based on the client’s full award, regardless of whether the client ever actually recovers the full amount awarded, reasoning that such a calculation better reflects the comprehensive value of the attorney’s services and the economic value received by the client.
Contingent Fee Agreement Form
LEGAL SERVICES AGREEMENT
1. IDENTIFICATION OF PARTIES. This agreement, executed in duplicate with each party receiving an executed original, is made between JOHN SMITH, hereafter referred to as “Attorney,” and JANE DOE, hereafter referred to as “Client.”
This agreement is required by Business and Professions Code section 6147 and is intended to fulfill the requirements of that section.
2. LEGAL SERVICES TO BE PROVIDED. The legal services to be provided by Attorney to Client are as follows: Representation of Client with respect to her claim for damages for personal injuries arising out of the automobile accident of September 15, 2002.
3. LEGAL SERVICES SPECIFICALLY EXCLUDED. Legal services that are not to be provided by Attorney under this agreement specifically include, but are not limited to, the following: Representation with respect to (a) any claim for property damage arising out of the accident, (b) any dispute with a medical care provider about amounts owed by Client for services received, or (c) any appeal in which Client is an appellant from a court judgment on Client’s personal injury claim (i.e., Attorney’s obligation to represent Client under this agreement extends to an appeal only if Client is a respondent).
If Client wishes that Attorney provide any legal services not to be provided under this agreement, a separate written agreement between Attorney and Client will be required.
4. RESPONSIBILITIES OF ATTORNEY AND CLIENT. Attorney will perform the legal services called for under this agreement, keep Client informed of progress and developments, and respond promptly to Client’s inquiries and communications. Client will be truthful and cooperative with Attorney and keep Attorney reasonably informed of developments and of Client’s address, telephone number, and whereabouts.
5. ATTORNEY’S FEES. The amount Attorney will receive for attorney’s fees for the legal services to be provided under this agreement will be:
(a) percent of the net recovery if the recovery is obtained before the filing of a lawsuit;
(b) percent of the net recovery if the recovery is obtained after the filing of a lawsuit but before the arbitration hearing, settlement conference, or trial, whichever occurs first;
(c) percent of the net recovery if the recovery is obtained at or after the arbitration hearing, settlement conference, or trial, whichever occurs first, but before the filing of
Client’s brief in an appeal from a court judgment; and (d) percent of the net recovery if the recovery is obtained after the filing of Client’s brief in an appeal from a court judgment.
“Net recovery” means the amount remaining after the total amount received (whether by settlement, arbitration award, or court judgment) has been reduced by the sum of all “costs,” as defined in Paragraph 7 of this agreement.
If payment of all or any part of the amount to be received will be deferred (such as in the case of an annuity, a structured settlement, or periodic payments), the “total amount received,” for purposes of calculating the attorney’s fees, will be the initial lump-sum payment plus the present value, as of the time of the settlement, final arbitration award, or final judgment, of the payments to be received thereafter. The attorney’s fees will be paid out of the initial lump-sum payment. If the payment is insufficient to pay the attorney’s fees in full, the balance will be paid from subsequent payments of the recovery before any distribution to Client.
Client is informed that this Attorney’s fee is not set by law but rather is negotiable between the Attorney and the Client.
If there is no net recovery, Attorney will receive no attorney’s fees.
6. DIVISION OF ATTORNEY’S FEES. Attorney will divide the attorney’s fees received for the legal services provided under this agreement with Margaret Andover. The terms of the division are as follows: Attorney will pay to Margaret Andover one third of all attorney’s fees received. Client is informed that, under the Rules of Professional Conduct of the State Bar of California, such a division may be made only with the Client’s written consent after a full disclosure to the Client in writing that a division of fees will be made and of the terms of such division. Client hereby expressly consents to the division.
7. COSTS. Attorney will advance all “costs” in connection with Attorney’s representation of Client under this agreement. Attorney will be reimbursed out of the recovery before any distribution of fees to Attorney or any distribution to Client. If there is no recovery, or the recovery is insufficient to reimburse Attorney in full for costs advanced, Attorney will bear the loss. Costs include, but are not limited to, court filing fees, deposition costs, expert fees and expenses, investigation costs, long-distance telephone charges, messenger service fees, photocopying expenses, and process server fees. Items that are not to be considered costs, and that must be paid by Client without being either advanced or contributed to by Attorney, include, but are not limited to, Client’s medical expenses and other parties’ costs, if any, that Client is ultimately required to pay.
