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Drama on Contingency

Q. After a rear-end crash and two years of treatment, the victim retained me on contingency. Within a week, I sent the liability carrier a strong settlement demand along with $175,000 in medical bills. After getting $300,000 in policy limits, my client says I didn't do "enough work" to earn a third of it. A deal's a deal, right?

A. Yes, a deal is a deal. But as a lawyer, any deal you cut with a client must be "reasonable."

Under Rule 1.5 of the Rules of Professional Conduct, an "attorney shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses." Though your retainer agreement sets forth a standard one-third contingency fee, the reasonableness of this fee must be reassessed thereafter to ensure that it remains fair to the client.

To determine whether a fee is reasonable, you must consider:

1. the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
2. the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment of the attorney;
3. the fee customarily charged in the locality for similar legal services;
4. the amount involved and the results obtained;
5. the time limitations imposed by the client or by the circumstances;
6. the nature and length of the professional relationship with the client;
7. the experience, reputation, and ability of the attorney or attorneys performing the services; and
8. whether the fee is fixed or contingent.

Let's say it took you ten hours to organize the medicals and draft a compelling settlement demand. If you took a $100,000 fee, you'd get the equivalent of $10,000 per hour in a clear liability case presenting big damages and little risk.

Not bad for a day or two of work. But your windfall would come at the expense of a client whose case would probably trigger a policy limits offer with or without you. With $175,000 in medical bills alone, most carriers would surrender a $300,000 policy to protect their policyholders from an even larger judgment.

Adding insult to injury, after paying for two years of agonizing treatment, the victim of this accident will net far less than you would after only ten hours of work. If liens aren't reduced, your client would pocket only a quarter of what you would. Is this reasonable?

One-third contingency fees may be customary in personal injury cases. But, in this particular case, your six-figure bonanza might be hard to justify. Contingency lawyers earn greater rewards for taking bigger risks. Here, your risk was negligible. To achieve a predictable result, you didn't have to spend much time or effort, didn't need to work under the pressure of harsh deadlines, and didn't need to forgo other opportunities. Nor does it appear that the outcome rested on your superior intellect or skill. It's nice that you addressed the case promptly, but would that entitle you to hit the jackpot at your client's expense?

To be sure, there are many instances in which a single phone call or demand letter prompts an outstanding result in which the attorney is entitled to the full fee. Lawyers should not be penalized for getting expeditious results. Indeed, there are even more instances in which lawyers spend years litigating cases that yield little or no fee at all. As one lawyer put it, "You roll the dice, stuff happens." I wholeheartedly agree — that is, when the lawyer really ​does​ roll the dice.

Where, as here, the reward far exceeds the exceedingly minimal risk and work involved and leaves the client with minimal recovery, some may believe a one-third fee to be excessive. Unfortunately, Rule 1.5 doesn't provide a formula for calculating a "reasonable" fee, leaving lawyers to settle for what would be fair to their clients. Like so many decisions in everyday practice, this one requires sound judgment, a sense of equity, and a conscience.

Taxation of Representation
"It's All Greek to Me!"

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