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Practical Fee Considerations

Hi Friends,

We've talked somewhat about some general fee considerations, but as I have more clients coming in the door (Yay!) I am finding that I'm curious about how to determine what types of fees to use and how much ethical leeway I have to modify traditional fee structures.

Recently I have been getting some people in who are looking at doing contingency fee cases, but I was wondering if the typical structure ("I take a third") can be modified. For instance, I have a client looking to recover a lot of money, and he offered me ten percent. That ten percent is still a lot of money, but it doesn't necessarily pay me for the risk I would be taking by agreeing to a contingency fee. Could I instead propose that he pay me a flat fee of 15%, which is far below the industry standard, and allows
me to not take such an enormous risk, but at the same time allows him to come out with much more for himself if all the money is recovered?

Generally, I am interested in whether basing flat fees on a percentage of the amount desired by the client makes sense, if it's ethical, and if I'm doing myself a service by taking that lower percentage than the industry standard contingency fee.

Does anyone have any thoughts on this?

Thanks. I hope you are well.
Graham

Comments

  • samgloversamglover Minneapolis, MN Admin
    I have a different approach to contingent fees, and I do a lot of them. However, in all our contingent-fee cases, we will get statutory and attorney fees if we win, so the "traditional" 1/3 fee after costs makes little sense. Here is how my fee is distributed in FDCPA cases (I don't share this with anyone, so please keep it to yourselves--I am only sharing this with the LAB):

    The total recovery will be distributed as follows, until it is exhausted:

    >    1. We will be reimbursed for our costs;
    >    2. We will receive our attorney fee, calculated at our regular hourly rates, unless attorney fees and costs are agreed to between the attorneys for the parties or ordered by the court;
    >    3. You will receive $1,000 as statutory damages;
    >    4. We will receive 45% of any remaining recovery; and
    >    5. You will receive the remainder.

    This probably will not apply to your case, but it is a very different fee structure than you may be used to seeing. In fact, I don't think you cancall the 1/3 contingent fee an "industry standard." It is an industrystandard, but only for personal injury lawyers. And even among personal injury lawyers, it can vary 10-20% either way.

    In other words, there is a lot of room to structure a contingent fee. The main requirement is that it is (a) clear; and (b) in writing. It must also be objectively fair and reasonable.


    In order to consider a contingent fee as low as 15%, I would have to be looking at a huge pile of money, and be extremely confident that the money would be collectible. I would also require the client to advance all costs, from filing fees to court reporters to postage. I think your idea to put performance-based bonuses in place is also a good one. You might set four milestones at 25%, 50%, 75%, and 100%. Each should be a flat amount, and you should define both how "recovery" will be calculated, and how much 25% is.

    Those are my thoughts, anyway. Be creative. Make sure your client has a stake in the case (costs, at least). Especially if you are going to take a percentage that is "far below the industry standard," put milestones in place.

     

    Sam
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