Contingency fees let a client hire a lawyer without paying anything upfront. The fee itself is a percentage of whatever the case recovers, not an hourly bill. Most states have adopted some version of Model Rule of Professional Conduct 1.5(c), which controls what that percentage can look like and requires clear disclosure. The rule demands a signed writing that states the percentage owed at settlement, trial, and appeal. It must also say whether litigation expenses come out of the recovery before the lawyer applies that percentage, or after. Few clients read that clause closely. The obligation doesn’t end at the signature. Once the case ends, the lawyer owes a written statement of the outcome. If there’s a recovery, that statement must also show how the lawyer calculated the final number.
How contingency fees work under Model Rule 1.5(c)
Rule 1.5(c) sets a disclosure standard, not a percentage. The agreement must state how the lawyer determines the fee, including what’s owed at settlement, trial, or appeal. That share often steps up as a case goes further, and a client who never reads past the signature line can miss it — not because the lawyer changed the deal, but because the deal always had stages nobody pointed out.
Each state adopts its own version of the model rule. The exact wording varies, even where the substance tracks Rule 1.5(c) closely.
Before or after: the clause that decides what contingency fees actually pay
One clause inside that same disclosure requirement shapes the client’s result more than the headline percentage does. It decides whether the agreement deducts expenses from the recovery before applying the percentage, or after. Deducting costs first shrinks the base the percentage applies to, so the client keeps more. Deducting the fee first does the opposite. The lawyer takes the percentage from the full recovery, then subtracts costs from what remains.
The percentage on the page can be identical either way. That’s why the clause is easy to miss and expensive to ignore. Model Rule 1.5(c) doesn’t pick a method. It only requires the agreement to state which one applies, leaving the choice to negotiation before signing. That makes the before-or-after clause genuinely negotiable — not boilerplate a client simply accepts.
Fees and costs are not the same thing
Fees and costs are legally distinct. The fee is what the lawyer earns. Costs are the hard expenses of litigating the case instead — filing fees, medical records, deposition transcripts, expert witnesses. Model Rule 1.8(e) allows a lawyer to front those costs. It permits a lawyer to “advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter.” For a client who couldn’t otherwise afford to sue, that advance often makes representation possible at all.
The same rule goes further for a client who can’t pay anything. A lawyer representing an indigent client “may pay court costs and expenses of litigation” on the client’s behalf, with no repayment expected under the rule itself. Rule 1.8(e) doesn’t answer whether a client who loses owes those costs back. The written agreement does — one more reason to read it before signing.
Where the law bars or caps the percentage
No contingency fees at all: divorce and criminal defense
Model Rule 1.5(d) removes the option entirely in two kinds of cases:
- Domestic relations: a lawyer cannot charge “any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof.”
- Criminal defense: the rule separately bars “a contingent fee for representing a defendant in a criminal case,” regardless of the outcome sought.
Both bars exist for the same reason the law allows the arrangement everywhere else. Tying a lawyer’s pay to a result changes the lawyer’s incentives. Here, the rule treats that shift as too risky to allow.
Capped by statute: medical malpractice in California, New York, and Florida
Some legislatures wrote a ceiling directly into the statute. California’s Business and Professions Code § 6146, as amended by AB 35 effective January 1, 2023, sets a two-stage fee schedule for medical malpractice. It caps the fee at 25% before filing a complaint or arbitration demand, and 33% after, though a court can approve more for good cause. That schedule is separate from any phase-in tied to the state’s damages cap. Don’t conflate the two.
New York takes a different shape for the same category. Judiciary Law § 474-a sets a sliding scale that steps the percentage down as the recovery grows. It runs from near 30% at the low end to about 10% at the high end, with court approval available only in extraordinary circumstances. Florida builds a similar protection into its constitution instead. Article I, Section 26 guarantees a malpractice claimant a minimum share of any recovery, stepping higher above a set threshold. That guarantee is waivable, but only through a specific process: a notarized form under Bar Rule 4-1.5(f)(4)(B)(iii), signed by both sides, carrying a three-business-day right to rescind.
