Different Types of Attorney’s Fees in North Carolina
Auto accidents are unexpected and can cause a lot of stress. In addition to the police report, medical attention and car repair, you may be thinking about hiring a lawyer to help you get the compensation you need and deserve. Finding the right attorney to take your case includes understanding common personal injury fee arrangements. Having an understanding of the different types of attorney’s fees associated with personal injury cases will better help you select the right attorney and budget for the process going forward.
Common Expenses in a Personal Injury Case
While all auto accidents involve a unique set of facts, there are several common expenses you can expect in all lawsuits. These common expenses include obtaining documents such as medical records, police reports, filing fees and depositions, as well as information from expert witnesses and investigators. As further explained below, the plaintiff will pay expenses as they arise or your attorney will front the expenses and take the total amount of fees out of your share of the settlement or damages awarded from trial.
Types of Fees
The most common attorney fee types are contingency, retainer and hourly – each is discussed below. The North Carolina Bar requires that the basis or rate of the fee and expenses for which the client will be responsible be communicated to the client. Additionally, if the agreed-upon fee arrangement is a contingency, the agreement must be in writing and signed by the client. Regardless of the fee type agreed upon, ask your attorney to fully explain the arrangement and how it will work. It is important to note that your attorney is prohibited from charging any fee that is clearly excessive.
Contingency fees are very common in personal injury cases. With a contingency fee, the attorney takes an agreed upon percentage from the settlement or final verdict. The plaintiff does not pay the attorney any fee until either a settlement has been reached or a damage award is won at trial. Once there has been a settlement or damage award, the attorney takes a percentage – usually 33.33% (or one-third) – of the final amount. Here, you are not paying an attorney a set amount per hour, and the attorney does not earn a fee unless you recover compensation. For more information about calculating attorney’s fees, visit our Attorney Fee Calculator.
For example, if the case settles for $12,000, your attorney’s fee will be $4,000 ($12,000 x 1/3 = $4,000) if you had an agreed upon contingency fee of one-third. However, should your case go to trial, attorney’s often increase their percentage to 40% of all sums recovered once trial begins. To continue the example above, if your case settles for $12,000 once trial begins, or the plaintiff is awarded $12,000 in a verdict against the defendant, the attorney’s fee will be $4,800.
In addition to the requirement that a contingency fee be in writing, the North Carolina Bar requires that the agreement describe whether the percentage will increase should the case go to trial and the expenses to be deducted from the final compensation. The agreement must also include whether or not the plaintiff will be responsible for any expenses, regardless of whether the plaintiff prevails in the suit.
An hourly fee arrangement is exactly what it sounds like. An attorney will charge an agreed upon hourly rate for every hour – or partial hour – worked on your case. For example, if an attorney works on your case for 5 ½ hours at a rate of $100/hour, your final bill will be $550. Many times larger law firms will have sliding scales depending on which attorney you are working with. The more experienced and senior-level attorneys will typically have a higher hourly rate while the younger associates’ rates are typically lower. Additionally, law firms might charge lower hourly rates for things like research, while the hours spent preparing for trial will be more. Ask your attorney to fully explain if and how their hourly rate may fluctuate and how many hours the attorney anticipates will be spent on your case. This will allow you to have a better understanding of the arrangement and help you budget for the lawsuit.
In a retainer agreement, a flat rate is paid to the attorney in advance of litigation. Generally, there are three types of fee agreements where the client pays at the outset of representation.
Advance Fee: The attorney opens a trust account for the upfront fee and only the plaintiff’s funds are allowed into the trust account. When the attorney completes work, usually on an hourly basis, money is moved from the client’s trust account into the lawyer’s operating account. Money cannot be moved from the client’s trust account (the retainer fee) into the attorney’s account until it is earned. This can be seen as a deposit for services that the attorney bills against. Unless otherwise specified, this is the presumed fee arrangement. Any unused amount will be refunded to the client.
Prepaid Flat Fee: This is a one-time fee for specific legal representation. This fee goes directly into the attorney’s operating account. As long as the attorney completes the work within a reasonable time and in a reasonable manner, the attorney keeps the entirety of the fee.
True Retainer: These types of arrangements can be seen as reservation of the attorney’s services. The client pays a set amount to reserve the attorney’s exclusive representation should the client need legal services at any time and the time frame, along with the fee amount, are detailed in the agreement. The true retainer fee is not used to pay for any legal services, but only for the reservation of the services. As such, the fee is deposited directly into the attorney’s operating account and is accessible immediately.