Fee Structures and Cost Drivers
Contingency Fees Explained: How "No Win, No Fee" Lawyers Get Paid
How contingency fee agreements work in the U.S., what the rules require, where they are banned or capped, and how expenses change what you keep.
In a contingency fee arrangement, the lawyer is paid a percentage of the money recovered for you, and receives no fee if there is no recovery. The percentage is set in a written agreement that you must sign, and the agreement must also say how case expenses are handled. "No win, no fee" does not always mean "no win, no cost": depending on the agreement, you may still owe expenses the lawyer advanced, even if the case is lost.
Contingency fees exist because many people with valid money claims cannot pay a lawyer by the hour. The lawyer takes on the risk of losing and the cost of financing the case in exchange for a share of the result. This guide covers the general rules that apply across practice areas; specialized fields such as personal injury have their own conventions worth researching separately.
What the rules require
In states that follow ABA Model Rule 1.5(c), a contingency fee agreement must:
- Be in writing and signed by the client.
- State the method for calculating the fee, including the percentage that applies if the matter settles, goes to trial or is appealed.
- Say which litigation and other expenses will be deducted from the recovery, and whether they are deducted before or after the percentage is calculated.
- Clearly tell the client about any expenses the client must pay whether or not the client wins.
At the end of the matter, the lawyer must give the client a written statement showing the outcome, the amount paid to the client and how it was calculated. Some states add more: Florida, for example, requires lawyers to give clients a written statement of client's rights in many contingency cases and regulates the percentages that may be charged in certain matters.
Where contingency fees are banned or capped
| Situation | General rule |
|---|---|
| Criminal defense | Prohibited under rules based on Model Rule 1.5(d) |
| Divorce outcome, alimony, support or property settlement amount | Prohibited in domestic relations matters under Model Rule 1.5(d) |
| Claims against the United States under the Federal Tort Claims Act | Capped by statute at 20% of an administrative settlement and 25% of a judgment or settlement after a lawsuit is filed |
| Social Security disability back pay | Fees require Social Security Administration approval; under the fee agreement process, the fee is limited to 25% of past-due benefits or a dollar cap set by the agency, whichever is less |
| Medical malpractice in some states | Several states cap or set sliding scales for percentages |
Social Security's dollar cap for fee agreements was raised to $9,200 in late 2024; check the Social Security Administration's representative pages for the current figure before relying on it.
How the numbers work
The two variables that matter most are the percentage and the treatment of expenses. Here is an illustrative example using a $90,000 settlement, a 33⅓% fee and $6,000 in expenses the lawyer advanced.
| Method | Fee calculation | Fee | Expenses | Client receives |
|---|---|---|---|---|
| Fee on gross, expenses after | 90,000 x 1/3 | $30,000 | $6,000 | $54,000 |
| Expenses first, fee on net | (90,000 - 6,000) x 1/3 | $28,000 | $6,000 | $56,000 |
The second method leaves the client $2,000 more on the same settlement. Neither method is illegal, but your agreement must say which one applies. You can test your own figures with the contingency fee calculator.
Stepped percentages
Many agreements increase the percentage as the case advances, because later stages require much more work. An illustrative structure might be one percentage if the case settles before a lawsuit is filed, a higher one after filing, and a higher one again if the case goes to trial or appeal. Ask exactly which event triggers each step. "Filing suit" and "the start of trial" are clear; "substantial litigation" is not.
Who pays expenses if you lose
Model Rule 1.8(e) allows a lawyer to advance court costs and litigation expenses, with repayment contingent on the outcome, and allows a lawyer representing an indigent client to pay those costs outright. That means agreements fall into two broad groups:
- Client owes nothing if the case is lost. The firm absorbs advanced expenses.
- Client owes expenses regardless. The client must reimburse costs even with no recovery.
This can be the difference between owing nothing and owing thousands of dollars for expert witnesses and transcripts. Find the clause and read it twice. The guide to court costs and litigation expenses lists what those expenses usually include.
Referral fees between lawyers
Sometimes the lawyer you meet refers your case to another firm and they share the fee. Under rules based on Model Rule 1.5(e), lawyers in different firms may divide a fee only if the division is proportional to the work each does or each lawyer takes joint responsibility, the client agrees in writing to the arrangement and each lawyer's share, and the total fee is reasonable. A referral should not increase your total percentage.
Is a contingency fee right for you?
Contingency makes sense when your claim seeks money, you cannot afford hourly fees, and a lawyer is willing to take the risk. It may be expensive if liability is clear and the case is likely to settle quickly, because the percentage applies regardless of how little work was needed. In that situation, ask whether the lawyer will consider a lower percentage for an early settlement or a hybrid arrangement.
For a broader view of fee structures, see the overview of how lawyers charge, and compare with hourly billing if you are offered a choice.
Frequently asked questions
Is the contingency percentage negotiable?
Often it is, especially for cases with clear liability or high value. Some lawyers keep fixed standard percentages. You can always ask, and you can compare offers from more than one lawyer.
Does the lawyer's percentage apply to medical bills paid from my settlement?
It usually applies to the gross recovery, before liens and medical bills are paid, unless the agreement says otherwise. Ask how liens will be negotiated and paid.
Can I switch lawyers in a contingency case?
Yes, clients can generally discharge a lawyer at any time. The first lawyer may have a claim to a reasonable fee for work done, usually paid from the eventual recovery. See the guide on changing lawyers mid-case.
What if the case is lost after years of work?
If the agreement says no recovery means no fee, you owe no attorney fee. Whether you owe expenses depends on the expense clause.
Sources
- American Bar Association — Model Rules 1.5(c), 1.5(d), 1.5(e) and 1.8(e)
- U.S. Department of Justice — Federal Tort Claims Act information
- Social Security Administration — representative fee rules and the current fee agreement cap
- The Florida Bar — contingency fee rules and the statement of client's rights
