Information about contingency fees in Texas

February 24, 2013

Information about contingency fees in Texas

Article provided by Nowak & Stauch, L.L.P.
Visit us at http://www.txlegalmalpractice.com

Texas residents involved in an attorney-client relationship know calculating attorney's fees are often complicated. Two common types of attorney fees are percentage and contingency fees.

What is a contingency fee?

According to the Texas Disciplinary Rules of Professional Conduct, a contingency fee is a "fee contingent on the outcome of the matter for which the attorney is rendering service". This means the attorney cannot collect the fee unless a certain result is obtained. Contingency fees also cannot be collected if the attorney is representing a client in a criminal case.

The amount of a contingency fee varies depending on the amount recovered. The interests of both the client and attorney are considered when determining a reasonable contingency fee.

Factors used to determine the reasonableness of a fee include:
-Amount involved in the case
-Time and labor required
-Nature and length of the attorney-client relationship
-Experience, reputation and ability of the attorney


Rules surrounding contingency fees

It is necessary that contingent fee agreements are in writing. This reduces the possibility of a misunderstanding and is especially important for new clients.

The agreement must also specifically state the method used for determining the fee. If the fee differs depending on the outcome, such as whether the case settles or goes to trial, the exact percentage the attorney receives for each different outcome must be stated.

A contingency fee agreement must also include:
-Litigation expenses deducted from recovery
-Any other expenses deducted from recovery
-When the expenses are deducted

Specifically, the agreement must clarify if expenses are deducted before or after calculation of the contingency fee. At the conclusion of the matter, the attorney must give the client a statement in writing describing the result. If there is a recovery to the client, the agreement must "show remittance to the client" and the method used to determine it, according to the Texas Disciplinary Rules of Professional Conduct.

Recent Texas Ethics Opinion on contingent fees

A recent opinion from the Professional Ethics Committee of the State Bar of Texas may change the permissible structure of contingency fee agreements. The committee declared that under Texas law is it unethical for attorney's to retain a security interest in a client's cause of action.

It is common for contingency fee agreements to include a provision which grants a security interest in a client's cause of action to ensure payment of a contingent fee. The committee has now determined this is unethical.

Committee opinions do not have the force of law, but they are extremely persuasive when it comes to interpreting ethics rules. Texas attorneys may consider changing their contingency fee criteria due to this new opinion.

An individual harmed by an attorney due to negligence, fraud or deception can benefit from an experienced legal malpractice attorney. The attorney can provide skilled representation and explain all available legal options.