RTL’s Real Truth about Lawyers # 4: “Is a good lawyer’s contingency fee taken out before or after expenses, and what constitutes an ‘expense’ on such a case?”I
A very good question. A lawyer’s contingency fee on a personal injury case shouldn’t be taken out until AFTER case expenses have been paid or reimbursed. If a lawyer wants to take his fee from the gross recovery of the case BEFORE reimbursing expenses, it means he wants YOU to pay the expenses alone to increase his recovery. That means he’s seeking an arrangement beyond the percentage agreed to and he’s not a good lawyer. Some lawyers do it, but it’s not ethical, and that’s simply the real truth about lawyers.
“So, what’s considered an ‘expense’ to my case?”
Case expenses incurred during a contingency fee case include out-of-pocket expenses reasonably incurred by the attorney OUTSIDE his own general office operating costs. But such ‘outside’ expenses are only those additionally incurred specifically for THAT case. For such an expense to be a case expense it should truly be an ‘out-of-pocket’ expense incurred by the attorney on behalf of THAT client. Bottom line… there should be an outside bill to be paid or a payment receipt to be reimbursed; not just an ethereal ‘miscellaneous noted expense’. When in doubt, ask for it.
Why a Lawyer’s “In House” Overhead Expense Isn’t Case Expense
A good attorney would not include his normal operating costs as case expense because that’s not a true ‘contingency’ case, is it? His ‘overhead’ costs are costs HE incurs to practice law, not expense to your individual case. If a lawyer intends to charge you for his own ‘in house’ operating expenses in a contingency fee case AND take a contingent fee, then he’s double dipping. A good client should see that as an unfair billing arrangement in a contingency fee case and avoid such a lawyer. He’s a lawyer looking to profit at the client’s expense by disguising his additional recovery as individual case expense when it’s not.
“Who pays expenses, me or my lawyer?”
Actually, you both do. A good personal injury lawyer sinks or swims with his client. That means a recovery for the case is a recovery for both and an expense of that case is, likewise, an expense for both. By sharing fully both the recovery and expenses of a case a good lawyer shows his client that he can be trusted to get the most he can for a client’s case because he’s working for both the client and himself in all aspects of the case.
“But I thought my lawyer paid all the expenses of my case.”
A good attorney will often advance payment of expenses of a case on the client’s behalf. It bears noting, however, that an attorney is not obligated to advance such expenses. But the reason most good attorneys do is to show good faith to clients who are most likely unable to finance such efforts themselves. By doing so a good lawyer shows he’s as optimistic about your case’s recovery as you should be. He shows he’s willing to accept such risk confident in the knowledge that the case is sound and those additional expenses will be reimbursed. It’s one more way a good lawyer proves to you that you can trust him because you are both ‘invested’ in the case together.
It’s Not Just Good ‘Lawyering’; It’s Good Business
But it bears emphasis: A good attorney takes his fee from the NET after those expenses. The mark of a good personal injury lawyer is one who’s NET recovery is directly related to the NET recovery of his client. It’s not only fair, but like so many fair practices, it’s just good business. It builds an implicit trust between the lawyer and the client that they are in the case ‘together’ in all aspects.
What This Ultimately Means to You
Paying case expenses from the gross recovery of a case BEFORE contingent fee splitting means a good personal injury lawyer is as mindful of the NET recovery as you are. It assures you that your attorney will not incur unnecessary expenses or drag a case out just to run up bills on it to pad his own pocket by unfairly increasing his fee. If any expense is incurred, it assures the client that it was done solely to increase the NET recovery of the case, not to run up bills. By being ‘in it together’ neither you nor your attorney want any additional expense that doesn’t increase the overall recovery in which you BOTH have a vested interest. And that’s just one more real truth about lawyers.