If you are referred to another firm, or change lawyers, what happens to the fees? Who gets paid, by whom, and when? Most importantly, how would that affect my case’s settlement or verdict?
Part 1: Contingent, Hourly or Set Fee?
1. What happens when your lawyer refers you to another firm?
Suppose your local lawyer wants to refer your personal injury case to another firm. This often happens when the case requires specialized expertise or the size and complexity of a case is too big an undertaking for a solo practitioner or small firm. An obvious question is what effect this referral has on fees. Clients often wonder if they will have to pay two different contingent fees.
The most usual arrangement is for the referring lawyer and the new firm to split the agreed contingent fee. Thus if the fee agreement is for a fee of 1/3, that is the total fee to the client with the referring lawyer and specialty firm splitting this 1/3 fee. If this happens, Massachusetts requires that the contingent fee agreement say that the fee will be split.
Our rules also require that the client specifically acknowledge and agree to this fee splitting. Our rules also require the lawyers to disclose the details and percentages in the fee splitting arrangement if asked by the client.
For this reason, a referral from a local or general practice lawyer of a personal injury or wrongful death matter to a firm concentrating in these areas only can benefit the client. For the same percentage fee, the client receives the services of both lawyers and firms.
2. What happens if you change lawyers?
The choice of a lawyer in a personal injury or wrongful death case is an important and, hopefully, once-in-a-lifetime matter. However thoughtfully the choice is made, there are times when the need can arise for a change. Massachusetts law provides that clients have a right to change lawyers.
However, when there’s a contingent fee agreement involved, a change of lawyers requires consideration of fee issues. The rule is that the discharged lawyer or firm is entitled to be paid the reasonable value of their services and out-of-pocket expenses while representing the personal injury or wrongful death client on a contingent fee agreement.
However, since there has been no award or settlement at the time of the lawyer switch, the discharged lawyer or firm is not entitled to be paid until and unless the new lawyer obtains and collects a verdict or settlement.
Massachusetts rules require that contingent fee agreements, where there is change of lawyers, say clearly whether the new lawyer and firm will pay the former lawyer’s fee from their contingent fee.
Where the client is going to be asked to pay the former lawyer’s fee and expenses, the contingent agreement has to say this and the client has to initial this option. Most frequently in personal injury or wrongful death cases, the new lawyer agrees to pay the former lawyer’s fee from his or her contingent fee.
In practice, where there’s a change of lawyers, most firms specializing in personal injury and wrongful death cases attempt to arrive at an agreement regarding fees and expenses with the former lawyer or firm early in their work for a client. This provides the client and the new law firm certainty that, as settlement or award is received, there will be no unknown surprises regarding the fee or expenses of the former lawyer.