1 Fee Agreements: Personal Injury BY: MATTHEW BILKER, ESQUIRE ECKELL, SPARKS, LEVY, AUERBACH, MONTE, SLOANE, MATTHEWS & AUSLANDER P.C. Agreement must be in Writing Contingent fees are, of course, permissible in a personal injury case as long as the fee agreement is in writing; Agreements must include the percentages that will accrue to lawyer in event of settlement, trial and/or appeal; Agreements must specify the expenses that are to be deducted from the recovery; Agreement should disclose whether expenses are to be deducted before or after the contingent fee is calculated. Referrals Pennsylvania has liberal rules on referral fees Policy: client receives the best possible representation because referral fees encourage attorneys who are inexperienced in handling personal injury cases to refer clients to experienced and competent attorneys Client must be advised of referral fee Client must not object to a referral fee Total fee must be neither illegal nor clearly excessive 1
2 Charging Liens Charging lien-attorneys right to hold onto file/client property unless and until the fees and costs are paid. Permitted but disfavored Ethical obligations to client Attorneys in personal injury field who are discharged already entitled to recover what they put into case (quantum meruit) Charging Liens: Language In the course of representation, it may be that a fund will be created, which may be held by our firm, designed to be distributed to you at some future time upon the happening of certain specified events. You authorize us to have a charging lien upon that fund for any delinquent bills. If, at the time such fund becomes available, you are late in the payment of any of our bills, you authorize us to pay our bills directly from your share of the fund. Charging Liens: Language Should this agreement be breached or otherwise terminated, my attorney shall be entitled to immediate reimbursement of costs, disbursements, and expenses and payment of his fee, if any, according to the herein percentage of whatever offer of settlement he may have negotiated to the date of breach or termination said charges shall constitute a lien upon the file which shall remain in the possession of my attorney until discharge of the lien in full. 2
3 Elements of a Personal Injury Fee Agreement Power of attorney: defines scope of power to be given to the attorney Includes ability to execute certain legal documents for client Language: I hereby give to my attorneys a power of attorney to execute all documents connected with the claim, including pleadings, contracts, commercial papers, settlement agreements, compromises and releases, verifications, dismissals, orders, settlement checks, and all other documents that I could properly execute in connection with the claim. Elements of a Personal Injury Fee Agreement Scope of Agreement Client agrees lawyer may negotiate settlement/institute legal proceedings Add boilerplate language regarding defendants Persons, firms, corporations, entities, etc. Negotiation: lawyer must obtain client s consent to any settlement Written authorization to settle prior to demand Power of Attorney Language I do hereby retain as my attorney to negotiate for me a settlement or to institute for me, in my name, any legal actions that in their judgment are necessary in connection with my bodily injury claim, including my claim for uninsured or underinsured motorist benefits against third party, and any other person, firm, corporation, insurer, or entity who may be liable arising from a collision that occurred. Protects against a client who does not want to pay for action instituted against his own insurance company 3
4 Fees Two-level Fee Agreement 33% prior to suit 40% after suit is initiated Three-level Fee Agreement 30% prior to suit 33% after suit filed/prior to trial 40% for cases tried to verdict Fees Attorneys may vary fee to fit facts of case, complexity of case, likelihood if trial. Must disclose what percentage is being applied towards Entire net proceeds Recovery from any source Less PIP benefits If no recovery, no fee Withdrawal or Discharge Without specifying a formula for determining fee, lawyer will be entitled to nothing more than quantum meruit Pros Certainty for lawyer regarding fee to be paid Cons Chilling effect 4
5 Minor s Claim Minor s claims subject to court approval 25% typical Claims regarding minor beneficiaries also subject to court approval General Orphans Court claims subject to court approval Lawyer should disclose to client that court must ultimately approval of settlement and fee to be charged Review local rules Special Considerations: UM/UIM Cases Post-Koken: fewer mandatory arbitration clauses Lawsuit would not trigger a second or third level fee Selection of arbitrator(s) most akin to filing suit Make sure to include language in agreement regarding UM/UIM insurer as a possible defendant Special Considerations: 1 st Party Benefits 75 Pa.C.S. Section 1716: First party benefit claims cannot be handled on a contingency basis Attorneys frequently handle these claims without additional charges Fee agreement should contain this provision 5
6 Special Considerations: Property Damage Most attorneys do not charge fees for property damage monies paid to client If attorney intends to charge for such a fee, must disclose in fee agreement Special Considerations: Structured Settlements Structured Settlement: Insurer purchases annuity that pays out a stream of benefits to claimant over time on a nontaxable basis Contingent fee agreement must specify how fees are to be charged Unethical for fee to be based on stream of payments Agreement should state that fee percentages are to be applied to cost of the annuity Structured Settlement Language As one possible settlement option, I authorize my attorneys to explore the possibility of a structured settlement through the use of deferred period payments. I agree that if my claim is settled through such a structure, attorneys fees on the part that is structured will be calculated in the percentages as set forth above (percentage based on level) based upon the cost of the structured settlement. 6
7 Costs Specify in agreement typical categories of costs that may be incurred Copies, fax charges, postage, notary fees, long-distance telephone calls, mileage for staff Investigation charges, court costs, research charges, medical records, deposition costs, expert witness fees Nguyen v. O Neill, et al. No.: 894 EDA 2013 (Pa. Super. 11/27/2013) (mem.) Nguyen v. O Neill, et al. No.: 894 EDA 2013 (Pa. Super. 11/27/2013) (mem.) Affirmed trial court s order directing attorney s contingent fee percentage in MVA case to be calculated on the net sum after deduction of costs and medical expenses from the gross recovery. Court held that fee agreement was ambiguous because it did not explicitly state whether contingent fee percentage would be applied before or after deduction of litigation costs. 7
8 Examples of Language regarding Costs I agree that out of whatever sum is secured by my attorney either by way of settlement or verdict, that said attorney shall retain % thereof. Thereafter, the expenses of suit, pretrial discovery, investigation, medical evaluations and reports, and fees of witnesses shall be reimbursed to said attorney. Duties of Client Enumerate client cooperation Available for meetings, conferences, depositions and trial Keep lawyer apprised of whereabouts Examples: I agree not to settle or adjust this claim or any legal action arising from it; I agree to fully cooperate with my attorneys in the handling of the claim. This includes, but is not limited to, attending depositions, legal proceedings, and conferences, and keeping my attorney informed as to my current mailing address, phone number and medical condition. Unpaid Medical Bills Attorneys must promise on behalf of clients that medical bills will be paid Should specify in agreement that payment of medical bills is client s responsibility Attorney is authorized to pay bills from client s share of recovery 8
9 Medical Bills Language Language: all medical bills incurred as a result of the accident, whether expended by counsel on behalf of me or not, shall be chargeable to my share exclusively. Additional language: I authorize my attorney to repay my medical caregivers for all outstanding medical bills and expenses incurred as a result of my collision-related injuries from my share of the recovery, unless paid or payable by another source. All subrogation or reimbursement claims will be paid from my share of the recovery. Appeals Permissible to bump contingent fee percentage higher of specified in agreement Closing Files Attorney may dispose of file if kept for a reasonable period of time and client consents in writing Include provision giving lawyer permission to destroy file after years Language: I authorize my attorney to destroy my file three years after the file is closed. 9
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