"No fee if no recovery" is a phrase used by countless attorneys—particularly personal injury attorneys—in advertisements that are designed to attract new clients. While the phrase has proven popular, misconceptions about what it actually means often arise with the general public. "No fee if no recovery" is a payment arrangement also referred to as working on a contingent fee basis. In the simplest of terms, a contingent fee means that the attorney will be paid for his or her work on a case only if money is recovered in that case. In other words, the attorney's fees are contingent upon a successful outcome in the case. While such a definition may sound straightforward, it is important to understand that contingent fee arrangements can become complex.
Contingent Fee Arrangements
Because contingent fee arrangements mean that the attorney only gets paid when money is at stake that means that contingency fee arrangements are usually only practical when damages are being pursued, most often in personal injury or workers compensation cases. The actual contingency fee will vary from attorney to attorney, but generally it ranges between 25–40% of the settlement amount.
Attorney Fees vs. Case Costs
Many people who are looking for a personal injury attorney to represent them often have a skewed notion of what a contingency fee arrangement entails. In particular, there is often a misconception that a case will be free for the client if the verdict goes against him or her. Such an arrangement is extremely rare in contingency fee cases. If the plaintiff's case is lost then it is true that he or she will not have to pay attorney's fees, which include the time and labor that an attorney and his or her staff put into the case. In most instances, however, the client will still need to cover case costs.
Case costs are those expenses that the attorney incurs as a result of filing and pursuing a case. Case costs may include, but are not limited to, such items as filing fees, expert testimony (including potential travel and hotel costs for those experts), postage, photocopying, and other expenses that may be incurred when building a case. In some cases, especially where complex evidence and expert testimony may be vital (such as a medical malpractice case), case costs can run into the thousands of dollars. While there are payment arrangements wherein case costs are covered by contingency fees, such arrangements are rare. The client will need to fully understand whether case costs will be his or her responsibility before retaining an attorney. Failing to inform the client about what costs and fees he or she is or is not responsible for could not only lead to a strained attorney-client relationship, but it could also expose that attorney to accusations of legal malpractice.
Contingency fees are almost universal in personal injury law. Despite the ubiquity of such fee arrangements, however, attorneys should never assume that potential clients are coming to them with a full understanding of what contingency fees fully entail. By discussing contingency fee arrangements in detail with the client early on, attorneys will protect their professional reputations and help build a sense of trust and confidence with the client.