• How to Calculate Legal Fees and Expenses in a Personal Injury Lawsuit

I received an email from a woman in another state who had questions about how the legal fees for her case would be calculated. While I could not answer her question without seeing the specific retainer agreement she had with her attorney, I thought her question presented a good opportunity to explain how legal fees are calculated in a personal injury lawsuit in New York. 

The Retainer 

All service and financial arraignments should be made clear in the retainer agreement that a client signs with an attorney. The retainer agreement is the contract between client and attorney and it spells out the arrangement for services and fees. 

I have revised my retainer over the years to put it in plain English and to make clear the roles and responsibilities of my client and myself. Quite frankly, I previously used a standard retainer full of legalese that had the facts right, but was not very clear. In revising the retainer, I have not changed any of the basic provisions, but it does make clear all of the components of the agreement I have with my clients.   

Contingency Agreement 

Most personal injury attorneys operate under a contingency arrangement. Here is how my retainer explains my contingency agreement: 

“Under this agreement, I will pay for services provided by Attorney Schlitt on a contingency basis. Payment on a contingency basis means that I will pay no legal fees upfront or during the case. The legal fees will be paid out of the funds received through the resolution of the claim at trial, settlement or otherwise.

If the case does not result in a payment of an award or settlement or other payment, then I will not be liable for any legal fees. I will only pay a legal fee if this claim results in a recovery of money through a suit, settlement or otherwise.” 

If you have a contingency agreement, then you will only pay legal fees if your attorney earns you an award or settlement.  Most personal injury attorneys operate under a contingency arrangement. 

Determining the Legal Fee 

All clients want to know how the attorney will determine the legal fees in their case. Here is how my retainer agreement explains the calculation of legal fees: 

I agree to pay legal fees of one-third of the sum recovered whether received through a suit, settlement or otherwise.

The fee shall be calculated on the net sum of total payments made after deducting all legal expenses associated with prosecuting this claim.  

Here is an example of the legal fee calculation. If there is an award of $1,000 and Attorney Schlitt advanced $100 in expenses, the legal fee is calculated on the remaining $900, not the full award of $1,000. In this example, I would reimburse the $100 in expenses and pay $300 in legal fees (that is one-third of $900). I would retain $600.  

Payments made for the following shall not affect the calculation of the fee:

  • Liens
  • Assignments or claims paid to hospitals, doctors, other medical providers, or insurance companies 

Under most contingency arrangements, payment for medical bills or repayment of medical liens come out of the client’s share of the proceeds and do not affect the calculation of the legal fees. In the above example, if the client had $100 of medical bills to pay, that would come from the client’s proceeds of $600. 

What are Legal Expenses? 

In most retainer agreements, legal expenses are subtracted from any award or settlement before calculating the legal fees. Under most retainer agreements, the attorney will pay the legal expenses and collect reimbursement after an award or settlement is paid. In doing so, the attorney funds the expenses of the case. 

The legal expenses that an attorney may charge to a client are those expenses directly related to prosecuting the case and may not include overhead or salaries. Here is how my retainer agreement defines reimbursable legal expenses: 

Attorney Schlitt will incur expenses in prosecuting this claim. Those expenses may include, but not be limited to the following: 

  • Court and filing fees
  • Fees for medical, government, public and other records and documents
  • Expert testimony and consultation
  • Investigative services
  • Transcription fees for testimony given at depositions
  • Production of materials for use at trial or in trying to settle the claim
  • Mailing and shipping expenses 

Attorney Schlitt may agree to pay these expenses in advance of a resolution of this matter. Upon resolving this matter, I will reimburse Attorney Schlitt for any advanced expenses from any payment received as a result of a trial, settlement or otherwise.  These expenses are reimbursed before calculating Attorney Schlitt’s legal fee (see the example above in “Legal Fees”).  

What should not be counted as legal expenses? Unless otherwise agreed upon by the client and attorney, the following should not be counted as legal expenses, but remain the responsibility of the attorney: 

  • Salaries for law firm employees
  • Overhead for the law firm
  • Payments made to other attorneys working on a case (e.g. a payment made to an attorney covering a court hearing or a deposition, etc.)
  • Legal education
  • Purchase of equipment 

As a client, you have a right to see a line item accounting of expenses. You should ask questions about any charges you do not understand or do not think are appropriate. 

I hope this makes clear how a New York personal injury attorney calculates legal fees and expenses. The specific arrangement you may have with your attorney will be documented in the retainer agreement you sign with your attorney. If you have questions, you should find the answer in that retainer agreement or ask your attorney. All lawyers should understand, if you retain us as counsel, we work for you. 

I hope you found this information helpful. If you have questions or believe you have a personal injury or medical malpractice case, I will be glad to answer your questions and assist you. You can call me at 1-800-660-1466 or email me. You can also visit my website or read more on my blog, New York Law Thoughts.   

Carol L. Schlitt
New York Personal Injury Attorney
http://schlittlaw.com/
1-800-660-1466
Carol@SchlittLaw.com 

This material is intended for informational uses only. It is not meant as legal advice. To receive legal advice, you should consult an attorney.

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