Contingency fees can be a minefield of client grievances. Here are a few tips to remember when you offer a contingency fee arrangement to a client:
- You can’t keep the money you save your client in the payout process of a contingency fee recovery.
- You can’t charge your client for a portion of the savings.
- You cannot save your client money and expect to charge the client for savings you provided.
There are numerous Disciplinary Counsel opinions on this subject. The money you save your client belongs to the client. Your fee is based on the amount of the recovery. If you charge a fee for the amount you saved the client, you are charging the client for fees he or she did not agree or approve. In essence, its double dipping and an easy way to find yourself with a grievance complaint.
There are attorneys who will try to find new ways to further charge their clients for contingency fees in excess of the agreed upon portion of the recovery. For example, let’s say, as part of the payout process in your attempt to settle a claim, you negotiate the health care provider’s bill down from $5,000 to $3,000 and you believe that you should benefit from the perceived windfall that your client will reap from the increased net recovery. You might have a more involved scheme or “working relationship” with the doctor’s office to charge one rate for settlement, demand and recovery purposes and accept a lower rate for payout purposes. Maybe you have agreed to pay the doctor’s office a predetermined amount of the medical bill and the doctor’s office has an agreement with you to refund you a portion of the payment of the medical bill as a kick-back to cover a portion of your advertising expenses, to help defray overhead and the cost of doing business.
In essence, the client is unknowingly paying for the law firm’s advertising expenses, something to which the client did not agree. And, if you did not disclose the kick-back information to the client, you have violated more rules in addition to the rules prohibiting kick-backs.