Question

My client was involved in an auto accident and she hired an attorney to represent her in court. Her medical bills were $5000. According to the retainer agreement, the client agreed that the attorney's fees would be calculated based on the net recovery after all disbursements were paid. The case was settled for 50k. Disbursements- $2500 for 2 years in litigation. Should the attorney's legal fees be calculated on the net or gross: Which option gives the client more money in their pocket?

What is the benefit of allowing the attorney to calculate his fees on the Gross amount?

Answer 1

Attorney's legal fees should be calculated besed on net income because:

Contingency fee

Assume that we are going to pay 10% of the amount which will be recovered after giving all the expenses and disbursements.

Case settlement= 50,000, Expenses = 5000+2500 = 7500

50000-7500 = 42500*10% = $4250

Whereas, if we go with the gross:

50000*10% = $5000, we need to pay more in this case.

In my viewpoint, it's always better to opt out of an agreement which says the legal fee from gross amount because you will pay higher in that. So, there is no benefit for paying on the gross amount