Brian White | January 12, 2021 | Houston Personal Injury Attorney
Lawyers almost always charge for their services, but the cost could be less than you might expect. Learn more about how much it costs to work with a lawyer and how contingency fees – which are the primary structure in personal injury cases – work.
How Much Can an Attorney Charge?
Lawyers cannot charge clients a fee that is illegal or unconscionable under the rules that govern attorneys in Texas. But the law gives lawyers a lot of leeway in determining how much they can charge for their legal services.
If you shop around, you may discover that lawyers have different policies about how they charge their clients.
In order to determine how much you might pay for a lawyer, you need to add:
- The Legal Fee: This compensates the lawyer for the time and effort spent on your case. Personal injury lawyers usually charge a contingent legal fee.
- Costs Charged to You: These expenses serve to reimburse hard costs that the lawyer incurs on your behalf. Some examples include fees paid to expert witnesses, filing fees, and court reporter’s fees.
We’ll dive deeper into each of these categories below.
The Structure for Legal Fees
Lawyers are paid for the services that they provide to their clients. However, lawyers can structure their fees in a few different ways to arrive at a value for fair compensation for the work they provide. Some examples of common fee structures include:
When a lawyer charges hourly fees, they track how much time is spent on the case. The lawyer multiplies the amount of time by an hourly rate to calculate the total fees. For example, if a lawyer charges $300 per hour and spends three hours on your case, the lawyer would bill you $900.
Lawyers use an hourly fee when the amount of work required for a case is not predictable. A lawyer might charge an hourly fee to represent a business that is suing another for a breach of contract.
Most personal injury lawyers do not charge hourly fees.
A lawyer might charge a flat fee if the lawyer can predict the amount of work that will be necessary. For example, a lawyer might charge a flat fee to help a client to incorporate his or her business.
Occasionally, a personal injury lawyer might charge a flat fee, but this is uncommon.
The typical fee arrangement for a personal injury case is a contingency fee. A contingency fee is “contingent” – or dependent – on the lawyer winning your case.
This gives contingency fees a few unique characteristics:
- A Fee That Depends on a Win: To receive a contingency fee, the lawyer must either win your case at trial or obtain a settlement in your favor. In other words, if you do not receive any compensation, the lawyer does not receive a fee.
- A Fee That Depends on the Amount Recovered: A contingency fee is a percentage of the amount of compensation the lawyer obtains for you. In a personal injury case, this means the contingency fee is calculated based on the amount that a settlement or paid damages award.
- No Upfront Fees: A contingency fee is calculated at the end of the case. As a result, the lawyer will not require any upfront payment to start working on your case.
For people who have sustained injuries, a contingency fee avoids the need to pay the lawyer out-of-pocket. Moreover, since the contingency fee is calculated based on the amount recovered, the lawyer has an incentive to obtain as much as possible for you from your slip-and-fall injuries, car accident injuries, or other injuries.
How Do Contingency Fees Work?
The amount of a contingency fee will vary widely. But the percentage will typically fall between 25% and 40% of the compensation recovered for you. This means that after the lawyer settles or wins your case, the lawyer will deduct a fee equal to the agreed-upon percentage.
According to the Texas Disciplinary Rules of Professional Conduct, lawyers must provide a written contingency fee agreement to clients.
Some of the requirements of this written agreement include:
The agreement must explain the amount of the contingency fee. Texas allows stepped percentages if they are explained in the fee agreement. Thus, the fee agreement could state the lawyer’s fee is 30% for a pre-trial settlement and 35% if the case goes to trial.
The agreement will explain the costs and other expenses that can be deducted from your settlement or damages award. Costs are expenses that the lawyer pays on your behalf while working on your case. For example, if the lawyer must hire a court reporter for a deposition, those costs are deducted from your settlement or from the damages awarded to you.
But if the lawyer does not win your case, the lawyer is responsible for those costs. In other words, the lawyer “advances” money on your behalf to pay costs and recovers it from your compensation, if any.
Calculation and Application
Calculating your attorney’s fee isn’t just about the percentage you’ve agreed to pay. It’s also about at what point in time that percentage is applied.
In the fee agreement, your lawyer must explain the method of calculating the contingency fee. Specifically, the fee agreement must describe whether the lawyer deducts costs before or after calculating the contingency fee. The difference could be substantial.
Suppose your compensation is $50,000, your costs are $8,000, and the contingency fee is 33%.
- Net Award Calculation: If the costs are deducted first, you will receive $28,140. Why? The attorney’s fee is calculated using $42,000 (total award less costs).
- Gross Award Calculation: If the costs are deducted last, you will receive $25,500. Why? Your attorney’s third is taken right off the top. So, after the fee is calculated, that leaves you with a total of $33,500. However, you still have to take care of your costs. So, once the expenses are paid for, you’ll be left with $25,500.
At the end of the case, the lawyer must provide you with a written statement describing all of the costs deducted and how the legal fee was calculated.
Don’t Be Afraid to Ask Questions About What Your Lawyer Will Cost
Many people will go through life without hiring a lawyer. If you need a personal injury lawyer, schedule an initial consultation, and ask a lot of questions about how the lawyer structures their fees.
When the lawyer provides you with a contingency fee agreement, read it carefully, and discuss any term you do not understand. After the case is over, review your statement thoroughly to make sure it matches up with the fee agreement.