What Is a Contingency Fee?

How Do Contingency Fees Work?

Direct Answer: A contingency fee is a payment arrangement where an attorney is paid only if the case succeeds, taking a pre-agreed percentage of the recovery — typically 33⅓% if settled and 40% if litigated to trial. If the case is lost, the client owes no attorney fees, only out-of-pocket costs in some agreements.

Under a contingency fee arrangement, the attorney agrees to provide legal representation in exchange for a percentage of the damages recovered through settlement or court verdict. This percentage is agreed upon before the attorney begins work and is formalised in a written retainer agreement.

The standard contingency fee in the United States is 33⅓% (one-third) of the gross or net recovery. However, many attorneys charge a sliding scale: for example, 33% if the case settles before a lawsuit is filed, and 40% if the case proceeds to trial. Some complex cases, such as medical malpractice or mass tort litigation, may command different percentages.

What Is the Difference Between Fees and Costs?

One of the most critical distinctions in contingency fee law is the difference between attorney fees and case costs. Attorney fees are the lawyer's professional compensation — the contingency percentage. Case costs are the expenses incurred in pursuing the claim: court filing fees, process server fees, medical record retrieval, expert witness fees, deposition transcripts, and similar disbursements.

In most contingency arrangements, the attorney advances these costs during the case and recoups them from the settlement or verdict. However, what happens to these costs if the case is lost varies by agreement. Some attorneys absorb the costs; others require the client to reimburse them regardless of outcome. This is a critical point to clarify before signing any retainer agreement.

How Are Contingency Fees Regulated?

Contingency fees are governed by the American Bar Association (ABA) Model Rules of Professional Conduct, specifically Rule 1.5, which requires that all fees — including contingency fees — be reasonable. Rule 1.5(c) requires that contingency fee agreements be in writing, signed by the client, and state the method by which the fee is to be determined. Rule 1.5(d) prohibits contingency fees in criminal cases and most domestic relations matters.

Each state adopts its own version of these rules. Some states impose additional requirements — for example, New York caps contingency fees in medical malpractice cases on a sliding scale, and New Jersey requires that contingency fee agreements include a specific statement that the fee is negotiable.

When Do Contingency Fees Apply?

Contingency fees are most commonly used in:

• Personal injury claims (auto accidents, slip and fall, premises liability)
• Medical malpractice
• Employment discrimination and wrongful termination
• Class actions and mass torts
• Product liability
• Civil rights claims (under fee-shifting statutes like 42 U.S.C. § 1988)
• Consumer protection (FDCPA, TCPA, FCRA)
• Social Security Disability (SSA caps at 25% or $9,200)

How Do US Contingency Fees Differ From UK No Win No Fee?

While often used interchangeably in casual conversation, the US contingency fee system and the UK's Conditional Fee Agreement (CFA) system are fundamentally different. In the US, the attorney takes a percentage of the damages. In the UK, the solicitor charges a success fee — a percentage uplift on their base costs. For a detailed comparison, see our UK no win no fee guide.