8. REPRESENTATION OF ADVERSE INTERESTS. Client is informed that the Rules of Professional Conduct of the State Bar of California require the Client’s informed written consent before an Attorney may begin or continue to represent the Client when the attorney has or had a relationship with another party interested in the subject matter of the Attorney’s proposed representation of the client.
Attorney is not aware of any relationship with any other party interested in the subject matter of Attorney’s services for Client under this agreement. As long as Attorney’s services for Client continue under this agreement, Attorney will not agree to provide legal services for any such party without Client’s prior written consent.
9. SETTLEMENT. Attorney will not settle Client’s claim without the approval of Client, who will have the absolute right to accept or reject any settlement. Attorney will notify Client promptly of the terms of any settlement offer received by Attorney.
10. ATTORNEY’S LIEN. Attorney will have a lien for Attorney’s fees and costs advanced on all claims and causes of action that are the subject of her representation of Client under this agreement and on all proceeds of any recovery obtained (whether by settlement, arbitration award, or court judgment).
11. DISCHARGE OF ATTORNEY. Client may discharge Attorney at any time by written notice effective when received by Attorney. Unless specifically agreed by Attorney and Client, Attorney will provide no further services and advance no further costs on Client’s behalf after receipt of the notice. If Attorney is Client’s attorney of record in any proceeding, Client will execute and return a substitution-ofattorney form immediately on its receipt from Attorney. Notwithstanding the discharge, Client will be obligated to pay Attorney out of the recovery a reasonable attorney’s fee for all services provided and to reimburse Attorney out of the recovery for all costs advanced.
If there is no recovery, or the recovery is insufficient to reimburse Attorney in full for costs advanced, Attorney will bear the loss.
12. WITHDRAWAL OF ATTORNEY. Attorney may withdraw at any time as permitted under the Rules of Professional Conduct of the State Bar of California. The circumstances under which the Rules permit such withdrawal include, but are not limited to, the following:
(a) The client consents, and (b) the client’s conduct renders it unreasonably difficult for the attorney to carry out the employment effectively. Notwithstanding Attorney’s withdrawal, Client will be obligated to pay Attorney out of the recovery a reasonable attorney’s fee for all services provided, and to reimburse Attorney out of the recovery for all costs advanced, before the withdrawal. If there is no recovery, or the recovery is insufficient to reimburse Attorney in full for costs advanced, Attorney will bear the loss.
13. RELEASE OF CLIENT’S PAPERS AND PROPERTY. At the termination of services under this agreement, Attorney will release promptly to Client on request all of Client’s papers and property. “Client’s papers and property” include correspondence, deposition transcripts, exhibits, experts’ reports, legal documents, physical evidence, and other items reasonably necessary to Client’s representation, whether Client has paid for them or not.
14. DISCLAIMER OF GUARANTY. Although Attorney may offer an opinion about possible results regarding the subject matter of this agreement, Attorney cannot guarantee any particular result. Client acknowledges that Attorney has made no promises about the outcome and that any opinion offered by Attorney in the future will not constitute a guaranty.
15. ENTIRE AGREEMENT. This agreement contains the entire agreement of the parties. No other agreement, statement, or promise made on or before the effective date of this agreement will be binding on the parties.
16. SEVERABILITY IN EVENT OF PARTIAL INVALIDITY. If any provision of this agreement is held in whole or in part to be unenforceable for any reason, the remainder of that provision and of the entire agreement will be severable and remain in effect.
17. MODIFICATION BY SUBSEQUENT AGREEMENT. This agreement may be modified by subsequent agreement of the parties only by an instrument in writing signed by both of them or an oral agreement to the extent that the parties carry it out.
18. ARBITRATION OF FEE DISPUTE. If a dispute arises between Attorney and Client regarding attorney’s fees under this agreement and Attorney files suit in any court other than small claims court, Client will have the right to stay that suit by timely electing to arbitrate the dispute under Business and Professions Code sections 6200-6206, in which event Attorney must submit the matter to such arbitration.
19. ATTORNEY’S FEES AND COSTS IN ACTION ON AGREEMENT. The prevailing party in any action or proceeding to enforce any provision of this agreement will be awarded reasonable attorney’s fees and costs incurred in that action or proceeding or in efforts to negotiate the matter.
20. EFFECTIVE DATE OF AGREEMENT. The effective date of this agreement will be the date when, having been executed by Client, one copy of the agreement is received by Attorney, provided the copy is received on or before February 1, 2002, or Attorney accepts late receipt.
The foregoing is agreed to by:
Date: ____________________________________________________
Client _______________________
Attorney_____________________________________________________
[This agreement is meant to be illustrative only. Counsel should consider what provisions should be included, and what modifications should be made, in a particular fee agreement.]