Capped by federal law: the FTCA and Social Security
Two federal programs cap the percentage directly and back the cap with real penalties. The Federal Tort Claims Act, 28 U.S.C. § 2678, bars a fee above 25% of a judgment or settlement. An administrative claim resolved before a lawsuit caps the fee at 20% instead. Charging more risks a fine, up to a year in prison, or both. Social Security disability representation works differently. 42 U.S.C. § 406 caps the fee at whichever is smaller: 25% of past-due benefits, or a fixed figure the Commissioner adjusts periodically. That figure is currently $9,200, as of November 30, 2024.
Liens and subrogation: why the percentage isn’t the whole recovery
None of this answers what a client actually cares about: how much of the recovery reaches their pocket. Liens and subrogation rights can take a share the fee agreement never mentions. Medicare’s secondary-payer statute, 42 U.S.C. § 1395y(b)(2), requires a primary plan to reimburse the trust fund wherever Medicare “has or had a responsibility to make payment.” If a responsible party doesn’t repay voluntarily, the government can sue and recover double damages.
Private health plans work differently. In US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013), the Supreme Court held that a clear ERISA reimbursement clause controls the outcome. Equity cannot override contract language the plan actually wrote. But the ruling has a second half that gets less attention. When the plan says nothing about attorney’s fees, the common-fund doctrine fills the gap by default. The plan then bears its share of recovering the money, instead of collecting for free. Stating only the first half of McCutchen is the most common mistake in this area.
The bottom line
Contingency fees look like a simple trade, and at the level of the headline percentage, that’s true. What the headline leaves out is that the percentage is one term among several. The term that most changes what a client keeps is the order in which the agreement deducts expenses. It’s also the term clients are least likely to ask about before signing. Model Rule 1.5(c) guarantees disclosure, not comprehension. An agreement can be fully compliant and still leave a client surprised by liens, subrogation, or an unexplained before-or-after clause.
Frequently asked questions
A contingency fee is a lawyer’s fee calculated as a percentage of the amount recovered rather than billed by the hour, and it’s owed only if the case produces a recovery.
It must be a signed writing stating the percentage owed at settlement, trial, or appeal, and whether litigation expenses come out of the recovery before that percentage is applied or after.
Deducting expenses first shrinks the base the percentage applies to, so the client keeps more; deducting the fee first and expenses after leaves the client with less, even at an identical percentage.
The lawyer must give the client a written statement of the outcome and, if there’s a recovery, show the remittance and exactly how the final number was calculated.
No. The fee is what the lawyer earns, while costs are expenses like filing fees, records, and experts, and Model Rule 1.8(e) lets a lawyer advance those costs, with repayment governed by the written agreement.
No. Model Rule 1.5(d) bars any fee contingent on securing a divorce or on the amount of alimony, support, or a property settlement.
No. Model Rule 1.5(d) separately bars a contingent fee for representing a defendant in a criminal case, regardless of the outcome.
Under Business and Professions Code § 6146 as amended by AB 35, the cap is 25% before a complaint or arbitration demand is filed and 33% after, with court approval available for more on good cause.
Yes. The Federal Tort Claims Act caps a fee at 25% of a judgment or settlement and 20% for an administrative claim, and exceeding it can carry a fine or up to a year in prison.
Yes. Medicare’s secondary-payer right and, in ERISA health plans, any reimbursement clause the plan actually wrote can take a share of the recovery separate from the lawyer’s fee.
Keep reading: Should you accept the insurance company’s first offer? · Phoenix personal injury lawyers: every guide and firm in one place
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Get MatchedThis article is general information about attorney fee agreements and is not legal advice. Laws differ by state and change over time, and the facts of your situation matter. For guidance on your own circumstances, consult a licensed attorney in your state.